Matthew Lynn on the Euro

I like Matthew Lynn.  Smart and witty - two things I aspire to.  Here are some excerpts of his thoughts on the Euro (it may seem like I am too focused on this, but I disagree - we are all currency traders now - and its my darn blog):

Who’s next? First Greece went bust. Now Ireland is on the brink of a bailout from the European Union and the International Monetary Fund.

When it happens, we’ll hear plenty of soothing words about how contagion has been stopped, the euro area has been put on a firmer footing, and the single currency saved. There will be a lot of grand rhetoric about the importance of the European project. Stern condemnations of the speculators will ring out across the continent.

Don’t listen to a word of it. The euro has turned into a bankruptcy machine. Once the markets have finished with Ireland, they will simply move on to Portugal and Spain, and after that to Italy and France.

In short, the problem wasn’t Ireland. It was the euro. The logic of that is inescapable. If it is the single currency that is at the root of the crisis, it won’t stop here. 

In each country, it will be a different trigger that causes a collapse in financial confidence. The root cause is the same, though. When the euro was launched, it was a big bet that sharing the same currency would make a group of very different economies converge, and so allow the European Central Bank to operate a single monetary policy for all of them.

It was an interesting theory, but it turned out to be wrong. The economies are just too different to allow a single central bank to manage all of them. Interest rates are always wrong everywhere. How that expresses itself varies. In Greece, it was a fiscal crisis. In Ireland, a banking collapse. In Spain, a construction bubble that burst. In Germany, a massive trade surplus. But, like a river looking for the sea, it always comes out somewhere.

This crisis will keep moving from country to country. The only permanent fix is splitting up the euro into more manageable currency areas. Until the euro area’s leaders recognize that simple truth, every bailout they come up with is only going to shift the attacks elsewhere.

The rest of the article is here:  Lynn on the Euro

As I am not as witty or smart (according to some, I couldn't possibly understand their 7th grade math, what with all the advances in math in the last 20 years), I will leave it at that.