I've recieved two 50 Euro notes as a payment from a guy in the Netherlands.
I certainly hope they stay good until my next overseas trip so I can redeem
them for real money without paying a fee to my bank here.
Most people in Ireland are not happy with the Euro. Prices have gone through the roof, inflation is up, and everyone calls it 'monopoly money'. This 'rose tinted' view of the Euro being a wonderful success is not accurate.
I know my way of thinking on this goes against the grain here but it's about time that Europe adopted a single currency. Imagine if the 50 states here in the USA maintained there own currencies? Well that's how it was over there. The average European country is smaller than many our our states. From Germany, for example, you are within a day's drive of about a half dozen other countries. Imagine living in Connecticut and having to convert your currency everytime you wanted to have dinner in Manhattan or go to the beaches in Rhode Island or visit Cape Cod in Massachusetts or go skiing in New Hampshire. Well, now you begin to understand what the Europeans have been going through all these years.
Well the European countries have a right to form a union if they wish, just as the original thirteen colonies here in America decided to form a union some 225 years ago.
I actually think that the tide of socialism in Europe may well be reversed by this move and capitalism has a real chance to flourish over there with a common unit of currency breaking down all the old barriers.
There is a lot more that has to happen of course before there is ever a "United States of Europe", this is just the very beginning. It may well take another generation or so for this thing to play out.
Why the Euro will Fail
Nominally, the Euro is being offered as (1) a way to achieve greater economic prosperity, (2) an alternative to the U.S. dollar, and (3) a means by which inter-country tensions can be reduced. It will fail on all those counts.
A nifty thing about a common currency is that it forces a common monetary discipline on the participants. If the participants share a common monetary philosophy, internal stresses are minimized. The problem in Euroland is that the countries involved have wildly different monetary histories (and presumably different expectations) due to their markedly different monetary philosophies. For example, the Germans are (were) rightly proud of their Deutschmark, due, in no small part, to their monetary discipline. The Italians, on the other hand, have a history of monetizing their national debt, producing severe inflationary pressures.
A country's monetary philosophy has many policy implications, which manifest themselves in many ways, such as government debt, size of the public sector, inflationary forces, expectations of the governed, etc. Try to imagine the Italians living under the austere discipline of a Prussian monetary policy. There would be riots in the street. (And in fact there were riots, when tight money policies were attempted in the 70's and 80's).
If Euroland component countries have wildly different expectations, why has there been relatively quiet acceptance of the Euro transition? One great advantage for the Euro-dreamers has been that the Euro was implemented during a time of great economic prosperity. The 90's were the time of the great, speculation-driven, Clinton Bubble. Public coffers were overflowing. Now that the Bubble has burst, expect growing economic problems and rising unemployment with resulting pressures on political and monetary policies. Even in these relatively good times, the Euro has been under pressure. Its value, relative to the US dollar, has fallen some 25% since its introduction 3 years ago.
The Euro's first major hurdle will occur when the economies of Euroland experience dissimilar conditions. This will force some hard choices. Should any of Euroland's weaker players slip into recession, expect the pressure on the Euro to inrease dramatically as political compromise steps in. The hoped-for formulation would be for the weaker countires to engage in significant fiscal discipline. However, local politics wil prevent that from happening.
The second major problem with the Euro is the resulting creation of the bureaucratic superstructure. A federalized layer of bureaucrats is being put in place in Euroland. Here the problems will be legion. Checks and balances are limited, so expect the size of this layer to grow inexorably.
It has been suggested that this new political entity will be equivalent to the US federal government's role, but this mischaracterizes the nature of the beast. The countries involved all have sovereign government bureaucracies in place already; think ministries of defense, judiciary, security, welfare, etc. None of the exisiting layers are to be eliminated (that would be "unfair"). So new layers are to be added to coordinate and implemement new Euroland laws, edicts, and policies among the various countries.
While it could be argued that a more efficient economic engine can easily absorb this additional cost, it is important to remember that Euroland is not noted for its efficiency and innovation. Take sluggish, socialist-leaning countries, tie them together with a new layer of bureaucrats and what is the result? An economic powerhouse, or something that more closely resembles the old USSR -- a socialist, centralized, supra-national bureaucratic backwater? Internal stresses will grow as additional socialist laws and programs are put in place to accommodate various "unfair" economic and political dislocations. One nation's economic advantage becomes another's political problem. The Eurocrats will be asked to step in and "fix" things.
Euroland officials are already admitting privately that decision-making by the current European Council is already close to unworkable. And they fear it could be paralysed when up to 10 extra nations from southern and eastern Europe join in 2004. Their solution? Add a new management layer, an "
EU super council" comprised of predominate Euroland countries. And so it grows.
The US has been relatively quiet on this whole issue. In part, it is because the issue is somewhat arcane. After all, to most people, economics is boring. Plus, the whole issue came to fruition during the time of Clinton. He and his ilk share in the vision of a political superstate, even at America's expense. Many on the left are watching in hopeful anticipation of the Euro's success. Conservatives, on the other hand, should realize that this will inevitably knock the Europeans for a loop. A set of major economic competitors (and problematic world allies) are in for a bumpy ride. Best to keep quiet while they shoot themselves in the foot.
The Euro will fail in its ostensible economic goals, but it will succeed in its true hidden ones, the promotion of a 'new European Soviet,' as Mikhail Gorbachev put it during a recent visit.
I spent 10 days in Spain recently ... the Euro certainly makes it a whole lot easier for foreign visitors.