Wither The Euro?

I heard a quote attributed to Milton Friedman last week regarding the Euro.

Friedman allegedly predicted that the currency would collapse with its first financial crisis. After considerable reading, reflection and discussions with well-informed, learned colleagues, I find myself in agreement.

I wrote here recently that Doug Dachille crystallized for me some misgivings I've had since the beginning of the Euro. Dachille's viewpoint was echoed as I spoke with a very experienced retired CEO this past weekend.

With some added days' perspective since last week's continued turmoil over the Euro, and the prior week's ECB actions, it continues to be difficult to see how the Eurozone countries can grow their way out of this fiscal mess.

And it is a fiscal mess. Recall that the origin was a rather quiet disclosure months ago that the prior Greek government simply lied about its budgets and deficits.

I won't reiterate my and others' comments on the quasi-socialist, slow-growth economies of the EU, the transfer of wealth from Northern European nations to Southern ones, and the inevitable stress on fiscal policies, savings, taxes and long term Eurozone growth. It's enough to note that, once the immediate bailout/crisis mode has passed, the EU will continue to live with economic problems associated with funding the Greek and other national rescues.

The trouble may well bring down Angela Merkel's government in time. At that point, you have an opening for the previously unthinkable- German withdrawal from the Euro and its return to the DeutschMark.

Just because this won't all happen this next month or this summer doesn't mean pressure isn't building for a radical, discontinuous resolution of the simmering Euro problem. It's ultimately a cultural clash- robust, harder-working Northern European economies rescuing more spendthrift Southern European economies.

These nations have hundreds of years of experience as independent nations with independent fiscal policies. It's hard to believe they will move closer to surrendering those differing fiscal policies to a single, more powerful Brussels-based EU government. Thus, with the status quo probably untenable, the other extreme becomes more believable- the end of the Euro.