Soon there will be no more FIAT's in the road
The Euro must work but it's likely to fail
From Gideon Rachman, FT
Ever since a single
European currency was first mooted, I have believed that it would eventually
collapse. That belief is based on three simple propositions. First, a currency
union cannot ultimately survive unless it is backed by a political union.
Second, there will be no political union in Europe because there is no common
political identity to underpin it. And so, third — the euro will collapse.
Plenty of people have
attempted to convince me, over the years, that each of these three propositions
is simple-minded and wrong. But events keep driving me back to the idea that
the euro lacks the political and economic underpinning that it needs to
survive.
The Greek crisis is a case in
point. The most passionate pro-Europeans are right that the only long-term
alleviation of the problems of the weaker economies in the eurozone would be to
set up a genuine transfer union, in which tax revenues automatically flow from
rich areas, such as Germany, to poor areas, such as Greece. But that is never
going to happen because the Germans and Greeks do not trust and like each other
enough to merge their fates in a real political union.
The Euro is a very good thing. You can travel across Europe without giving money to banks to exchange your national money. Students can study in any school in Europe. We have the same rules. Euro is a good store of value for your savings.
However Italy cannot devalue and since it loses a bit every year vs Germay& The northern countries, Italy is getting poor slowly. Since there are no transfers from Germany Italy has a bit of an incentive to leave and devaue they currency again. Soon there will be no more FIAT's. If Italy exit they will devalue and the FIAT's can be back again at least for the domestic market.
With a Single market only the best will survive and the best is not FIAT.
With a Single market only the best will survive and the best is not FIAT.
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