Ed., when you say that “the markets will now takeover and finish off the eurozone”, it is the eurozone “as we now know it”.

There are two ways to look at the euro: economic and political. The economic view sees the euro as simply a currency like the dollar, which is used in a grouping of US states which have not been seriously at war with each other and do not fear that possibility.

The political view of the euro is that its existence is necessary to prevent those EU states from going to war again and to deal with the fear that this could happen once more.

Since the euro was devised for political reasons primarily, its possible absence as a political tool is terrifying to EU states on the continent of Europe.

This terror of Europe without the political instrument known as the euro is so great that, regardless of any economic issues, the euro will continue to exist. The euro is needed desperately for political reasons, so the economic reasons become irrelevant.

Therefore, the markets will never take over and finish off the euro and eurozone because the markets belong to economy and the euro to politics.

What the markets will do is to take over and finish off the eurozone “as we now know it”. Since the markets will never finish off a political concept, there will therefore be a new eurozone after the present one has been finished off.

The new eurozone will included Germany and Netherlands and possibly all the other 15 countries who have agreed to sign up the European Stability Mechanism. This will be the new eurozone.

Of course, the next eurozone could also, in its turn, be finished off by the markets, but there will then be yet another eurozone with a different set of countries once more.

In other words, the political concept “eurozone” will never die because it is a political concept of peace (ie absence of war) and is the only alternative to “holocaust”, I suggest.

Ed Note: Economics always wins over politics and politicians that is why it scares them stiff.

Thanks for your note, Ed. I am not yet convinced that “economics always wins over politics”. You may be right but I am, as yet, unsure of this.

I know that the Third Reich had significant economic problems in 1939, but it was a political decision by Hitler to invade Poland. He used “living space” to contribute to a justification of his destruction of Poland, but he himself was uninterested in the German economy leaving that to Goering and others.

So, the decision to attack Poland and, therefore, to start the Second World War, was political and not economic.

The pact Hitler made with Stalin, at the same time, that they would not attack each other did, indeed, include a transfer of wheat and raw materials from the Soviet Union in exchange for German manufactures. In Hitler’s mind, however, was the political need to prevent Stalin joining the allies before he had time to prepare his attack on the Soviet Union, which he did later on, defying the pact with its economic benefits to Germany.

When Roosevelt decided to join Britain in the last war, it was a political decision and not economic. He declared war on Germany because Hitler had just declared war on the US and was already behaving in a belligerent fashion with its U-boats off the eastern seaboard.

Roosevelt’s decision to declare war on Japan was not economic. It was political and was his response to Japan’s decision to attack Pearl Harbour.

I agree that the fall of the Soviet Union was economic and not political but it was not, at that time, at war, that is active, fighting war, with any other country. There was a domestic erosion of party politics as a result of the expansion of the middle class, which the old communism could not control.

My argument about the euro and eurozone is that politicians can keep something in place and in power if they make a political decision to do so.

Economics winning over politics as far as the euro is concerned is, in my opinion, economics winning over the CURRENT political set up of the eurozone.

Economics can change the form in which the eurozone exists, but only politics can cause the eurozone to cease to exist.

Ed Note: the rise of Hitler was entirely due to dysfunctional economics, Germans are not naturally given to suicidal wars! You could certainly say the same about the rise of Japan as a reaction to economic failure at home. I generally think politicans surf on economic waves and pose as being in charge!

This article is a cracking read but IMHO over-hyped in the finest traditions of journalism.

I actually expect stocks to rise! Let us see who is correct.

It is the economy – it is the demographics.
Interesting to see what happens when Brussels puts a strait jacket on Southern Europe (& France) that hits their social benefits to control spending. Will governments have to put down their own rioting populations under the instruction of Brussels (Germans in effect)?

What happens when these countries have parties evolve calling for seperation from the strait jacket? Will those parties be banned? Will the Thought Police prevail? Will Governments be swapped out, replaced with the technocrats with no election (Greece, Italian examples).

This is becoming truly Orwellian.

NB: none of the above as the euro is about to blow up and the southern countries exit.

Not quite. Let’s not be hasty. The Germans know what they are doing and have the levers (through the ECB and banking sector) to backstop a crisis if they see fit. Basically the argument was Roubini’s solution of EZ-wide reflation (which is not palatable to the Germans because they don’t want to throw money around without any control) vs. the German solution of “targeted reflation” (i.e. we’ll save you if we think you at least do something about your economy).

@TomTheMon: Straight jacket or not, they will have to put it on whether in the EZ or not. It’s not like the Germans are demanding some prize of war. Greece will still be utterly broke whether in EZ or not. And France’s socialy security system is still unsustainable whether in the EZ or not. And all politicians (except for the populists) know this all too well.

Offtopic: I now saw Roubini’s book in the sidebar of the site. Frankly, I don’t know what advice he dispenses in that book but it’s funny taking advice from him since I heard his RGE enterprise is underwater currently to the tune of millions of dollars.