Foreign Perspectives

An awful lot of people are now taking it for granted that Greece will be parting ways with the euro later this year. The only question now seems to be whether it’ll be an orderly exit or a total fiasco. Either way, it seems sure to be something of a roller coaster ride for everyone.

But, whether or not Greece exits the euro, there remains the question as to what to do in the rest of Europe. There are just too many major economies in trouble and needing to grow their economies at the same time as cutting their deficits. One country trying to do one of those choices is difficult but several countries trying to do both simultaneously seems an incredibly unlikely prospect. The result seems likely to be a little of one, a little of the other and overall nothing much happening that’s in any way positive.

In the midst of this the European central bank president sees the future as him taking over the position of the central banker for all the Eurozone countries. That would have been the sensible way to go 10 years back when the euro began. Now it brings forth the vision of Bankia writ very, very large: not the merger of seven lame-duck regional banks this time to create one bigger failing bank but rather the merger of a number of lame-duck central banks to create one bigger failing central bank. Even if he had the time and there were the political inclination to do it, it seems just a means of postponing the inevitable break-up of the Eurozone and, just as the collapse of Bankia will be more painful than the collapse of the individual banks that created it would have been, the collapse of the super central bank would be much, much more painful than the collapse of one or two smaller ones would (will?) be.

Painful as it may well be, it would seem that the best way forward would be to recreate the drachma, lire, peseta and perhaps the punt.