Peter Oborne makes a bold prediction in today’s Mail: that the Euro – ten years old yesterday – won’t live to see its twentieth anniversary. Whether or not you agree with that prognosis, Oborne’s case is compelling:
“Indeed, far from being the staggering success its supporters claim, the euro-zone is already inflicting huge damage on the nations within it. Many currency market experts believe that some of these struggling members may be forced to peel away from the euro – with devastating consequences for the rest of the world.
The greatest problems, in the short term at least, are in the four Mediterranean economies known as the PIGS – Portugal, Italy, Greece and Spain.
For each of these countries, the euro has already proved a disaster. Put simply, most of the PIGS are so heavily indebted that the market no longer believes they will be able to repay their borrowings.
Normally, if a country falls into too much debt, it can devalue its currency, essentially devaluing its debt burden – this is exactly what Britain has done over the past few months. In the euro-zone, however, the currency’s value is set centrally.
This means the only way out for the struggling PIGS is to crash out of the euro, default on their debt and start again. At the start of 2009, this prospect is beginning to cast a huge shadow over the global economy, for the sums involved are huge.”For all his economic mismanagement, that Brown hasn’t taken us into the Euro is one of his crowning achievements. If Britain’s currency were subject to the same centralised control as that of the PIGS right now, our economy would be in an even worse state. Now they have the benefit of hindsight, it’s just plain astonishing that certain people in government would still have us join the single currency.
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