Do not resuscitate

No one can fault the doctors: they are using every tool available to them to save their very ill patient. But they will probably fail in their efforts to save the euro in its current form.

And this will be because the regimen they originally prescribed did more harm than good. Economists were almost unanimous in warning that it is beyond the wisdom of man to set an interest rate that suits 16 countries without also unifying fiscal policy, creating income transfer mechanisms, and a common language to reduce barriers to labour mobility.

So we have Ireland, a country that devised a low-tax path to prosperity. Rather than raising interest rates to cool its overheating economy, the European Central Bank kept area-wide interest rates low to suit Germany. The result was a property bubble followed by financial bust.

Before that we had Greece. For political reasons the eurocracy turned a blind eye to its creative bookkeeping and invited it into Club Euro. Investors immediately lowered the interest rate demanded of this Brussels-backed nation, enabling its government to borrow low and spend high. Until it couldn’t pay its bills. Unable to devalue the currency for which it had sacrificed the drachma — a one-size exchange rate is no better a fit for all than a one-size interest rate — Greece had to accept an austerity programme as the price of a bailout, and is watching its economy shrink at an annual rate of 4 per cent.

Not to worry. The eurocracy will save the euro by doubling the dose of the medicine that has so far almost killed the patient. What is needed, it seems, is as much central control over the fiscal policy of members — how much they may tax, and whom, and how much they can spend, and on what — as there is control over their money.