One size that does not fit all

To: The Solihull Times and Sutton Coldfield News

The Euro, an EU superstate project, is shaky because currency sharing is difficult for states with differing finances, standards of living, economic cycles and productivity.

"Convergence" by cash transfers ("structural funds") and restricting government budgets ("stability pact") failed. Germany complied but Italian debt is 106% of GDP (stability pact max 60%!). Greece and Spain have trade deficits of 13% and 10% of GDP reflecting cheap easy borrowings to import goods. Now Italians borrow cheaply because their debt is in euros! The glue is coming unstuck.

So Italians pay 0.5% higher for debts than Germans who stop lending to Spanish. Banks stop lending to banks, questioning their assets. Politicians give taxpayers money to shore up private debts, compromising commercial banks by this cheap lending. The taxpayer bears the risk, but worse, on the continent the eurozone currency spreads this burden e.g. ECB (European Central Bank) takes on Spanish euro mortgage debt while their construction industry flops!

A euro light sculpture

"A euro light sculpture at the
European Central Bank in Frankfurt."

South euro flagging economies want the ECB to reduce interest rates to allow higher euro inflation to write down their debts. Germans want the opposite showing concern that current euro inflation of over 3% is above its 2% target.

German backed ECB inflation controls may cause certain countries to leave the euro to re-establish their own currencies, allowing their traditional devaluation and inflation to solve their debts as before.

As UKIP says “One-size does not fit all.” If you think this ‘heavy’ try the EU controls on the UK economy!