Even as President Obama is following in Eurosocialist footsteps, the 14-year utopian experiment on a single currency is collapsing. The architect of the euro just ran up the white flag on the biggest policy mistakes in history. Former German Finance Minister Oskar Lafontaine called his own brainchild a “catastrophe“.
“The economic situation is worsening from month to month,” he wrote on his Left party blog. “unemployment has reached a level that puts democratic structures ever more in doubt.”
“Catastrophe” is the right word.
Today Greece is suffering more than 50% unemployment. That’s worse than the Great Depression in the US. This winter in Athens, people cut down the trees in the city parks for firewood. They couldn’t afford to buy heating fuel. The resulting wood smoke created the worst smog in decades, obscuring even the Parthenon. About half of the younger people are leaving the country.
Ireland, Spain, and even France are in distress. The Netherlands economy is the worst in half a century. Only Germany is still going strong, and that fact is creating deep resentment. Germany can afford the euro. Other countries can’t. The industrious Germans make the euro expensive, while being shackled to the same currency makes Greek and Italian exports harder to sell. A single, one-size-fits-all currency can’t adjust to market conditions in widely varying spocieties and economies
Milton Friedman predicted this outcome, based on his life’s work in economics. Forbes wrote an article last year, called, Happy Birthday, Milton Friedman, The European Crisis is Your Latest Vindication.
“July 31st (2012) was Milton Friedman’s 100th birthday, and his birthday present is to watch the ‘European Project’ come crashing to the ground, just as he predicted that it would. I doubt that it gives him any pleasure. In fact, Friedman told Robert Mundell (the ‘Father of the Euro’) that since the experiment had already been entered into, he hoped that he would turn out to be wrong. But he hasn’t been.”
For econophiliacs, the detailed debate between Friedman and Mundell can be found here.