Let’s be candid, shall we? Pretend and extend isn’t going to cut it. Not with the wolves at the door of Spain and Italy. These aren’t minor Mediterranean redoubts, like Cyprus, which can be swept under the rug or glossed over or absorbed into the great bureaucratic folds of the Eurozone blob that is Brussels. These countries are central components of the European Union.
And no amount of debt reorganization and austerity and “prioritization of payments” is going to set things right. So the options are, essentially, three:
1. Federalize. The eurozone becomes the United States of Europe. Good luck with that.
2. Germanize. You might call it The Fifth Reich (the Fourth being reunification). Germany absorbs the deadbeats’ debt, in exchange for first lien on all the assets across the eurozone (more or less).
3. The Geuro and the Euro. The Geuro is Germany and a handful of others who have their act together. The Euro is the deadbeats and the extend and pretenders. France, as one expert told us this evening, would desperately want to be included in the Geuro, but would ultimately be excluded on the grounds that it would bring down the neighbourhood.
The beauty of the Geuro and the Euro is that the Euro gets to reset against the Geuro and the rest of the world’s currencies. Put more bluntly, the Euro would be devalued immediately, which is what is required but currently is impossible because of fiscal union.
No way, you say? That’s close to being true, but does anyone have a better idea? Does anyone really think that “extend and pretend” is “sustainable?”
Anyone up for the Fifth Reich? I didn’t think so. Does anyone think that the United States of Europe could be “harmonized” politically? The USE would make the USA look like a finely-tuned governing machine.
So the Geuro and the Euro it is. We’re at the end of “extend and pretend.” It’s over. We need to completely rethink the best way to put the eurozone down and remap its political design.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.