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

Insight Analyst – Permanent – Up to £40k – North London

£35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

Associate Recruitment Consultant

£18000 - £23000 per annum + OTE: SThree: SThree are a global FTSE 250 business...

SQL Developer - Permanent - London - Up to £50k

£45000 - £50000 Per Annum 23 days holiday plus Pension scheme: Clearwater Peop...

KS1 and KS2 Primary NQT Job in Lancaster Area

£85 - £110 per day: Randstad Education Preston: Randstad Education is urgently...

Day In a Page

Read Next
 

We need to talk about homophobia in the police

George Gillett
 

i Editor's letter: Summer holidays are here... so what to do with the children?

Oliver Duff Oliver Duff
Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn