Thursday, May 1, 2008

The Vagaries of a Common Currency

Today's Times has a terrific article on the tenth anniversary of the Euro (my how time flies). Evidently a resurgent German economy combined with a falling dollar has been reopening the north-south economic divide between prosperous northern Europe, which wants to keep inflation in check, and more sclerotic, export-driven (and therefore highly sensitive to currency fluctuation) southern Europe (Italy, Greece, Spain, Portugal), which wants a weaker Euro to push up exports and raise standards of living.

The article, though, echoes my sense that European integration, at least at the economic level, long ago passed the point of no return. As much as the incoming Berlusconi government might like to have a lira to devalue and thereby juice the Italian economy, the overall political and economic costs of abandoning the centerpiece of the Maastricht Treaty wouldn't be worth it by a long shot. Still, it'll be interesting to see how such tensions play out in the coming years, and in particular how the newer E.U. states of Eastern Europe line up. I'll need to do a bit more research into the state of their economies in order to make any kind of informed analysis (and even then it'd be on the amateurish side - my economics knowledge doesn't get much past the Macro 101 level), but stay tuned in any case.

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