The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- For some time, I have argued the eurozone is not a viable economic entity.
- The French and German governments, working on behalf of their banks, will squeeze all they can out of the "weak sisters".
Unemployment rates will continue to increase with accompanying civil disorder/riots becoming more intense.
The leaders of the "weak sisters" will commit political suicide by continuing to support the ECB/IMF mandates.
Giving Up National CurrenciesBhidé asserts: "The argument for fleeing the euro to devalue is misguided. Greece and the other peripheral economies lost little in giving up their national currencies." Lost little? What? In giving up their national currencies, countries also lost their ability to use monetary and fiscal policies to achieve full employment. Does this matter? Well, maybe not if all eurozone countries had the same unemployment rates. But they do not. Take a look at the following table. You have some eurozone countries near full employment. But the countries starting with Belgium have serious unemployment problems. Monetary policies in these countries should be keeping interest rates low while fiscal policies should be creating jobs. Not so for Austria, The Netherlands and Germany: countries at or near full employment. A common monetary and fiscal policy simply cannot address the vast differences in economic conditions in the eurozone countries.
DevaluationsWhen all countries have to use the same currency, they are held to the competitive standard: they must adjust their internal costs structures to compete on world markets. Take a look at the next table. Most eurozone countries with high unemployment have negative current account balances -- an indicator of an inability to compete on world markets.
- "In all the years I have been covering the IMF, I have never seen such a long list of policy changes being demanded of any country. The general categories include: fiscal reforms, pension reforms, health sector reforms, Social Security reforms, government performance reforms, and economic system reforms. In order to achieve these objectives, the Greek government has agreed to foreign technical assistance in more than 20 different fields. OK. So maybe if Greece did everything on the IMF list, they could stay in the eurozone and compete with the Germans. But don't hold your breath. This will not work."