The Euro is an ever greater misery in the making. By design this currency is absolutely not sustainable. For 16 years Germany and The Netherlands (D&NL) were able to export unhindered to other Eurozone countries where most of their stuff was bought with borrowed money. Thus the industry of the importing countries (Portugal, Italy, Greece, Spain-PIGS) shrank continuously. The result was rising PIGS unemployment and further strengthening of imports from the German “miracle” and The Netherlands (D&NL).
Greece is merely a small symptom of what is waiting to happen at continental scale. All PIGS countries are nearing bankruptcy while D&NL will see their Eurozone markets shrink because the PIGS capacity to borrow is narrowing and nearing exhaustion. There is nothing stable in the European design. From the Brussels bureaucracy comes a continuous flood of rules while a harmonization of the economic level, especially a PRODUCTIVITY CONVERGENCE had never got the adequate priority. As result, in just 16 years the internal free market, instead of integrating, has separated and pushed the individual economies at an even greater distance from each other: more and more money+work went to D&NL, while more and more debt+unemployment went to PIGS. And Brussels maintains a dangerous indifference about this. Their attitude is kind of a power trip: rules first, results later.
The Eurostat data continue to show a growing productivity divergence between D&NL and PIGS.
The Eurozone has 1 currency unit for 19 economies. Can one imagine a car designed to have 19 wheels, each wheel allowed to run at a different speed and not falling to pieces?
But how dramatic and massive the development shortfall of the PIGS may be, there’s an even bigger problem of the “Euro”: the single currency is not European. The Maastricht Treaty prohibits fiat money creation by the ECB. Before the ECB was established, due to the IMF arrangements, no central bank of any of the countries now in the Eurozone had a status of Lender Of Last Resort (LOLR). Nor has the ECB a LOLR status. To circumvent the Maastricht Treaty while widening the money supply, the ECB was forced to give all the new liquidity coverage in US Dollars by means of swaps with the Fed. So, what does this mean in practical terms? It means that all “quantitative easing” operations of the ECB are financed by loans from the Federal Reserve, loans which have to be paid back in the future by the people of the Eurozone. When this debt of trillions will show its effects it will be too late. This final crash will be like a life threatening car accident: the awaken from the coma patient will be told what happened and informed about a paralysis kind of future. The fundamental problem of the Euro is that this currency is a Dollar surrogate and the Eurozone is a monetary plantation of the Federal Reserve.
With a dollar surrogate as currency, a central bank without the power of Lender of Last Resort, an economy less integrated than at the time when the Euro has been introduced, the Eurozone can not survive the harsh storms of the history to come.