The eurozone gamble

Gamblers set out to win, be it on the winners of races, movements on the stock exchange or the luck of the dice.  The canny gambler knows when to stop. Take winnings and do not chase after more.  Have a stop loss position and do not  continue to bet beyond that point.  Unfortunately, some gamblers do not heed good advice and continue to bet  in the hope that losses will be retrieved.

The biggest gamble of recent years has been the formation of the eurozone. Set up without any fiscal or political union it was bound to fail.  The gamble was that the desire to move towards ever closer union would resolve the structural problems of the eurozone.   But fate intervened in the form of the USA mortgage crisis, closely followed by the banking crisis and world recession.  Before the political and fiscal union could be formed, with its attendant central bank with the necessary powers, a crisis of sovereign debt, bank illiquidity and some economies moving into deep recession, the eurozone started to fall apart. 

It was saved, pro tem, by throwing money at the problem and insisting on austerity measures, but these singularly fail to deal with the underlying structural problem of the eurozone.

The gamble has been lost and those who are suffering are the people of Greece, Italy, Spain, Portugal and Ireland.  Pain is spread well beyond the perpetrators of the gamble.

What to do.  Throw more money at a lost cause?  The answer surely has to be to permit countries  to leave the eurozone.

 Four interesting articles:

http://www.telegraph.co.uk/finance/financialcrisis/9205856/Nicolas-Sarkozy-lambasts-ECBs-rigid-policies.html

http://www.telegraph.co.uk/news/worldnews/nicolas-sarkozy/9206157/Frances-decisive-week.html

http://www.nytimes.com/2012/04/16/opinion/krugman-europes-economic-suicide.html?_r=2

http://www.telegraph.co.uk/finance/comment/jeremy-warner/9207777/IMF-still-wont-admit-truth-about-the-euro.html

UPDATE:

Spiegel's take on the French presidential election:

http://www.spiegel.de/international/europe/0,1518,827770,00.html