Dear Ms Merkel,
The Euro is dead because you were too greedy. You were happy to take the benefits of a currency which undervalued German goods and therefore made you the most competitive country in the eurozone and very competitive on the world stage. You were able to do this and provide social benefits to your workers which are the envy of the world. Unfortunately you and your people are not willing to redistribute those benefits around the rest of the eurozone to compensate them for joining the Euro. They gave up the advantage of a floating currency and the ability to print their own money and set their own interest rates. Now you cannot afford to bail them out because you spent all the money on benefits for yourselves.
Please give it a decent burial and leave the rest of us alone. This will not be the end of a European trading block or the European Union it is simply a recognition that it was a badly designed currency block which did not enforce fiscal unanimity at the outset and enforce fiscal transfers to balance out the inevitable divergence in competitiveness. I realise that fiscal transfers are probably politically unacceptable because the economic narrative of the past thirty years has been low taxes, low regulation and unemployment as a price worth paying. You and the Western Governments (the U.S.A. and the U.K. foremost in this endeavour) have rigged the system in favour of the rich and powerful elite which you are a member of backed by a press which sets the narrative. In fact as George Monbiot points out “The corporate newspapers are the elite’s enforcers, misrepresenting the sources of oppression.”. The ordinary working people, the young the old, the voters, are denied a voice because they are portrayed as extremists if they object to the excesses of unconstrained financial, corporate and political power. The people who stand up against oppression in Libya are portrayed as heroes when they stand up against oppression and are afforded the support of our military might in the defence of their struggle for democracy whilst peaceful protesters highlighting the excesses of the City of London and Wall Street are forcibly evicted and vilified in the press.
We need governments to return to full employment as the main objective of policy, not the narrow goals of profit for its own sake. This requires cooperation between governments, a return to the principles of the Bretton Woods System but this time with the added security of the ‘Bancor‘ as proposed by Keynes. Some will argue that Keynesian economics is discredited and leads to unconstrained borrowing. That is the argument put forward by David Cameron and the Conservative party of Great Britain the narrative being used being that in times of austerity, whilst we are in debt, the answer is not to borrow more (like borrowing on a credit card) but to cut back on spending and pay back our debts. This is a siren song based on a misguided interpretation of Keynes’ argument. The basis of Keynes argument was that in the recessionary phase of the economic cycle government should borrow to invest in a countries infrastructure thus keeping people in work and producing worthwhile assets for the country whilst in doing so also causing the multiplier effect causing growth in employment and industry when those employed in public works spend their earnings on goods produced by the private sector. The difficulties experienced by the western nations ascribed to Keynesianism were due to governments misusing the theory, the corollary of Keynes argument that governments should borrow and spend in times of recession was that governments should cut back spending and pay back debt when the economic cycle returned to growth. Something that government chose to avoid due to narrow political advantage (using the gains to reduce taxation rather that pay back debt) and proponents of the Austrian School choose to conveniently forget.
This is a time of world financial crisis caused by politicians and the proponents of laissez-faire economics in pursuit of their own narrow interests. It is to be hoped that we can overcome this by working together, I am not confident that our current political leadership in the West is up to the job however and it may take the unpleasant results of mass protest to spur them to action. My plea then is to Ms Merkel, Mr Cameron, Mr Obama and the rest of the West to get together with China, Russia and the rest of the world to sort this out before it gets any worse.