Ten years ago, this is how the euro started as a currency: with optimism and celebrations. I was in Europe at the time, and I remember the excitement. A friend of mine said he noticed I wasn’t excited. I said, “I give it about ten years before it collapses.” He smiled, “Always pessimistic, you Christian conservative?”
Last year, this is what the European experiment in socialism led to: riots and violence. January 1, 2012 marked the tenth anniversary of the euro’s official introduction to the market. And European economists now agree with my pessimism of ten years ago.
Of 27 leading European economists interviewed by the UK treasury the last week of last year, six said that the euro zone will certainly cease to exist. The majority of them said that there is 30-40% chance for the break-up of the euro zone within the next year. All of them agreed that the recession is not gone, and in fact, a new recession is around the corner for Europe.
I am not “always pessimistic.” In fact, I am always optimistic about history. My lack of confidence in the survival of the euro zone was only a realistic assessment of the moral problems it created – problems that no economic mechanism, no political will, no financial sleight-of-hand by a central bank can overcome. Not that the moral problems weren’t there before but the common currency only made them worse and impossible to solve.
And the greatest moral problem I saw back then was that in every nation, the mood was that a common currency would now overcome the hurdles to new levels of uncontrolled spending that the limited national currencies presented. After all, an Italy or a Spain, or a France could only spend to the limit of their national abilities. But now, for some reason, every country thought they will be able to spend the money of the other nations in the Union for their own purposes. Of course, every other nation was making the same plans too. So now, with a mega currency, a mega-spending frenzy took over the European governments. And not only the individual governments but the central power in Brussels too. What we couldn’t do with local currencies, we’d be able to do with a global currency.
Very few actually thought in terms of business, trade, entrepreneurship, innovation. Everyone thought “spending.”
It led Europe to Greece. Then Ireland. Then Portugal.
And now, the economists are saying, the whole European Union and the euro zone are going down the drain, financially, and may be economically and politically too.
Spending is what got it there. And since spending is so addictive, no one really wants to stop it. And therefore there is no solution.
Which brings me back to the US and our own situation. It ain’t much different. The historian Niall Ferguson wrote an article right in the middle of the Greek crisis trying to explain to Americans that America is in an even worse condition than Greece. The Wall Street Journal editor edited the name of the article; he found it politically incorrect. The original title was: “PIGS’r’US.” Spending addiction is the same here, in our own government and our own political class, and our own entitlement lazy buns and crony capitalists.
And just like Europe, our politicians refuse to deal with it. The Democrats just love government spending for it buys them votes. The Republicans are no different either, except that they use more acceptable language for their refusal to decrease spending: “tax reform,” “revenues reform,” “budget reform.” Of all the Republican candidates for Presidential nominee, only one has presented a clear plan for spending cuts. The rest, like Rush Limbaugh and Glenn Beck have pointed out, only dance around the edges, 1% here, 2% there.
Unlike Europe, though, Americans have more possibilities to elect the right candidates to make those spending cuts at the large scale necessary to save the financial stability of the nation, and send the dancing-around-the-edges politicians to the garbage heap of history. Europe seems to have no hope. But America still does.