The Euro wasn't supposed to work like this

[Recursion]

This is like the part in the movie where the villain stares off into the distance and explains to the hostage that it wasn't supposed to be like this. He had such good intentions when he started, and then the world kept getting in the way.

20 years ago, the idea was that the stable European economies would form a common currency and customs union with a similar set of fiscal and legal frameworks. This economic powerhouse would provide a needed counterweight to the US hegemony, and pull the "peripheral" European nations inexorably towards it.

It was never envisioned that nations would guard their sovereignty so tightly. The economic power of the eurozone was the drug that was supposed to wean them off that, because anyone with even a high school economics class can predict what happens when you have central monetary policy and distributed fiscal policy. They might not have named Greece, but they could have outlined the story.

Greece has problems, but the amount of money involved here has no relation to Greece's economy and is mostly about France and Germany trying to keep their banks afloat. Forgive all of Greece's debt tomorrow and they still need to leave the Euro.

It wasn't supposed to be like this, but here we are.

[Hydra]

1. lol

The Eurozone was a test environment for Goldman Sachs and others to set up bigger economic units that they would control. The people were against it to begin with, and tried to work with it after they were ignored.

The thing is, it could have worked if the people trying the experiment were not so insanely greedy and power-hungry. They tried to vacuum up too much wealth from the normal people and put it in too few hands.

They want to rule the world, but they aren't capable of managing it in any sane way.

[Tatiana La Belle]

2. +1000

nt

[geek tragedy]

3. Was rather naive in retrospect, no?

"We're all in this together. You go first."

[Nye Bevan]

4. To be fair, this was predicted by some:

http://www.businessinsider.com/margaret-thatcher-on-the-euro-2013-4

[geek tragedy]

5. Credit where credit is due. nt

[stevenleser]

8. She was wrong about a lot of things but she wasn't a moron. She refused to meet with Palin

when Palin went to go see her.

I remember remarking at the time that while the two women are probably ideologically occupying the same space, Thatcher has no interest in having her brand conflated with that of ignorant Palin's.

[roamer65]

6. Cart before the horse.

Monetary union comes AFTER political union. Not the other way around. Countries just don't surrender sovereignty for a currency union. You can blame Helmut Kohl, Francois Mitterrand and Jacques Delors for this error in judgment.

Britain was absolutely right to stay out of the Eurozone and Greece will be better off in the long run if they get out now.

[MicaelS]

9. Agree completely. n/t

[sadoldgirl]

10. Yes, and no. You will have to blame Mitterand mainly,

because he made the Euro the condition for German
reunification, which Kohl desperately wanted.

Yet, Mitterand would have never agreed to a
political union.

[Drahthaardogs]

7. The rich are jealous

they never give anything away.

[Yo_Mama]

11. When nations signed on to the Euro, they also agreed to fiscal policies

Of course almost none of them followed those policies, and that includes Germany. Nor are they completely possible.

But Greece did violate numerous covenants. This is not a simple situation, and almost all of the external debt (debt not owed domestically in Greece) is actually owed not to banks but to the ECB, the IMF and other European governments.

So you are quite, quite wrong about the motivations here.

The real issue is the debts of all the other countries. They don't want to officially write down Greek debts because they can't afford to do it for the Irish, Italians, Portuguese and Spanish debts.

It's a bad situation, but a highly political situation, and misunderstanding it doesn't help to create a solution.

[MFrohike]

12. Yes, it was and is

Combined with Maastrict, it's nothing but an overt assault on the welfare state. It was meant to be a new gold standard and it's succeeding quite well in that regard.

[MattSh]

13. Correct. Here's how it was designed to work...

Robert Mundell, evil genius of the euro | Greg Palast | Comment is free | The Guardian

The idea that the euro has "failed" is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.

That progenitor is former University of Chicago economist Robert Mundell. The architect of "supply-side economics" is now a professor at Columbia University, but I knew him through his connection to my Chicago professor, Milton Friedman, back before Mundell's research on currencies and exchange rates had produced the blueprint for European monetary union and a common European currency.

Mundell, then, was more concerned with his bathroom arrangements. Professor Mundell, who has both a Nobel Prize and an ancient villa in Tuscany, told me, incensed:

"They won't even let me have a toilet. They've got rules that tell me I can't have a toilet in this room! Can you imagine?"

As it happens, I can't. But I don't have an Italian villa, so I can't imagine the frustrations of bylaws governing commode placement.

But Mundell, a can-do Canadian-American, intended to do something about it: come up with a weapon that would blow away government rules and labor regulations. (He really hated the union plumbers who charged a bundle to move his throne.)

"It's very hard to fire workers in Europe," he complained. His answer: the euro.

The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

Complete story at - http://www.theguardian.com/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro

[Kurska]

14. Fiscal sovereignty requires a national currency.

This is a law of economics so ignorantly ignored by the dreamers of the world.

Great OP

[alcibiades_mystery]

15. In the years between German reunification and the Euro proper

Every economic discussion in Europe was about currency: devaluing, revaluing, devaluing again. The record is pretty interesting on this point, though mostly forgotten (or never known) in the US. The discussions (and maddening hem-hawing) go back well past reunification, of course, but the intensity of the issue was at a fever pitch in the 90's. It's interesting that we're trending back in that direction after, really, just about 15 years.