Survival of the Euro – a dire game of Jenga perhaps?

eurocoin questionsandjengaGREECE

Oh dear, perhaps you haven’t heard of Jenga? Well it’s a block-stacking, and finally a stack crashing game. A set of wooden blocks are first stacked-up in a sturdy tower, whence you then chance your arm, against the laws of gravity, by pulling out an individual block from the pile. When a critical block is pulled out from the stack the whole tower collapses. End of game.

You see this is very much like the Euro isn’t it? There, we had an assorted assembly of European countries, desperate to form a single currency (sixteen years ago), inserting themselves as individual blocks into such a stack – the Euro tower no less. But it turned out to be not such a sturdy tower did it? The Euro-jenga is perhaps now a game being played-out with potentially devastating effects by the European Union, don’t you think?

The whole concept of the Euro was ill conceived from the outset and it was based on naivety and ideology. The laudable and ambitious idea was to emulate in Europe the success of the world’s all powerful American dollar. The US dollar is a successful common currency across the whole of the fifty States of the USA, and the idea was that the EU could equate individual Countries with States – WRONG! While it is true in America that the individual States have a certain amount of autonomy, nevertheless there is overriding central government authority and financial & fiscal control from Washington. Not so in Europe, where every country retains its own sovereignty and each individual government paddles their own canoe, so to speak? Oh yes, there is a so called European Parliament that makes laws but it has zero de-facto control of member country’s finances – and they can easily get out-of-control (and by golly haven’t they?). This conundrum has been compounded by the shameful failure of the Eurozone runners  to stringently enact and enforce their sensible entry constraints on those wishing to join the Euro – in the end any Tom, Dick, & Harry was allowed in (and it certainly shows doesn’t it?).

The bottom line now is that because of the European debt crisis there are a number of crucial Eurozone members that have already hit the buffers financially – like Greece, Portugal, Ireland, and Spain (there are ongoing fears about Italy) . Lending them large masses of money from Europe’s central bank has been necessary to avoid them defaulting on their loans, being bankrupt, or having no cash in the bank to survive – the so called ‘bailouts’.

Traditionally, when central banks lend large sums of money in an emergency, they extract a heavy price don’t they? It can be summed-up in the word ‘austerity’, can’t it? Its madness really though, because the answer to such debt problems is to stimulate ‘growth’ and you can’t do that by blighting the economy and with putting out the flame can you? But that is what they always do.

The problems with the Euro has caused widespread stunted growth, and the frustration with cut backs, high unemployment, and the resulting disgruntlement with the EU is growing like Topsy – in particular in countries like Greece, Spain. Italy, & even France.

Where is it all going to end, you might wonder? Well, the beginning of the end of this wild experiment on European monetary union might start with Greece. They have had enough you see, and have recently elected a new government on a platform to reverse the violently opposed austerity measures (an irresistible force?) – their problem is though that the country is currently broke and desperately needs injections of money from the EU (an immoveable object?). Hard-nosed powerhouse Germany is becoming increasingly frustrated though with Greece’s attempts to back out of their previous commitments, and may well decide to pull the plug on further funding – if so, Greece will ‘default’ and leave the Euro. The first Euro-jenga block will then of course be pulled-out from the unstable stack – will it collapse, eh? But if Greece gets away with it, who else will follow that lead – Portugal?  Will the tower then collapse? What about Spain’s block? Will the Euro-jenga structure then come crashing down? Perhaps the Euro will last less than another decade? Perhaps the European Union will bite the bullet instead and form a full political ‘United States of Europe’ (that will please the Germans, won’t it?)

 

 

[As it stands the Euro (EUR) is a dead duck in the water, surely? Its value is going down and is now below its launch value – still want to stick with it?]

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