Irwin Stelzer

Do not resuscitate

The euro is almost certainly dead. Brussels would be wise to accept that. It won’t

issue 20 November 2010

No one can fault the doctors: they are using every tool available to them to save their very ill patient. But they will probably fail in their efforts to save the euro in its current form.

And this will be because the regimen they originally prescribed did more harm than good. Economists were almost unanimous in warning that it is beyond the wisdom of man to set an interest rate that suits 16 countries without also unifying fiscal policy, creating income transfer mechanisms, and a common language to reduce barriers to labour mobility.

So we have Ireland, a country that devised a low-tax path to prosperity. Rather than raising interest rates to cool its overheating economy, the European Central Bank kept area-wide interest rates low to suit Germany. The result was a property bubble followed by financial bust.

Before that we had Greece.

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