Tim Duy: It's Time to Call the Euro a Failure Already

      File this one under the hard to argue with department. Recently in the event of Margaret Thatcher's passing there's been some debate of her legacy. On the Right she is loved while some on the Left are more critical to varying degrees.

      I share some of the criticisms-and she certainly didn't leave on top with all the backlash over her very unpopular poll taxes. This is the point Krugman has made: Thatcher didn't so much shrink government as change how it's funding: she made the tax code considerably more regressive than it had previous been-as Reagan and then his real protege-Bush W. rather than his father-did in the U.S.

     http://diaryofarepublicanhater.blogspot.com/2013/04/margaret-thatchers-legacy.html

     http://diaryofarepublicanhater.blogspot.com/2013/04/the-one-good-thing-we-can-say-about.html

     However, no matter what you think about this or her large privatization and her unsuccessful Monetarist experiment she did one thing right: kept Britain out of the Euro.

      Her reasons may not have been the best-a large part was British chauvinism. However, that may be it was the right call and very few people agreed with her at the time. Just how large a bullet Britain dodged becomes clearer every day.

       The latest numbers out of the EU show that things keep getting worse with new records in unemployment-now at least 12% two months in a row.

        Consider a handful of recent reports. First, unemployment continues to reach new highs. From Bloomberg:

Unemployment in the 17-nation euro area was 12 percent in February and the January figure was revised up to the same level from 11.9 percent estimated earlier, the European Union’s statistics office in Luxembourg said today...The European Commission predicts unemployment rates of 12.2 percent this year and 12.1 percent in 2014. ECB President Mario Draghi said on March 7 that “it is of particular importance at this juncture to address the current high long-term and youth unemployment.”

     I don't think that 12.2 percent forecast will hold. Greece remains a complete disaster. Via Aljazeera:

Greece's unemployment rate reached a new record of 27.2 percent in January, new data has showed, reflecting the depth of the country's recession after years of austerity imposed under its international bailout.

The latest figure rose from a revised 25.7 percent in December, the country's statistics service ELSTAT said on Thursday...Unemployment among youth aged between 15 and 24 stood at 59.3 percent in January, up from 51 percent in the same month in 2012.

http://economistsview.typepad.com/economistsview/2013/04/fed-watch-when-can-we-all-admit-the-euro-is-an-economic-failure.html

     Meanwhile the EU continues to impose further austerity on Greece, Cyrpus, Spain and the rest of the periphery. The question that begs is when the price to remain in the Euro is too high. 

      "Is the price of staying in the Euro finally now too high? Meanwhile, Ambrose Evans-Pritchard reminds us that both Cyprus have gone frombad to worse:

On cue, Angela Merkel's Christian Democrat base in the Bundestag has warned that there can be no increase in the EU-IMF rescue package for Cyprus.

The Cypriot people alone must carry the extra cost of up to €5.5bn beyond what was already agreed in the €17.5bn deal in March.

"Should that not be possible, the assent of the German Bundestag next week is out of the question," said Christian von Stetten, a key member of the finance committee.

And Evans-Pritchard repeats a point that cannot be repeated enough:

If the eurozone refuses to offer any further help, there must surely be a greater temptation to withdraw from the euro and default on sovereign debt in a classic restructuring deal with the IMF.

That is what the IMF is there to do. Such restructurings have been done countless times across the world over the last 50 years. It is traumatic, but countries usually recover after a couple of years.

     While there are certainly risks in leaving the Euro at some point the risks are less than staying in it. Nor is the pain only in the periphery. Even mighty Germany is not looking so mighty lately:

      And, increasing, it is not just periphery. From Reuters:

Manufacturing across Europe's major economies endured another month of mostly deep decline in March, dragging down even former bright spots, surveys showed on Tuesday....

Factories in Germany and Ireland, the relative stars of February's PMIs, fell back into decline last month. Everywhere else, the industrial rot extended.

Spanish manufacturing declined at its fastest pace since October, which followed news the government will revise its economic forecasts for 2013 to show a 1 percent contraction, from a 0.5 percent decline previously.

In France, factory activity retreated for a 13th month and car registrations there dived 16.4 percent in March, further underlining the malaise sweeping through the euro zone's second-biggest economy.

     "The euro zone's March manufacturing PMIs ... (banishes) the recovery scenario projected by the European Central Bank further beyond the realm of likely probabilities," said Lena Komileva from G+ Economics in London."

      The Euro was just a bad idea from the beginning. The "European Project" is another matter. It was certainly a worthy and desirable goal. Yet, it's largely been achieved: do we really believe there will ever be another war between Germany and France? The irony is that as Milton Friedman had said back in the late 90s just at the time of the inception of the Euro, it is political reasons that created the Euro but the economic turbulence would undermine the political goal.

      At this point relations in the EU is worse than it's been in many years. The trouble is ta ht the Euro wasn't created for political reasons but the economics of it were badly thought out. The weakness is that it's both too much union and too little. For a current currency to work you would need much  closer political and fiscal ties-an agenda that perhaps is too ambitious-after all, it was tough enough to achieve political and fiscal union in the U.S.-it took the most bloody war in our history-and even after the true cessation of conflict among the different regions was a work in progress that has taken a lot of time.

     Unfortunately the failure of the Euro is becoming clear to everyone-except European policy makers.