Douglas Carswell's Blog

Reality is coming to Euro la la land

“If Greece becomes the first country in developed Europe to restructure sovereign debt since the Second World War,” writes Ambrose Evans-Pritchard, “it breaks a powerful taboo and risks opening the floodgates to serial defaults in southern Europe and Ireland.”

Indeed. Call it debt restructuring, or “haircuts”, or default ... the inescapable truth is that many Eurozone members cannot pay what they owe. 

Having exhausted the option of merely passing their debts onto future generations, they must either pass it on to more prudent members of the Euro club, such as Germany (who will try to make sure they are shared with non-club member Britain, too).  Or they can  default on their debts and decouple from the Euro.

Do the second, and the dream of “ever closer Union” is over. Do the former, and EU integration will undoubtedly have diminished Europe, dragging the prudent and the productive down to the level of the basket cases.  A debt union in which we're all busted together ...  

I suspect that the coming crisis in Euroland won’t simply be about a common currency. For the first time in a generation or two, all Europeans will be forced to ask if their high tax / high spend / high welfare / high-debts-for-the-grandkids model is sustainable.     

It’s not just the future of the Euro that is open to question. It is the viability of Europe’s la la land economics.

But which of our leaders are giving serious thought to the policy options when this begins to happen? 

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