Ambrose Evans-Pritchard: The euro "has essentially broken down"

Ambrose Evans-Pritchard, International Business Editor of The Daily Telegraph, is convinced that the euro "has essentially broken down as a viable economic and political undertaking": 

On a single day, the European Commission said monetary union was in danger of "disintegration" and the European Central Bank said it was "unsustainable" as constructed. Their plaintive cries may have fallen on deaf ears in Berlin, but they were heard all too clearly by investors across the world.

Joschka Fischer, Germany’s former vice-Chancellor, said EU leaders have two weeks left to save the project.

"Europe continues to try to quench the fire with gasoline – German-enforced austerity. In a mere three years, the eurozone’s financial crisis has become an existential crisis for Europe."

"Let’s not delude ourselves: If the euro falls apart, so will the European Union, triggering a global economic crisis on a scale that most people alive today have never experienced," he said.

Mr Fischer has the matter backwards. The euro itself is the chief cause of the existential crisis he discerns. Yet he is right that three precious year have been squandered, and that Europe‘s policy mix has been atrociously misguided. The pace of fiscal tightening has been too extreme, made much worse by the ECB’s monetary tightening last year. This inflicted a double-barrelled shock on Southern Europe. The whehole region was forced back into slump before it had reached "escape velocity".

Read the entire article here

PS

The next few weeks promise to be interesting in Europe. There will be two major euro projects to watch closely - the one mainly happening in Brussels, and the one kicking off in Poland and Ukraine this weekend. Hopefully there will be fewer own goals in the latter one than we have witnessed in the Brussels game.