a curious Yankee in Europe's court

As she was in the beginning (Angela Merkel)

What is the nitty gritty of what precisely is happening with the European Union — the Europe project — in these days?  An answer to that puzzle is set out clearly, shortly and sweetly by Irishman Jason O’Mahony in a blog post today.

O’Mahony rests the matter of Europe’s future squarely on the shoulders of the remarkable Angela, the current Chancellor  of Germany.  Merkel faces a  very clear choice between saving Europe or destroying Europe, O’Mahony argues.  Check out what he has to say here.

My favorite part of the post, though, is this excerpt.

British eurosceptics constantly remark that the euro was a political project, as if that is a killer argument. It was. It was supposed to be, and whilst it is malfunctioning from bad design, the fact with European integration is that it has been the great success story of post-war Europe.

Surely I’m not the only one to take notice that the bulk of the doomsday talk these days about the imminent fall of the euro is coming either from outside Europe or from eurosceptics.

An underlying assumption of this dire talk, perhaps, may be the idea that eurozone citizens are so discontented that they are demanding return to national currencies. But where is there evidence of this?  Even most Greeks, supposedly mad as hell at EU leadership, reportedly want to stay with the euro (see here, for example).

And, although it’s admittedly an anecdotal report, I can say I’ve not heard or seen either a peep or a scribble of any such San Pietro! let’s return to the lira talk here in Italy either. That is, except for the usual disgruntled voices of the northern far right who, more or less, want to exit everything including the southern half of their own country.

And then this just now in the UK Guardian‘s live blog on the eurozone crisis:

1.47pm: Almost four out of five Germans believe the 17-nation single currency will survive, according to poll for ZDF television. Some 78% of people asked said the euro would survive despite its problems while 56% felt chancellor Angela Merkel was doing a good job of managing the crisis. That’s an improvement on a similar poll in October which had her approval rating at 45%.

How much of a role does the European public play in the rise or fall of the euro? I have no idea really, given the murky fog that constitutes most financial reporting, and the politicians’ backroom political jockeying. But if eurozone voters’ support is needed to drive the currency into collapse, seems to me that’s a non-starter.

Impressively concise assessment of what it means to belong to a currency union — in this case the Euro — offered this week by Protesilaos Stavrou, a young European studies student from Cypress (“Should Germany leave the euro and let others crash and burn?” Aug 27, 2011).

Excerpt:

Countries in a currency union are interconnected, since they have first abolished all or most of the trade barriers between them, their economies have practically merged into a single market and their banking sector, as well as other important sectors of the economy, are organically linked. Severing a part of this “organism” will doom both the part and the whole just as if a vital organ is removed from the human body where both die.

The reason that is true is because the country that opts out will trigger a chain effect in the banking sector and in all other sectors it can influence, which will see private banks and other corporations falling one after the other just like in a domino.

Read full post here.  (Saw this link at Bloggingportal.eu)

At least, and that’s rather exceptional, Nouriel Roubini spreads the gloom around evenhandedly. Writing an op-ed piece this week for Project Syndicate about problems of the Eurozone, he grounds the assessment in a disapproving scowl at most of the world’s biggest economies (“The Eurozone’s Autumn Hangover” Sept 15, 2010):

.. all the factors that will lead to a slowdown of growth in most advanced economies in the second half of 2010 and 2011 are at work in Germany and the rest of the eurozone. Fiscal stimulus is turning into fiscal austerity and a drag on growth. The inventory adjustment that drove most of the GDP growth for a few quarters is complete, and tax policies that stole demand from the future (“cash for clunkers” all over Europe, etc.) have expired…

Roubini’s primary concern seems to be that European leaders have largely postponed having to account for Europe’s economic problems, rather than finding a real resolution for them:

In the periphery, the trillion-dollar bailout package and the non-stressful “stress tests” kicked the can down the road, but the fundamental problems remain: large budget deficits and stocks of public debt that will be hard to reduce sufficiently, given weak governments and public backlash against fiscal austerity and structural reforms; large current-account deficits and private-sector foreign liabilities that will be hard to rollover and service; loss of competitiveness (driven by a decade-long loss of market share in labor-intensive exports to emerging markets, rising unit labor costs, and the strength of the euro until 2008); low potential and actual growth; and massive risks to banks and financial institutions (with the exception of Italy).

You can read the whole essay here.

Europe’s reputation was damaged at the beginning of the recent eurozone crisis, but now everyone is backing the euro, former Italian Prime Minister Romano Prodi said in an interview today with Bloomberg Television.

He added that it would have been better if the European Union had not taken so long to make its decision, but now the clear decision is that there is no alternative.

The delay has had very, very high costs, you know, but to build Europe, you need time, as you know, Prodi said.

To see the full interview (7:33), click on thumbnail above.

Interesting short video interview here with Italy’s Minister for Economics and Finance (“TOMMASO PADOA-SCHIOPPA talks to Martin Wolf — The Italian Finance Minister discusses market turmoil”, Financial Times, Dec 20, 2007). Padoa-Schioppa talks about the Euro-zone, various key issues at present, and how Europe is being affected by what’s happening in world market conditions.

Toward the end of the nine-minute talk, interviewer Martin Wolf complimented Padoa-Schioppa on recent improvement in Italy’s economy, describing it as “remarkably successful on the fiscal side.” In response, the Italian minister agreed that he is “much more comfortable” with Italy’s situation now than a year and a half ago, saying that Italy is “out of the financial emergency.”

Answering Wolf’s question about Italy’s situation at present in “what may be a very turbulent world economy,” Padoa Schioppa said that the “recent turbulence doesn’t seem to hit Italy in any significant sense.”