Whither the euro?

I always said Greece (and Italy) should never have been allowed to join the euro in the first place.

When the euro started up I was living in Belgium and I thought it was a jolly good idea, not least on purely practical grounds. The Belgian/Luxembourg franc was an irritating nonsense: it had been successfully tied to the Deutschmark for ages, so there was no point in having a separate currency with all its inconvenience whenever one crossed the border to France, Germany or the Netherlands.

If I remember rightly, the original idea was that the members of the euro would be the Benelux countries, France, Germany, Austria, and Denmark, all countries with strong economies tightly linked to Germany's, and whose currencies were fairly closely aligned on the mark. (Denmark later decided it didn't want to belong, largely I suspect for emotional or symbolic reasons. I never thought there was the slightest prospect of Britain joining in, so whether it would have qualified or not is a question that need not be addressed.)

Great stress was laid on "economic convergence" as a criterion that had to be met before a currency could join. The Germans were especially keen on this if their people were to be persuaded that losing their strong, stable currency was a good idea.

I was really taken aback when it was later proposed that the lire and the drachma should be admitted. This involved turning a blind eye to what everybody in Brussels surely knew, that Italy and Greece were, and had always been, corrupt basket cases. It seemed that a sensible and prudent economic project was being replaced by a rash and purely political one. I don't understand why Germany agreed to this.

So I have a bit of an "I told you so" feeling about recent events. But the current British schadenfreude is misplaced, as Will Hutton points out in Don't laugh at Europe's woes. The travails facing Greece are also ours. Hutton is highly critical of our Supreme Leader for giving the impression that the euro's problems are nothing to do with us. He adds:

We also have no interest in Greece triggering a wave of exits from the euro and the 1930s-style competitive devaluations that will follow. Those dreaming of the free-market utopia of floating exchange rates should be careful for what they wish. By now you might hope there might be just a grain of suspicion about the manias and panics of free financial markets. Hope in vain.

If the struggle for economic reform in Europe is lost, Hutton says, we all go down. The reform programme, if it is to have a chance of success, must have at its heart the concept of "fairness - both within Greece and between Germany and the rest of Europe". Let us hope the powers-that-be will heed this wise commentator.