The Euro Must Go: Opinion
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- Europe's single currency is a bust. With unemployment reaching depression levels in the Mediterranean states, time has long passed to negotiate an orderly return to national currencies.
Euro advocates argue a single currency is essential for creating a unified continental economy, and the euro is falling short of expectations, because monetary union was initiated without fiscal union -- namely, sovereign taxing and spending authority for Brussels. Those arguments are little more than polemics from politicians, public servants and pundits who have staked their reputations and careers on a failed economic idea.
Prior to the euro, Europe already enjoyed tariff free trade, common product standards, and reasonably free migration of labor and capital. By Treaty of Rome, Brussels has constitutional primacy in antitrust enforcement, called competition policy across the pond. That permits the EU bureaucracy and courts to nix business practices and national government policies than may frustrate cross-border trade, much as the Commerce Clause empowers federal antitrust authorities and courts in the U.S.
Prior to the euro, a European Currency Unit, defined by a basket of major currencies that could adjust in value to accommodate changing competitive conditions, provided multinational businesses with a single monetary unit. Businesses could obtain checking accounts in the ECU, as well as dollars, to conduct pan European commerce.
After the introduction of the euro in 1999, productivity growth was slower and prices rose faster in southern Europe than in Germany and other northern states. Consequently, the more competitive north enjoyed growing trade surpluses and the Mediterranean states endured deficits. Trade deficits can instigate unemployment, and to create jobs and finance social programs, many eurozone governments borrowed too much.