As artists from countries, European and otherwise, rehearse for the Eurovision Song Contest in a week's time, this year's theme, 'Share The Moment', couldn't be more ironic if it hit Nana Mouskouri on the head with a with a bottle of home-made ouzo. Like Eurovision, the euro has many flaws, but its weakest link is Greece, whose fundamental problem is that for years it spent too much, earned too little and plugged the gap by borrowing in order to enjoy a rich man's lifestyle. It flouted EU rules on the limits to budget deficits, its accounts more wayward than those of a Westminster MP.
Back to the drachma?
By any legitimate measure, Greece was unworthy of eurozone membership. That it achieved card-carrying status was down to the sleight-of-hand skills of its Brussels fixers and the acquiescence of central bank bean-counters. Now we know the truth, jet-hosing it with yet more debt makes no sense. Another dose of funny money will delay but not extinguish the need for austerity.
This is why the euro, in its current form, is finished. The game is up for a monetary union that was meant to bolt together work-and-save citizens in northern Europe with the party animals of Club Med. No amount of assistance from Berlin can save the euro from collapsing under the weight of its own structural dysfunctionality. You cannot run indefinitely a single currency with one interest rate for sixteen economies, when there are such huge fiscal disparities.
In 1996, Sir Martin Jacomb, then chairman of the Prudential, predicted: "A country which does not handle its public finances prudently will find its long-term borrowing costs adjusted accordingly. Although theory says that default is unlikely, nevertheless, a country that spends too much public money, and allows its wage costs to become uncompetitive, will experience rising unemployment and falling economic activity. The social costs may become impossible to bear."
