euro - zone of suffering: the impending collapse of the monetary union

The brouhaha about the status of the Greek economy within the eurozone has been boggling minds and lives for the past year or so. Indeed, the future of the eurozone is at stake. The terminal state of the Greek economy is not only rattling minds in Greece, it has forced policymakers and common folk alike across the eurozone to rethink the viability of the euro experiment.

 

I am no economist nor a financial professional in any stretch of the word, but I believe that the euro experiment was never a comfortable marriage for the following reasons:

1. The economies that bonded to form the euro were never in the same level of economic development, and because they were never on equal footing economically, other countries became more competitive than they otherwise would have without the euro and others became even less competitive although they maintained a lifestyle of artificial success. Such scenario will eventually break over time and would drag the entire union into the gutters.

2. The eurozone countries did not make a common financial pact regulated and binding in all countries that would designate one body to regulate the financial activities of each country within the union. Such uber-body would control spending and budgetary initiatives of each member country. The absence of such arrangement created a free-for-all attitude of reckless borrowing and unsustainable financial policies. 

3. The eurozone countries did not really commit fully to the union as evidenced by the populace in each countries reluctance to give up certain rights to make the union more financially stronger, such initiative would mean giving up monetary sovereignty to the ECB. It seems that the less developed economies did not make painful financial policy changes to catch-up with the more developed economies and more developed economies flooded liquidity to the less developed ones which only incentivized their reluctance to delay necessary changes. The euro countries therefore wanted to have their cake and eat it too.

With such structural defects, the eurozone would eventually face an up-hill battle to keep it together - the hen has come to roost. 

Many articles have been written depicting the scenarios that would happen if and when the euro collapses, all would certainly cause more suffering, and could possibly disentangle the eurozone itself.

For all of the inherent problems facing the eurozone and the Greek economy in particlar, there is an increasing possibility that Greece could possibly move out of the union by the end of 2012, possibly by October, then again, that is just me.