Greece debt crisis exposes flaws in euro, one-worldism
Wouldn't it just make sense if there were one world currency, one world government and everyone were on the same page?
Sure, if that were possible. But Greece is showing why it probably is not.
I'm not talking about totalitarianism. That doctrine has failed enough times that it's still surprising anyone (China, Cuba, Venezuela) still gives it a go.
I mean an agreed-upon simplification of currency, say, to begin with. That was the dream of the euro when it debuted in 2002.
Here's a good piece by the Associated Press, reported from all over the Continent, explaining why the one-for-all ideal goes right out the window when one country behaves badly:
"I'm going bankrupt due to this recession, so I really don't care about Greece," said Michele Fenizia, 55, who runs a takeaway kosher pizza place in Rome. "I don't think we should focus on helping Greeks, we should mainly think of ourselves."
Even in a global economy, and despite the fact that Athens is closer to Rome than New York is to Chicago, when you're a suffering pizza-maker in Rome, Athens may as well be another planet, and another time. Like politics, economics turns out to be local, too.
The Washington Post editorialized this morning on the euro problem, saying:
"By effectively replacing their currencies at a puffed-up rate, the German-underwritten monetary union enabled Greece and other southern European countries, plus Ireland, to consume more than they produced. If this situation reminds you of the persistent imbalance between the high-consumption United States and China's export machine -- well, it should."
The difference between Greece and the U.S. and even China, however, is that Greece does not control its own monetary policy. The U.S. can print money to stave off a liquidity crisis, as it did in 2008, or it can tighten interest rates to stave off inflation, as it probably will do sometime this year. China, aside from manipulating the value of yuan, also controls its currency.
Euro monetary policy is set in at the European Central Bank, in Frankfurt, Germany, not Athens. So even though Greece sets and collects its own taxes and creates its own budget (and chronically under-reported its debt and ran a government based on bribes), it did not have the lever of monetary policy. It's like putting someone behind the wheel of a car and telling them they can accelerate and brake but not steer.
But the main driving force of the euro’s fall from grace has been increased focus on a flaw that many commentators believe to be at the very heart of European monetary union.
“Behind this intense focus on Greece is the long-standing unresolved issue of how to enforce fiscal discipline in a currency union of sovereign states,” says Thomas Stolper, at Goldman Sachs.
If the Greek contagion spreads to the rest of Europe, the euro's days could be numbered. And won't Britain look smart for refusing to abandon its beloved pound?
For now, at least, it looks like the dream of one-worldism -- be it a super-currency or a democratically elected global government -- will remain the province of science-fiction writers.
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February 12, 2010; 5:27 PM ET
Categories: Deficit/debt , The Ticker | Tags: Greece debt crisis, euro, one-worldism, yuan
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