European Monetary Union is a failed experiment
By Michael P Gardner
The European Monetary Union (EMU) is a failed experiment and should be put to rest. It was a good idea in principle, but not in practice. Like the saying goes, the road to Hell is paved with good intentions. I understand this proverb, what I do not understand is, why some nations want to go down this road, and join this disastrous endeavor.
Let's look at some of the current economic conditions in the EU according to Eurostat. GDP growth rate in 2013 is 0.1%, compared to 2007 3.2%. Retail sales have steadily declined since 2000 despite a near zero European Central bank benchmark interest rate. Unemployment is currently at 12%, the highest since EU statistics were compiled. Consumer spending in 2012 is at 2007 levels. By almost every measure, the people of the EU are worse off than before unification. Greece (27% unemployment) and Spain (26% Unemployment) are much worse off. In the case of Bulgaria, just being pegged to the Euro has required them to enact severe austerity measures. This has brought down the Bulgarian government. According to Danish economist Lars Christensen, "The Bulgarian Government has been heroic. But the fact is there hasn't been any real growth for five years. They have lost their policy levers and are importing a monetary crunch from the ECB's tight policies and a credit crunch due to links to Greece. They now face years of deflation."
This is merely the latest casualty in a series of EMU countries like Greece, Portugal, and Spain. These countries have given up their economic sovereignty for what? They have an economic union that has been devastating to their countries. It is one thing to have a dire economic situation in your country and be able to make adjustments and control your own destiny. It is quite another to have a foreign authority tell you what you must do, and when you comply, it not only does not correct the problem, but actually makes it worse.
I don't want to blame all of the economic problems in Europe on the EMU. Some of it is cyclical and some of it because of demographics. Europe is getting older and there are less young people to stimulate economic growth and create jobs. But as Lars Christensen, states "Turkey is doing much better. So is Ukraine. So is Moldova". How can these economies be doing better when they are operating under the same conditions and demographics as the rest of Europe. He answers that question by saying "In fact, the lesson is that if you want to prosper as a developing economy on Europe's fringes, keep well-clear of the EMU Project". Ambrose Evans-Pritchard, financial writer for the UK Telegraph, reports what the European commission said in its annual report. "A string of countries on the periphery (either in EMU or pegged) seem trapped in a downward spiral of falling output, fast rising unemployment and eroding disposable incomes". Evans-Pritchard states "the wave of austerity policies raise important questions about the viability of Europe's welfare states."
The current economic situation in Europe requires each country to make adjustments based on what is best for them. Unfortunately, that impossible if your country is pegged to the Euro, or you are in the EMU. You must do what Brussels tell you to do, like it or not. In this atmosphere, I cannot understand why countries like the Turkey, Serbia, and Macedonia want to be a part of this disaster. There is no evidence to suggest that it improves a countries economic situation, and, may in fact, make it worse. The reality is that this economic union (pegged or EMU) has not worked and will, in all probability, collapse in the future. New EU candidate countries need to ask themselves if they want to be part of this debacle, or safely sit it out.
Michael P Gardner