Leading article: Euro's day of reckoning looms

The Franco-German elite which rules the euro is still in denial about the failure of its core project

Share
Related Topics

British pro-Europeans have been subdued lately. The antis who warned against the creation of the euro have been in full "told you so" flow since the credit bubble burst nearly four years ago. They are entitled to be, but we cannot allow them to claim the euro's failure as a vindication of their entire world view.

This newspaper wanted Britain to adopt the euro, but we said in 2003, when the Blair government decided against it, that The Independent on Sunday "accepts the economic conditions are not some marginal irrelevance". It was never close to being in our economic interest to join the eurozone.

However, we pro-Europeans did not take seriously enough the flaws in the currency's construction. We could see that not just the Greeks, but the Italians and the Spanish, had been let in to the club for political rather than economic reasons. But we assumed that the deep determination of the Germans to make the French project work, financed by the deep pockets of the German taxpayer, would prevail.

It has been clear to us for at least a year now that this is not so. Unfortunately, the Franco-German elite which rules the euro is still in denial about the failure of its core project. Last week's elections in France and in Greece were important breaches in that barrier against reality. François Hollande was elected to the French presidency on a platform of opposition to "austerity", shorthand for the orthodox policies defended by the outgoing president, Nicolas Sarkozy, and Angela Merkel, the German Chancellor. It is not clear what Mr Hollande will do about it; specifically what he will do about the eurozone treaty. He disagrees with it, but it is to be put to the Irish people in a referendum at the end of this month, so it is too late to change it. Instead, he and Ms Merkel are likely to repackage some large numbers when they meet in Berlin this week, to allow Mr Hollande to announce a co-ordinated stimulus.

None of which will deal with the fundamental question. Most economists agree that cutting public spending in the European periphery economies is the wrong response.

Larry Summers, Bill Clinton's former treasury secretary, said the other day that "high deficits are much more a symptom than a cause of their problems". The real cause, he said, is "lack of growth" and cutting spending makes that worse.

But even if the eurozone could pursue an expansionary policy, it would not solve the underlying problem. Germany could in theory run high inflation, but would never agree to do so, in return for some easing of the squeeze in Greece and Spain. Yet the fundamental imbalances would remain, until the parts of the eurozone return to their own currencies and allow their value to adjust.

Fortunately, the Greek election promises a way out of this impasse. The Greek people have rejected the price demanded for euro membership. It may be that a coalition government can be put together today, or perhaps there will be new elections. Either way, it's time to prepare for Greece's exit from the eurozone.

This may be (even more) painful for the Greek people in the short term, but at least it offers a way out, which trying to maintain the status quo does not. Equally, it may be that Greece can postpone the reckoning again by renegotiating the terms of its bailout. After all, the Germans can afford to buy the entire country, not just its sun loungers. But they cannot afford Spain and Italy, the next in line. It is time to start preparing for their exit from the euro, too.

The Greek people have spoken. It is in our interests that the euro countries resolve the currency's difficulties. Our prosperity depends on it. True pro-Europeans should support the break-up of the euro, as it is in the interests of the whole Continent.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

QA/BA - Agile

£400 Per Day: Clearwater People Solutions Ltd: Our client are currently seekin...

PPA Supply Teachers

£121 - £142 per day: Randstad Education Luton: Early Years, KS1 & 2 Prima...

Primary Supply Teacher

£121 - £142 per annum: Randstad Education Luton: Early Years, KS1 & 2 Prim...

Primary Supply Teacher

£121 - £142 per day: Randstad Education Luton: Primary supply teacher Hertford...

Day In a Page

Read Next
 

Ebola virus in the US: How did the disease ever spread this far?

Sophie Harman
 

The most common question I am asked is 'How do I become a YouTuber?' This is my reply

Jim Chapman
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?