Adieu Euro?

A good piece in the Telegraph today by Ambrose Evans-Pritchard, in which he questions whether the Eurozone countries have the collective will to put together a bail out plan for European Banks.

Who in the eurozone can do what Alistair Darling has just done in extremis to save Britain's banks, as this $10 trillion house of cards falls down? There is no EU treasury or debt union to back up the single currency. The ECB is not allowed to launch bail-outs by EU law. Each country must save its own skin, yet none has full control of the policy instruments.

Germany has vetoed French and Italian ideas for an EU lifeboat fund. The former knows exactly where that leads. It is a Trojan horse that will be used one day to co-opt German taxpayers into rescues for less Teutonic EMU kin. One can sympathise with Berlin. But sharing debts with Italy and Spain was implicit when they agreed to launch the euro. A shared currency entails obligations. We have reached the watershed moment when Germany has to decide whether to put its full sovereign weight behind the EMU project or reveal that it is not prepared to do so in a crisis.

This is a very dangerous set of circumstances for monetary union. Will we still have a 15-member euro by Christmas?

For the Euro to survive long term is has to be able to survive major crises.  That can only happen if Eurozone countries act together in the common interest.  But acting in the common interest only occurs when it coincides with the member nations own self-interests.  When it doesn't, as Ambrose Evans-Pritchard highlights, inaction and disagreement results.

When a Eurozone country is in a middle of a major crisis, at some point the government is going to decide to do what it is own interests and stick two fingers up to the common Eurozone interest - after all governments are re-elected by their own nation's voters and not by European voters.    When that happens, it and maybe all of us will be saying Adieu to the Euro...