In response to an FT article by Martin Sandbu on 24th June 2015, entitled 'UK would have fared better inside the eurozone'
I think there are two higher level questions that need to be considered before answering that question:
1. Do the people of Britain want to be part of a Federal Europe? - my personal answer to that is 'No'
2. Was the conception and structure of the Euro ever going to work? - again my personal opinion is 'No'
To elaborate - Mrs Merkel said last week:
“The decision to have a single currency in Europe stands symbolically for the idea of European unity like no other European decision”.
The European project is about economics for some, but for the core, it is and always was, a political project. Whether Mrs Merkel believes a Federal Europe is still a possibility I do not know. What seems absolutely clear to me, however, is that the creation of the Euro was originally taken as a step towards a Federal Europe by people who had that as their primary aim.
What also seems clear is that the architects of the Euro must have understood that a common currency would not work without consolidating the debt into a single bond market. Knowledge of how debt markets work or a study of the process undertaken by Alexander Hamilton in the fledgling USA, would, and I suspect did, lead to that conclusion. They must also have been aware at the time that national populations would not go for such a leap in one go. In a nutshell, there was insufficient unity to create 'unity'.
So what happened? I believe the decision to go ahead was originally taken as 'phase one'. The strategy was to get everyone comfortable with the currency, drip feed the idea of fiscal union, and do it by stages. The politicians will not talk about this publicly for obvious reasons - people don't like being told they've been the subjects in a 'drip drip' experiment. As Mr Juncker said recently, and I paraphrase 'Some things are so important you have to lie about them'.
So where does that leave us? It doesn't solve the Greek problem, and it won't solve the Greek problem. Neither will it solve the imbalances steadily building in Italy and even France. Monetary union without fiscal union does not work and will not work. Continuing to kick the can down the road will simply delay the inevitable - we are in the early stages of a sovereign debt crisis and Greece is the canary in the coal mine.
Ultimately this is not just a European problem - it is a symptom of a massive and unstable mountain of global debt, which is being added to daily by politicians and central bankers who are as bankrupt intellectually as their balance sheets are monetarily. This could have, and should have been been addressed in 2008. Personally I think it is now too late.
However, coming back to whether we'd have done better inside the Eurozone. No, the global economy would still be in the mess it is. Recovering from the crisis that I believe is coming will be difficult enough, without having to disentangle ourselves from a monetary system that was never going to work in the first place.