That the dollar is in disastrous freefall is clear but is the buoyant Euro on the brink of collapse? Avi Tiomkin at Forbes thinks so:
What will undo the euro: the mounting tension between the inflation-obsessed German bloc (including Austria, Luxembourg and the Netherlands) and the Latin bloc of France, Italy and Spain. The Germans, saddled with memories of the hyperinflation that brought the Nazi Party into power, remain singularly focused on fiscal and monetary discipline. Despite core inflation in the euro zone of only 2.4% and a slowing global economy, the Germans insist that the European Central Bank maintain a tight monetary policy. In direct opposition to Germany, the Latin bloc, joined by Ireland, wants the ECB to lower interest rates.
Tomkin’s analysis is flawed in one respect. He views the European Common Currency as an economic or financial tool instead of what it really is: a political tool.
Does it make sense that Germany, which is undergoing an export boom and struggling with inflation, should have the same currency as Italy, where industry and manufacturing disappeared with Mussolini and where 0.5% growth is considered torrid? No, but they already do have the same currency–and will continue to.
The Euro accomplishes two things for Europe: it allows Europe to punch above its geopolitical and economic weight by concentrating the continent’s financial power, and it accelerates political integration through economic integration.
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