Ruinous euro rescues

In an attempt to save the euro at all costs, Europe's technocrats are advocating policies of startling brutality

 
Angela Merkel: Those in Brussels and Berlin must ask, not: 'What is necessary to save the euro?' but: 'What is necessary to restore prosperity to our benighted continent?'

When the Dutch finance minister suggested that the Cypriot bail-out could become a “model”, the outcry was immediate. It was all very well to treat a minnow such as Cyprus in such a brutal manner, said Jeroen Dijsselbloem’s critics, but no country of real stature would put up with a raid on its savers’ funds. What a difference a few weeks makes. Germany’s council of economic experts has now scrutinised the Cypriot rescue package, and concluded that the critics had a point. Not about the arbitrary confiscation of wealth, but that a levy on bank accounts was an inefficient manner of going about it. They suggest, in future, a tax on property or other assets, paid predominantly by the wealthy, since it is far more difficult to move your home out of reach.

From one point of view, the suggestion has a certain logic. Bailing out those countries whose economies are unable to compete within the single currency is an inordinately expensive business. With even Germany’s resources stretched to their limits, it makes sense (from Berlin’s perspective) to punish the sinners for their crimes – especially since new data appear to show greater housing wealth on the eurozone’s periphery than at its core. Such a pot of money in such undeserving hands makes for an irresistible target.

Sadly, the architects of this plan have it backwards. Their starting point is “What is necessary to save the euro?” From there, they end up advocating policies of quite startling brutality. Yet the very differences in housing wealth between nations illustrate, once again, the folly of locking disparate economies into a shared currency. Those in Brussels and Berlin must ask instead: “What is necessary to restore prosperity to our benighted continent?” The answer is to recognise that the euro, in its current form, is bringing ruin to all too many of the nations trapped inside it.