Ten Miles Square

Blog

March 27, 2013 2:04 PM Why the Eurozone Is One of the Worst Ideas in History

By Ryan Cooper

I stared at this FT piece with mouth agape this morning:

Donald Tusk, Poland’s prime minister, took a big political gamble on Tuesday when he opened the door to a referendum on joining the euro, in the face of strong public opposition to the common currency.
The move is part of a campaign to prepared Poland to begin the final stages of accession to the single currency by 2015. Mr Tusk had previously opposed a public vote, arguing that Poles had already bound themselves to the euro when they voted in 2003 to join the EU.

Apparently this is actually a retreat from his previous position that no referendum would be needed since the Poles already agreed to join up in 2003. However, there would need to be changes to the Polish constitution to officially join the Eurozone, and right-wing parties opposed to that demand a referendum first.

The obvious question here is just what in God’s name Mr. Tusk is thinking. The Euro has been an absolute cataclysm for everyone except Germany, while Poland has been rather a star performer for the last few years. Here’s a chart from Dylan Matthews:

And yet, Mr. Tusk is planning a massive public relations push to bring people around. What gives?

One can’t know for sure, but the basic fact that Mr. Tusk is eager to chain his country to the economic Titanic is telling. Joining up is equated with being closer to Western Europe, and, one presumes, reaching their level of development. In the FT piece his is quoted saying “being in the euro will mean being in the European Union.” Sounds pretty good, put that way.

This surface plausibility of joining a common currency is what makes the Eurozone such a world-historical disaster. The way the discussion is typically framed, joining up is simply a matter of getting closer to Europe, and the ensuing economic collapse is confusing and technical. “Let’s cede our budget power to a bunch of unelected technocrats who will inflict brutal recessions at will” would have never passed muster in any European country. But “let’s join a common European currency,” which has amounted to the same thing, did.

Thankfully, the Polish people are none too enthused about joining the Euro—public opinion is running at 62 percent against. I would encourage the Euroskeptic right-wingers (and for the welfare of 38.5 million people, I wish them Godspeed) to base their objections on grounds of national sovereignty and democratic legitimacy. As Steve Randy Waldman has written:

Even though devaluation is no panacea, the nations of peripheral Europe might still wish to consider dropping the Euro. But the case for that is not, ultimately, about relative prices, but about sovereignty and bargaining power. As the MMTers correctly emphasize, control over money is essential to the sovereign power of a state. For now, the nations of the Eurozone have ceded a significant part of their sovereignty to European institutions. That would be fine, if those institutions could be trusted to look out for, or at least give fair weight to, the interests of the states which have surrendered sovereign powers. If I were a citizen of Portugal or Greece, Spain, Ireland, or Italy, I would conclude that European institutions have unduly little concern for my interests and unduly much concern for a transnational financial system and Northern European taxpayers. If that continues, I’d want my government to retract the sovereignty it had ceded, so that it has the freedom to maximize the forward-looking welfare and growth of my nation without hobbling itself in the interests of claimants to past loans that ought never have been made.
Ryan Cooper is a National Correspondent at The Week, and a former web editor of the Washington Monthly. Find him on Twitter: @ryanlcooper

Comments

  • Carambar on March 27, 2013 8:54 PM:

    you just forgot an important point aboit Poland. Poland is the largest recipient of European subsidies. Huge infrastructure investment were paid by the EU. People are making again the same mistake they did when they saluted the PIGS for growing faster than the old France and Germany.
    the facts that Polish politician are calling for a referendum is pure ... politics at its worst.


  • hornblower on March 27, 2013 10:03 PM:

    Joining the EU has saved Ireland from a disaster of its own making. Hopefully, the EU is here to stay. After thousands of years of discord on the continent it's going to take some time to get this right. Giving up so soon is a real mistake.

  • Anonymous on March 28, 2013 9:43 AM:

    @ Ryan Cooper

    A quibble; your article's title in no way matches the content in said article. And for that matter, other than one chart, you make little effort to explain why the eurozone is even Poland's worst idea ever.