Imagine that the euro had never been introduced and we instead had had freely floating European currencies and each country would have been free to choose their own monetary policy and fiscal policy.
Some countries would have been doing well; others would have been doing bad, but do you seriously think that we would had a crisis as deep as what we have seen over the past seven years in Europe?
Do you think Greek GDP would have dropped 30%?
Do you think Finland would have seen a bigger accumulated drop in GDP than during the Great Depression and during the banking crisis of 1990s?
Do you think that European taxpayers would have had to pour billions of euros into bailing out Southern European and Eastern European governments? And German and French banks! (I elaborate on this here.)
Do you think that Europe would have been as disunited as we are seeing it now?
Do you think we would have seen the kind of hostilities among European nations as we are seeing now?
Do you think we would have seen the rise of political parties like Golden Dawn and Syriza in Greece or Podemos in Spain?
Do you think anti-immigrant sentiment and protectionist ideas would have been rising across Europe to the extent it has?
Do you think that the European banking sector would have been quasi paralyzed for seven years?
And most importantly do you think we would have had 23 million unemployed Europeans?
The answer to all of these questions is NO!
We would have been much better off without the euro. The euro is a major economic, financial, political and social fiasco.
It is disgusting and I blame the politicians of Europe and the Eurocrats for this and I blame the economists who failed to speak out against the dangers of introducing the euro and instead gave their support to a project so economically insane that it only could have been envisioned by the type of people the British historian Paul Johnson called “Intellectuals”.
And don’t say you where not warned. Milton Friedman had warned you that forced monetary integration would cause political disunity and would be an economic disaster. He was of course right.
Bernard Connolly who wrote the book “The Rotten Heart of Europe” warned against exactly what is going on right now. Nobody wanted to listen. In fact Bernard Connolly was sacked from the European Commission in 1995 for speaking his mind.
The sacking of Bernard Connolly unfortunate is telling of lack of debate about monetary policy matters in Europe. Any opposition to the “project” is silenced. The greater “good” always comes first.
There have only been referendums about euro adoption in a few countries. In Denmark and Sweden the electorate have been wise enough to go against the “orders” of the euro establishment. As a consequence both countries today are better off than if the electorate had followed the orders of the elite and voted ‘yes’ to euro adoption.
It is easy to understand the frustration of the European voters. They have been lied to. Unfortunately the outcome is that voters across Europe now are happy to vote for parties like Front Nation, UKIP, Podemos and Syriza. I ask you the cheerleaders of the euro project – is this what you wanted?
I can only say that I can understand the Greek population’s anger over seven years of economic and social hardship and I likewise can understand that the taxpayers of Finland don’t want to pay for yet another meaningless bailout of Greece. But you should not blame each other. You should blame the European politicians who brought you into the euro.
Blame the eurocrats who never understood Hayek’s dictum from his great book “The Fatal Conceit”:
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
The euro is a fatal conceit.
UPDATE: I now have some empirical evidence that the euro is indeed a Monetary Strangulation Mechanism.
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