Economists churn out endless forecasts for the eurozone and the euro,but in reality there crystal ball is no better than yours or mine? The bond markets are as jittery as an insomniac hearing noises in the night.No one really knows after the Greece and Ireland crisis,what will happen next?
Its no secret that at the birth of the euro,many in Brussels turned a blind eye to some dodgy national accounts that where held by Italy and Greece.The stampede to join the euro,and not be left out in the cold was enough to get you in.Everyone knew this at the time,and everyone put there fingers in there ears and whistled? Greece and Italy should really never have joined,but where desperate to get rid of the Lira and the Drachma.
The 2nd glaring mistake of the eurozone was when France fell foul of the 3% deficit rule;got a little slap on the wrists,but there was no penalty or fine towards Paris from the ECB in Strasbourg..So when this happened every other member of the eurozone realized it was a free for all.If France had broken the euro rules,then so can we? So in a relatively short time the eurozone 3% deficit rule widely became ridiculed by all. Don’t miss the gravy train,and everyone rushed to get onboard.The ECB in Strasbourg sat back and EU elite did nothing through indecision,which is what Brussels does best in a crisis?
Now the Brussels technocrats are talking tough about sovereign debts and banking supervision;but as usual all to late after the event.The so called PIIGS countries,mainly the Mediterranean eurozone countries are desperately trying to correct there deficits,and reduce there historical dependence on public sector spending.Some countries like Greece now seriously tackling there bloated public sector largesse under great pressure from the IMF and ECB;though Italy,Spain,and Portugal just doing enough to silence the critic’s,and tinkering around with just small reforms to there bloated numbers in there public sector.
There is talk and debate that there may even be a two way split in euroland,with Germany and the core northern countries striking out on there own to leave the sickly southern Mediterranean countries behind.For the euro to survive the southern EU countries have to revitalize there private sector and allow more free enterprize to grow.In short pull there economies back into real growth,and not just governments throwing mountains of cash at pet national projects.
Will the euro survive 2011? No one really knows,enough summits and conferences in Brussels,it’s now make or break time for the euro and the eurozone?