The Euro was started so that Germany would never attack France again. This was an historical diplomatic breakthrough.
But today, although Europe’s financial leaders have not sought my advice on either economic policy or hotel behavior, it is clear that the Euro must let some of its members go.
The root problem is that a continent of Eurocrats could not leave well enough alone. They were compelled instead to extend the new currency into Europe’s fabric as deeply and widely as possible. Doing so furthered grand notions of a “united” Europe, and addressed paranoic fears of Franco-German economic domination. Only the UK among the larger nations of Europe resisted the Euro’s sales pitch.
The Euro is used by a group of unequal nations. You can contact me for the details I’ve compiled on the topic if you’d like, but the basic fact is this: the Euro makes it more expensive to live in the less wealthy Eurozone countries than it should be. This distorts the costs of housing, labor, and many other goods, thus making it very difficult for, say, Portugal and Greece to compete with Germany and France.
Furthermore, there may be open borders, but the language barriers and cultural traditions make it difficult for a truly free flow of labor, such as is found in the U.S.
So, after an experiment lasting more than 16 years now, it is clear that the Euro works fine for Germany, France, and the Netherlands, less so for Spain, Italy, and others, and doesn’t work at all for Greece and perhaps Portugal.
A dramatically shrinking drachma or escudo would cause screaming headlines and TV shoutfests for a few weeks, but in the end would allow their issuers to grow on their own terms. This assumes that the countries’ investment climates would be liberal, ie, foreigners would be allowed to invest very freely in markets, real estate, and businesses.
Unleashing less wealthy Eurozone nations should also cause a dramatic rise in the value of the Euro – with the ironic rebuttal to earlier fears that German and French businesses would have to work harder to keep their products competitive in a world market.
I say all these by peering through the lens of the research I’ve been conducting for the past 18 months. By weighing countries’ ICT expenditures on a truly relative basis, I’ve found the Eurozone to be lagging.
Sweden and the UK – both non-Eurozone countries – lead the wealthy Western European nations. Estonia is the leading Eurozone country, and in fact leads both Sweden and the UK. But it lags many of its Eastern European neighbors, something that I think it would not do if it still had the kroon in place.
Among the larger Eurozone countries, the Netherlands stands first, followed by Germany and Finland. With the latter, I see another Euro-drag – had it stayed with the markka, would Finland have finished closer in the rankings to neighboring Sweden?
The non-Euro countries of Central and Eastern Europe are the big winners in my rankings, as they have shown a commitment to IT purchases, have relatively low costs of living, have maintained relatively income parity, and continue to shed their corrupt Communist pasts.
And a final note: halfway across the world from Europe, phenomenal South Korea tops my rankings overall. Its currency, the won, has steadily shed value over the decades. At 1150 to 1 USD today, it has lost about 99.99% of the value of its original post-WWII currency.
Floating freely since 1997, the won’s exchange rate has little to do with the absolute value of its country’s issuer. I can’t imagine the country would do as well as it has, by all world measures, if it was somehow yoked into some sort of currency zone.