Former ECB chief economist Otmar Issing is out with a new book, The Birth of the Euro. He crows that the euro allowed the European economy to absorb exogenous shocks that it never could have withstood during the days of the European Monetary System. While he is correct in that regard, he risks taking a premature victory lap.
In recent months the strong euro has shown itself to be a huge drag on the European economy, and as the economy slows unproductive European workers are becoming even less productive. Without the tailwind from strong US, Asia, Latin American and Middle Eastern economies, Europe will struggle mightily in the months ahead. A too-tight central bank amid a looming European recession will rekindle all the old intra-European economic squabbles of the 1980s and 90s.
As a New England Patriots fan, I am all to familiar with idea the premature celebration. Don’t take that victory lap just yet, Otmar.
