The Euro Was Doomed From The Start—–And Still Is

The Greek crisis epitomises the complete mess that Europe has made of the single currency. Greece should never have been admitted in the first place, though it was not the only country – Belgium and Italy were two others – that didn’t meet the strict criteria for membership. From the beginning, the rules put in place for the euro, relating to bail-outs, monetary financing and deficit levels, have been ignored. Europe claims to be a rule-based organisation. But however else the eurozone is run, it is not run strictly according to its own rules.

The rhetoric of the various participants in the Greek crisis knows no bounds. Prime Minister Alexis Tsipras accuses the IMF of “pillaging” his country and of “criminal responsibility”. In turn, the governor of the Greek Central Bank warns of events that may “entirely transform the economic and political balances throughout the West”. No 10 Downing Street warns that Britain faces an economic crisis if Greece defaults and leaves the euro. It is an astonishing achievement of the euro that a small country on the periphery, representing just about 2 per cent of Europe’s GDP, should be able to threaten such a catastrophe.

The Greeks have made mistakes. Yet I have to confess to being more sympathetic to Greece than many observers. The EU has also made mistakes and the crucial one was the failure to write off more of Greece’s debt with the first bail-out in 2010. Greece’s debt now is spilt milk. It will not and cannot be repaid. Even the IMF’s chief economist, Olivier Blanchard, has expressed his dismay at the unreality of the negotiations and called for further debt relief to be a central part of any settlement.

Because of the absence of realistic debt write-off, Greece has had to undergo, to use the official euphemism,

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