All it's showing, once again, is that central planning doesn't work. How can one person, or a committee of boffins, set an interest rate for the whole of Europe?

And how can you have a central bank without the function of providing bail-outs? Central banks and bailouts go together, because the whole point of central banks is to increase the money supply via fractional reserve banking which is inherently unstable. If that were not so, there would be no need of central banks.

If governments' money monopoly - legal tender - laws were repealed, and FRB abolished, the *real* choice of the European people for money would almost certainly turn out to be gold, silver and copper, and certificates of deposit therefor.

That would solve all the current issues in the Eurozone. It would enable a free trade zone with a single currency. No need for central banks. No need for centrally determined interest rates. And it would automatically correct ballooning government debt in any one country. Any government going into excessive debt would see a flight of gold out of the country, that would constrain its spending.

The great advantage of gold as money is precisely that it is independent of political decision-making, and acts as a brake on the growth of arbitrary political power.

What is stopping this reform is that it would end the ability of governments to monopolise paper money, base it on government debt, and constantly inflate it.

Thus the issue within any fiat currency union - which group is to be forced to pay for which other group - is only a reflection of the same issue *within* any country with a fiat currency and FRB - eg the USA.

The current ructions in the Eurozone are only showing that the political class would rather sacrifice the aim of an open, peaceful, prosperous and united Europe, would rather risk going back to the disastrous old days of nationalism and European wars, than sacrifice their socially unjust privilege of ripping off their own populations by way of fiat money and FRB.

The Eurozone is really just a giant vendor financing scheme for
Germany.

Politicians were warned, but no, they knew best. Now the chickens
are coming home to roost.

Greece showed us how politicians were going to solve it, ie force
lenders to write off 50%. Intererstingly that would drag down
French and German banks in the process.

The market is simply responding to the new reality. Clearly they
won't cough up for Italy's debts either, so why lend them even more
money? Meantime smart Greeks are moving their money to Swedish
banks, which might be a bit safer.

It all just shows the dangers of politicians borrowing a bit more
here and a bit more there, to finance the latest "you beaut" scheme.

People mistrust bankers, but clearly ignore the dangers which their
very own favourite politicians can create for them, aware of it or not,
with that next feelgood solution. The law of unintended
consequences invariably sets in and bang, we have yet another disaster.

A very informative article.

It appears that this man-made disaster is set to continue its stumbling course, unless rationality comes to the fore and the euro is disaggregated into the original currencies.

The "original sin" aspects of this rolling disaster deserve to be further highlighted.

The rules for the Eurozone were established by intelligent, hard-headed, realistic people. They knew how it would be a massive temptation to politicians of every nation to use the system to favour themselves. They therefore made it clear, that in order to join, a country's economy had to demonstrate specific qualities. Conditions that indicated they were serious about their responsibilities towards their fellow-members.

Original Sin #1: the EU turned a blind eye to cheats, who knowingly and with malice aforethought fudged their financial status. Given that the rules were made for a specific purpose - to provide a stable start-point - flouting those rules in favour of warmth, fuzziness and false "togetherness" was nothing less than criminal negligence.

The rules also made it clear that in order to maintain membership, a country, being still in control over the major levers of their own economies, should stay with certain fixed budget limits.

Original Sin #2: the two supposedly most fiscally responsible countries in the Euro zone exceeded those limits, and in a fit of hubris decided that they were too important to be held to their own rules.

Why anyone is even slightly surprised at the current chaos beggars belief - it was a train wreck signalled long ago.

This was not, and is not, a problem with the Euro itself. The Euro project was a good idea, but was appallingly badly executed. And then cynically manipulated, by a conga-line of nest-feathering politicians.

The problem with the EU is its essentially utopian character. It exists to eliminate the down-side of a free market ... but any market that’s truly free is going to produce a down-side. Over the long haul, a free market works far, far better than any sort of command economy -- both logic and history prove that -- but a free market is far from harmless. The EU project aimed too high: it’s objective has been to keep member economies feeling healthy at all times. That’s like letting you catch a virus, but preventing fever; feeding you spoiled meat, but eliminating nausea; you can burn your fingers, but won’t feel the pain. The economies of Portugal, Ireland, Italy and Greece have been rotten for years, and their poisons are seeping north. Europe will survive but, as with any disease that’s allowed to fester untreated, recovery will be long, painful, and costly. Needlessly so -- the EU’s many flaws have been well known for a long, long time. Nothing for it now but GFC Mk II ... and maybe an important lesson learned: next time elite opinion promises utopia, don’t just get mad. Get even.

The Greeks have got to be nuts.

They sack the PM who legislated to spend too much, when he tried to implement a strategy to reduce the debt to the European banks.

They replace him with a man from the European banks. Those banks which had the stupid lending policy that allowed the Greeks to run up unrepayable debts.

Both had a hand in allowing the accumulation of the Greek debt.

Do they really expect him to fix things?

It's no wonder the French and Germans want to end the free holiday for these charlatans.