THE INDEPENDENT: The global recession has changed everything, exposing grave structural problems within the European economy.
Fears about the future of the euro have helped plunge global markets into chaos, with share prices around the world reacting to the possibility that the eurozone will break up and that several of its member countries may default on their debts.
Will the euro survive? It is a question that, two years ago, would have seemed outrageous. Anyone who suggested that the eurozone was fatally flawed was branded as a Europhobe, someone who hated the European Union, not just its single currency. For the euro appeared a success. After a few wobbles, it had established itself as a major currency, while across the Continent, euros were making it easy for people to travel and trade. More important, adopting the euro seemed to have given a greater stability to countries that had previously had weaker currencies, such as Italy and Spain, cutting their interest rates and encouraging growth.
True, there were rumbles of discontent. Many in Germany felt the country had had to adopt too tough a policy to hold down its costs, whereas in Spain and Ireland the soaring property prices exposed the difficulties created by one-size-fits-all interest rates. Even more ominously, a number of countries, including France and Germany, had breached the rule in the Maastricht Treaty that fiscal deficits should not exceed 3 per cent of GDP. But while the boom continued, these problems seemed a small price for the stability it gave the Continent. >>> Hamish McRae | Saturday, May 22, 2010
