5 ms·

Thanks, impressive foresight in the last paragraph (as of today; the picture might yet get bigger of course): The drive for the Euro has been motivated by poli

by jkn 10y ago

Thanks, impressive foresight in the last paragraph (as of today; the picture might yet get bigger of course): The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.

toyg 10y ago
I think it's not all black and white, and there's actually a bit of both at play. Eurozone Countries now have no choice but to achieve increased levels of fiscal and political coordination. That process will inevitably produce friction, but this would have happened even without the currency. If anything, a heightened level of friction creates an urgency that would not otherwise be there. If you are looking at it from a Brexit perspective, consider that shedding skeptic countries that never joined the Euro is a good thing in a federalist sense, since it makes it easier to achieve consensus in a smaller and more committed group. In a way, losing Greece or Italy would have proven Friedman right, but the opposite happened: the Euro survived, Greece and Italy now are forced to drive their economy from a European perspective. De-facto political unity is happening, country by country.
- tonyedgecombe 10y ago
  It's interesting that despite it's economic difficulties Greece doesn't seem want to leave the Euro.
  - tim333 10y ago
    Greece leaving would be problematic as Greece owes a lot of euros. If they leave, Greeks earning devalued drachmas would probably default, causing the German banks they owe money to to fail and generally causing a lot of issues. I think they'd quite like to if it wasn't for such problems.
    - tonyedgecombe 10y ago
      I can't imagine the Greeks are too worried about what happens with the German banks, it seems far more likely they just don't trust their own government to run a fiscally sound monetary policy.
      - toyg 10y ago
        For southern countries, there is also an aspirational element. Knowing you are guaranteed the same rights and privileges as people living in Paris, Berlin or Stockholm is a powerful motivator -- if anything because you know that, should things become completely unsalvageable back home, you can always up sticks and leave to better-run countries.

by jkn 10y ago

toyg 10y ago

I think it's not all black and white, and there's actually a bit of both at play. Eurozone Countries now have no choice but to achieve increased levels of fiscal and political coordination. That process will inevitably produce friction, but this would have happened even without the currency. If anything, a heightened level of friction creates an urgency that would not otherwise be there. If you are looking at it from a Brexit perspective, consider that shedding skeptic countries that never joined the Euro is a good thing in a federalist sense, since it makes it easier to achieve consensus in a smaller and more committed group. In a way, losing Greece or Italy would have proven Friedman right, but the opposite happened: the Euro survived, Greece and Italy now are forced to drive their economy from a European perspective. De-facto political unity is happening, country by country.

tonyedgecombe 10y ago
It's interesting that despite it's economic difficulties Greece doesn't seem want to leave the Euro.
- tim333 10y ago
  Greece leaving would be problematic as Greece owes a lot of euros. If they leave, Greeks earning devalued drachmas would probably default, causing the German banks they owe money to to fail and generally causing a lot of issues. I think they'd quite like to if it wasn't for such problems.
  - tonyedgecombe 10y ago
    I can't imagine the Greeks are too worried about what happens with the German banks, it seems far more likely they just don't trust their own government to run a fiscally sound monetary policy.
    - toyg 10y ago
      For southern countries, there is also an aspirational element. Knowing you are guaranteed the same rights and privileges as people living in Paris, Berlin or Stockholm is a powerful motivator -- if anything because you know that, should things become completely unsalvageable back home, you can always up sticks and leave to better-run countries.