Deconstructing the Euro
The eurozone’s current travails stem from the fact that the euro’s exchange rate does not align with member countries' economic positions – a problem that cannot be resolved within the currency union. The only way to restore balance to Europe is to pursue a controlled segmentation of the eurozone, led by Germany and France.
PARIS – In January, Chris Williamson, Chief Economist at the economics research firm Markit, called France “the new sick man of Europe.” With near-zero GDP growth, rising unemployment, and mounting public debt – not to mention counter-productive austerity policies – it is difficult to argue otherwise. Given France’s profound importance to Europe’s economic and political stability, this poses a major threat to the entire European project.
Recent developments confirm Williamson’s diagnosis. French business activity sank to a seven-month low in December. While tax revenues increased by €32 billion ($44 billion) last year, the government deficit fell by a mere €8 billion and public debt increased from 89% of GDP to more than 93%. Meanwhile, unemployment rose from 9.5% to 10.5%.
The obvious conclusion is that austerity is not the answer. Indeed, France must abandon its current policies, for its own – and the rest of Europe’s – sake.
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