As European finance ministers join US Treasury Secretary Timothy Geithner in Poland today for a two day meeting to discuss Europe’s debt crisis, the controversy over support for “failing” eurozone members continues to spark market volatility.
The euro was a mistake. Its architects doubtless envisioned a socialist European superstate evolving naturally from the common currency. Member states would be seduced into exchanging more and more national sovereignty for the symbiotic benefits of access to a larger market. That foolishly chimerical notion, along with the rest of the world’s confidence in the euro, has evaporated in the heat of turmoil in the financial markets. It was a non-starter really. European countries are politically and culturally too different to warrant a single currency.
It should have been obvious that redistribution between richer and poorer member countries would be necessary and problematic. Bailouts are effectively a transfer of bank debts to EU taxpayers and could not be tolerated for long.
We’ve reached the tipping point for the euro. Breaking up is hard to do, but it will be less painful if it is done in a controlled and orderly fashion. The worry is that Angela Merkel and Nicolas Sarkozy don’t see this and they’re blocking the fire exits, causing a panic.