Alice in Euroland

What are we to make of the financial crisis? I am not an economist but my view is that the attempt to form a financial union without a political union was doomed to failure. The entry requirements for a currency union were deliberately fudged so as to admit Greece to the union, and even France and Germany have had to bend the rules in order to stay within them.

The only countries that have kept their finances obeying the rules have been those who didn't want to joint the Euro and the UK made the sensible decision not to join because its finances never met the entry criteria. At present, not only Greece, but Ireland, Portugal, Spain, Italy and Belgium are vulnerable to fractions in Euroland and even France is not safe.

The blame for this crisis falls squarely on Germany, which having absorbed East Germany at extravagant cost, thought it could do the same for the rest of Europe. As with its 20th Century ambitions to control Europe, Germany has over-reached itself and found that its desires are too great for its population to carry. In Cannes we have seen the two leaders of the largest European countries desperately asking the Americans, the Chinese, the Brazilians, the Japanese and the British to bail them out when the European Central Bank (aka the Bundesbank) refuses to do so. Fat chance.

I have some respect for Greece. All this chit-chat about a referendum at least shows that they have some backbone and aren't going to be pushed around by the French and Germans. Of course they have been living beyond their means for the past 10 years because the commitment to the Euro has not allowed them to sell their greatest asset, sun and sand holidays at their true value. Outside the Euro they would be profitable but with a gradually sliding exchange rate.