Europe and the euro: a contrarian view
French president Sarkozy said, “There is no doubt that the eurozone is going through the most serious crisis since its creation….We can’t let the euro fall. The euro is Europe and Europe is peace”.
That’s one way to see things. Maybe it’s the majority view, but there are others:
- The European Union is not a federal system. The full faith and credit of all EU member states do not back the debts of a single member state.
- The euro is a common currency. It is not a NATO-like pact for mutual defense.
- Having a common currency does limit members’ ability to do certain things, like printing money to settle debts. Markets also discipline states who do this. Member states retain an arsenal of measures to finance expenditures, including deficits.
- EU members in the eurozone accept to follow agreed rules on deficits and public indebtedness. EU members have repeatedly excused members’ failure to meet these requirements.
- All eurozone members issue sovereign (state) debt. Each pays a distinct interest rate: some higher, some lower than others. All universally accept this to be normal.
- Greece today faces higher interest rates than other eurozone members. This is a consequence of Greek deficit spending and a high level of indebtedness, neither of which resulted from exceptional circumstances or unexpected crises. There is no economic argument why Greece should be entitled to access credit at interest rates available to Germany, or France, or Italy.



