Monetary union first destabilised the South with massive capital flows. Now its contractionary bias blocks recovery.
Oxford Professor Kevin O'Rourke has called for an end to the misery in a remarkable cri de coeur for the International Monetary Fund. What shocks him is that EU officials seem to treat it as a matter of course that unemployment should be stuck at 1930s levels, or that Italian GDP should still be 9pc below peak after half a decade. "These are not minor details, blemishing an otherwise impeccable record, but evidence of a dismal policy failure," he said.
"If economic historians learned anything from the Great Depression, it is that adjustment based on austerity and internal devaluation is dangerous. Britain ran large primary surpluses throughout the 1920s, but its debt-to-GDP ratio rose substantially thanks to the deflationary, low-growth environment."
Prof O'Rourke said he has been waiting five years for Europe's leaders to forge the new instruments needed to make the failed experiment work, but it is by now obvious that Germany will not allow fiscal union or shared banking liabilities, and others will not accept a federal political Europe. It therefore pointless to protract the agony.
"The demise of the euro would be a major crisis, no doubt about it. We shouldn’t wish for it. But if a crisis is inevitable then it is best to get on with it, while centrists and Europhiles are still in charge. If the euro is eventually abandoned, my prediction is that historians 50 years from now will wonder how it ever came to be introduced in the first place," he said.