Peak Euro?

Looks like we may be reaching peak Eurocracy.

In the UK, Ukip is surging and David Cameron has had to scramble to promise a referendum on EU membership in the event (currently unlikely) that he wins the next election. In Italy, recent elections were won by parties that reject continued austerity. Now, Germany has a new party calling for an end to the euro.

Ambrose Evans-Pritchard reports:

A new party led by economists, jurists, and Christian Democrat rebels will kick off this week, calling for the break-up of monetary union before it can do any more damage.

“An end to this euro,” is the first line on the webpage of Alternative für Deutschland (AfD).

AfD leader Bernd Lucke is an economist.

They propose German withdrawl from EMU and return to the D-Mark, or a breakaway currency with the Dutch, Austrians, Finns, and like-minded nations.

Club Med keeps the euro. It enjoys instant devaluation, while still able to uphold euro debt contracts. The spectre of sovereign defaults recedes.

This is the way forward. A new ersion of the Latin Monetary Union keeps the euro, while a Nordic Monetary Union creates a new currency. The euro survives, the chaos of withdrawal and default is averted, as is the current grinding austerity, but the two zones pull apart.

Why two zones have diverged so much is a question for another day.

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2 Comments

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2 responses to “Peak Euro?

  1. If I’m not mistaken though, this would entail an effective write-down of existing debt obligations given that those obligations would continue to be denominated in devalued Euros. I’m not saying that this wouldn’t be a good way to resolve the crisis, I agree that there seems to be a basic structural problem similar to the basic problems of the gold standard, but I wonder if a partial default is within the realm of the politically possible.

  2. I admit that is a major problem. I cannot see anything better right now, though.

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