ECB: Imagine There’s No .. Greece

As surely as the dollar seems doomed to decline in status, one might assume that the Euro would be preparing to take its place. And while some in Europe would love for this to happen, the problem with the Euro is simply that it’s impossible to set a European-wide policy that works for the various national economies.

We’ve often discussed the problems with the Euro, and the dichotimies to be found within it. For a while, it seemed as if the Euro-zone could only expand. Now, quite to the contrary, the ECB has been delving into just how a country might “leave” the monetary union. It isn’t hard to figure out which countries they are talking about.

An article by Ambrose Evans-Pritchard in the Telegraph reported this story last week, but the article no longer appears on the Telegraph’s website. A little investigative work yields a copy of the article here, and the dryly titled document (“Withdrawal and Expulsion from the EU and the EMU Some Reflections”) still exists as a PDF on the ECB’s website. Ambrose Evans-Pritchard savagely lays into the ECB’s musings:

The author makes a string of vaulting, Jesuitical, and mischievous claims, as EU lawyers often do. Half a century of ever-closer union has created a “new legal order” that transcends a “largely obsolete concept of sovereignty” and imposes a “permanent limitation” on the states’ rights.

Those who suspect that European Court has the power pretensions of the Medieval Papacy will find plenty to validate their fears in this astonishing text.

The Euro-drama is certainly worth watching. On the 13th of January the ECB held their interest rates flat despite palpable crises in several member countries. Let’s be clear, these are countries desperate for lower interest rates, and they won’t have this precisely because they yielded their monetary futures to the European collective.

Now, we know exactly how the very German ECB will respond. Rather than considering interest rate reductions, they are investigating the methods by which members of the Eurozone can leave. The ECB only made one false calculation: they assumed that if the less responsible countries of Europe signed agreements promising they would be fiscally responsible they actually would be.

The Germans run a tight ship – to their credit – and they have been excellent stewards of the Euro. The idea Spanish, Greeks, and Italians can whine enough and get them to weaken their currency to bailout a reckless Southern Europe, is proving laughable.

But there is no laughter in southern Europe. Only the unrelenting descent into chaos.