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How’s That Euro Thing Working Out?

February 5, 2010
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By all appearances, not too well:

A rout in stock markets that began in Europe spread to Wall Street on Thursday and around the globe to Asia on Friday, amid fears that Europe may be the world’s next financial flashpoint. Pressure has been mounting across the Atlantic as Greece, Portugal and a handful of struggling countries that use the euro scramble to pay off mountains of debt accumulated from years of profligate spending.

Well, why don’t they easy up their money?

The current troubles began in Greece, which qualified for membership in the euro club in 2001. But the government never curbed shortfalls in its budget when times were good, and drastically expanded employment by adding to government rolls, even as an inefficient tax collection system reduced tax receipts.

Oh.  It’s pretty interesting that a country like Greece couldn’t become a banana republic even if they wanted to because they lack the tools to monetize their debt.  Does the European Onion have a plan to fix this?  Doesn’t look like it:

Fearful investors have started asking whether France, Germany and other rich countries should be forced to bail out their poorer cousins, or simply allow them to default — an outcome that would have major repercussions for Europe and financial markets worldwide.

Maybe I’m just a wee lad, but I never really understood the advantage of being able to use what is essentially an overvalued currency in the first place.  It always seemed weird that like peripheral countries like Greece and Malta would willfully subject themselves to the monetary policy of the more powerful countries like Germany, the location of the European Central Bank.  Sure, it gives you a stronger currency (and thus cheaper stuff) during expansions, but the ability to revalue your money comes in handy during recessions.  I guess it’s one of those things that’s really great when things are good and really awful when things are bad.  Like alcoholism.  Okay, bad example.

Situations like these come with the territory of ceding your economic freedom without completely ceding your economic freedom.  Even though the Eurozone is more like a nation now than ever before, Greece still has just enough room to screw itself up, as it did when it refused to shore up its deficit, and not enough room to try to repair itself.  What a botch.  Luckily, none of the other members of the Onion have any freedom either, so they may have to bail the Greeks out against their wishes.  We should totally try that whole let’s-all-get-together-to-protect-ourselves-because-none-of-us-have-defense-budgets-due-to-the-ever-increasing-cost-of-social-democracy thing.  Seems like it’s working.

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