Financial Times
August 29, 2011
Having been an early supporter of the euro, I now consider my engagement to be the biggest professional mistake I ever made. But I do have a solution to the escalating crisis.
I have three reasons for my change of heart. First, politicians broke all promises of the Maastricht treaty. Not only was Greece let into the eurozone for political reasons, also the fundamental rule, “no member to exceed its yearly budget deficit by the equivalent of 3 per cent of gross domestic product”, was broken more than a hundred times. Mandatory punitive charges were never applied. To top it all: the “no bail-out” clause was wiped out in the wake of the first Greek rescue package.
Second, the “one-size-fits-all” euro has turned out to be a “one-size-fits-none” currency. With access to interest rates at much lower German levels, Greek politicians were able to pile up huge debts. The Bank of Spain watched the build-up of a real-estate bubble without being able to raise interest rates. Deprived of the ability to devalue, countries in the “south” lost their competitiveness.
Third, instead of uniting Europe, the euro increases friction. Students in Athens, the unemployed in Lisbon and protesters in Madrid not only complain about national austerity measures, they protest against Angela Merkel, the German chancellor. Moreover, the euro widens the rift between countries with the euro and those without. Of course Romania would love to join, but does anybody believe Britain or Sweden will find it attractive to join a “transfer union”? Meanwhile, dissatisfaction with the euro drags down the acceptance of the EU itself.
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