“Common responsibility for the European currency will also engender a common decision-making instance for the European economy. It is unthinkable to have a European central bank but not a common leadership for the European economy. If there is no counterweight to the ECB in European economy policy, then we will be left with the incomplete construction which we have today… However even if the building is not finished it is still true that monetary union is part of a supranational constitution… It is our task for the future to work with the appropriate means for the transfer of traditional elements of national sovereignty to the European level.”
~ Italian President Carlo Ciampi, Frankfurter Allgemeine Zeitung, February 8, 2000
With thanks to Grant Williams (via John Mauldin)
While the Euro was coming into existence I could never understand how it could possibly work.
A simple analogy is Australia where the RBA sets borrowing rates based on overall economic activity. I lived in South Australia during the huge spike in rates in the 70’s and 80’s which was aimed mainly at controlling the economies of NSW and VIC. It wasn’t a pretty sight in what was a fairly moribund economy before that got under way. Now NSW and VIC are not enjoying the current interest rate which is arguably due to the mining boom in WA (although there is was too much froth in housing overall in my view)
My point is that this occurs even though each state is pretty much identical culturally and politically and even largely identical in terms of economic policy. I still can’t understand how anybody thought they could chuck all the Euro countries into one pot in effectively the blink of an eye