The Eurozone is a kind of lunacy if you look at it as an economic project. But this isn’t about economics, or rationality — it's about emotion, as the leader in today’s Telegraph says. The Brits and Americans often fail to understand this fully because we judge a currency union in terms of its economic merits. But many European nations see it as part of another, wider, agenda. For the Spanish and Portuguese it’s about not going back to dictatorship. For Greece it’s about being Western rather than Eastern (and not being run by the military). As John O’Sullivan wrote for The Spectator recently, Eastern European states still — even now — want to join this imploding Euro just to make sure they don’t fall back into the orbit of a resurgent Russia. For France it’s about ‘constraining German power’ (as Robert Peston put it during his documentary on Thursday). And for Germany it’s about atonement. One Cabinet member told me that Lady Thatcher explained the European project to him thusly: ‘The French are terrified of the Germans — and so are the Germans.’
P.S. Peston's documentary is well worth watching online, for those who missed it. It's fair, informative and the list of interviewees is broader than the Roubini-Soros range of opinion you normally get from the BBC. Dangerously underpriced debt sent the Spain, Greece, Ireland, etc, ‘a little bit mad’ (to quote the superb Louise Cooper, who is interviewed). I wonder if he'd apply the same analysis to Britain, because that’s precisely what happened here. And our remedy? Even cheaper debt. What can possibly go wrong?
(And I do mean 'hundreds' of European polities, above. There were about 1,000 mini-states in the 14th Century and about 500 in the 16th Century.)