The Euro?

Many publications have been written about the Euro that focus on economics.  If we take two steps back, we need to focus on four strategic elements; culture, society, politics and economics.  First, we must look at the culture and society within Europe.

Europe ignores that the United States of America has a history.  That history is embedded in its Civil War that cost more lives than all the other U.S. wars put together.  It was a war about Federalism versus States rights.  It was a war not only about slavery but a war about culture and society.  It was a war about the Northern banks having mortgages on the Southern plantations.  That was a horrible war.  For good or bad, a true Union has emerged today in the United States of America.  It took great leaders like Lee from the South and Grant from the North to mend those deep wounds.  Enemies sometimes were, are and become best friends.

The most important fact from U.S. history is that the European Union is a Confederation, not a true Union.  The cultures and societies within Europe are very different.  The labour force is not mobile.  A person with German culture and living in a German society will most likely not immigrate to Spain.  The Spanish will also not go to Greece.  In the United States, the labour force is mobile and this is a difference between a Union and a Confederation.  So, the starting point is that the European Union is not a Union but indeed a Confederation.

Second, we must look at the politics.  The states dictate the Confederation.  The rich countries within the Confederation will support a Euro because that increases their exports to the Confederation.  An Audi will cost the same in Portugal than it does in Germany.  That creates jobs for the wealthy North, but what about the South? Do their politicians have the same clout?

Finally, the economic factors come into play.  The Confederation has lost its monetary and fisical policy to a Union that does not exist.  Sun and tourism are exports, but Portugal, Greece, Spain and Italy have surrendered this to the clouds of the North.  Without these tools, the South will default.  The South needs to devalue its currency. The South needs lower interest rates to stimulate its economy at a time when the North needs to raise interest rates in order to fight inflation and defend its economic growth.  The South needs to regain its fisical policy...but now it is trapped.  The only way out for Greece is to leave the Euro.  It needs to attract tourism like its arch rival neighbour Turkey...that I am sure each will come to peace with each other as they are Southern neighbors. However, success in Europe must be determined by economic empowerment within the European Confederation.

The Euro can not survive in its current form. 

The Euro?.....

THE END

Copy right July 12, 2011.  All rights reserved.