How the Euro Will End

From Gerald O'Driscoll, at the Wall Street Journal:

The euro is the world's first currency invented out of whole cloth. It is a currency without a country. The European Union is not a federal state, like the United States, but an agglomeration of sovereign states. European countries are plagued by rigidities, including those in labor markets—where language differences and the protection of trades and professions in many countries impede labor mobility. That makes it difficult for their economies to adjust to cyclical and structural economic shifts.

For such reasons, when the euro was created in 1999, Milton Friedman famously predicted its demise within a decade. He was wrong about the timing, but he may yet be proven right about the fact.

Greece is the epicenter of a currency and fiscal crisis in the euro zone. Markets fear a "Grexit," or Greek exit from the euro. That exit is almost a foregone conclusion. The endgame for the euro will be played out in Spain.

Read it all at the link.

Actually, Germany, and the rest of the Eurozone countries too, will work overtime to make sure the Euro survives. The fate of the European project depends on it. I'm personally skeptical about the long-term prospects of the single European currency as long as economic dislocation continues, and I think that it will. And ultimately, I doubt Germany will have the domestic political support to continue propping up the entire union. Time will tell. I expect Spain could get another bailout or two before long. And don't forget that eyes have turned to Italy as the hot spot on the horizon.

Expect updates. This is one of the most significant developments in international politics since the end of the Cold War.