I used to find myself amused at the small stores around Barcelona and Malaga that used to list prices in Euros and then the now defunct peseta below, imagining the older residents of the neighborhood deciding that adopting a new currency after so many years of another was just too much effort. After all, this was years after the introduction of a European currency, meant to unite the 17 member states that had signed on to the experiment under a single economic policy. Were they really waiting for a return of the peseta or could they just not muster the enthusiasm for this great European project? Over the past few weeks, I’ve started to see some wisdom in the actions of these smaller shops as the reality of a broken or drastically altered Euro becomes more of a reality that anyone involved ever hoped it would be. Banks in the UK are running war games to see how hard they would be hit if the Euro collapsed – not if, but how much of a dent it would leave. Heads of state are having little luck calming voices of calamity from even within their own parties. Euro-skeptics are now being hailed as prophets who saw the ill of the continent’s ways as Euro Romantics, as Paul Krugman has coined them, rushed headlong into certain economic disaster.
Google ‘The end of the euro’ and you’ll be greeted by a lengthy list of the phrase as decisive statements and pondering aside. The coverage runs from the sadly hopeful to the methodically analytical. The news, they all agree, is not good. Meanwhile, even the best efforts of political leaders from Berlin to Madrid have done little to rebuild any sort of confidence in the currency and really the economic stability of the entire community. Despite new leadership, decisive shifts of power and pledges of pushing through difficult cuts have done little to bolster investor confidence, leaving countries struggling beneath spiking interest rates and a currency that seems to slip against the US dollar with each passing day. Yes, it remains steady considering the storm moving across the continent but losing ten cents against the dollar since January is nothing to dismiss. And finally, Chancellor Merkel crushed any remaining hopes of the ECB stepping in to offer what analysts warn was a last chance effort to stave off the currency’s collapse. To put it simply, this has been a tremendously bad couple of weeks for the dream of a European economic community. To be honest though, I am not sure I see the need for panic when it comes to the trials and travails of the Euro and the economies of member states.
Yes, I see plenty of reason to worry about the inaction on the part of particular heads of state – a week in, interest rates hitting record highs and 23% unemployment and Spain’s new prime minster can not muster the strength to name a finance minister? Sure, their inability or unwillingness to take difficult steps that might doom immediate election chances for the sake of the entire community but as far as the immediate issues facing them, wasn’t it supposed to be like this? This difficult? The idea was to bring together 17 very different economies under singular policies and a single currency and they could not see potential potholes along the road ahead? Its hardly a novel finding that Athens has different spending habits than Berlin, is it? There were always going to be obstacles to full integration and the thought that certain parties would bail out of the ship at the first sign of a wave seems a bit of an overreaction. To be clear – this is a hell of a challenge ahead but one I am naïve enough to think that the early proponents of a continental currency would have seen coming.