Jonathan Fryer

Is the Eurozone Doomed to Fail?

Posted by jonathanfryer on Tuesday, 10th July, 2012

This lunchtime I was at Dr Challoner’s High School for Girls in Chalfont, opposing the motion that This House Believes the Eurozone Is Doomed to Fail. Proposing it was David Moller, a former Reader’s Digest journalist, on behalf of Civitas. The audience were a group of 30-odd Year 12s who have been studying economics. A vote on the motion was taken before either of us spoke, with the Aye side winning 18:4. I set out the benefits that the European Union had brought, not just for the eurozone members, and pointed out that the crisis we are going through is a global one that originated not in Europe but in the United States. It is probably true that Greece should not have been allowed to join the euro until it gots its economy and taxation revenues in order; new countries wishing to join have to pass more stringent criteria. But my main point was that the eurozone countries do not want the single currency to fail. Indeed, even countries outside the eurozone — including Britain, with its ‘moderately eurosceptic’ Prime Minister — do not want the eurozone to fail, and therefore they will do everything possible to make sure it survives. Moreover, despite the eurozone’s current woes, the euro has been a remarkable success, establishing itself in just ten years as the world’s second global currency. So what needs to be done is to assist economic readjustment in some of the weaker periphery countries and, as Angela Merkel has said, have ‘more Europe’, not ‘less Europe’, in the sense of greater coherence in economic and fiscal policy. When a fresh vote was taken at the end of the debate the Ayes only won by a single vote, 12:11 — a significant and pleasing shift!

(photo: Fiona Glen)

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One Response to “Is the Eurozone Doomed to Fail?”

  1. The eurozone countries are in much the same position as a man who went kayaking in the Niagara River just above the falls then lost his paddle; his ill-conceived venture is about to lead to a tragedy. That he most certainly doesn’t WANT the inevitable to happen has very little to do with what will actually happen next.

    In the case of the eurozone the whole proposition was fatally flawed from the outset. The advantages of a single currency are massively outweighed by the disadvantages – no lender of last resort, no possibility of adjusting exchange rates or interest rates to suit local circumstances and no way of tackling the mismatch in competitiveness between ‘north’ and ‘south’ which has sucked the jobs out of the ‘south’. All this was compounded when the banks forgot that exchange risk didn’t vanish but morphed into solvency risk. Many european banks as a result are hopelessly insolvent. Moreover collapse will humiliate the established political class who are therefore using their position to throw the (taxpayer-funded) kitchen sink at the problem in a vain attempt to stop the inevitable.

    They are also having to play fast and loose with legal and constitutional ‘niceties’ which imperils democracy itself. A very slippery slope.

    .

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