The Greek patient - A second editorial excursion

Let me say right off that I personally thought the euro was introduced too soon, but I'm not a banking/finance/economic expert, so what do I know. It turns out that Herr Müller, Mr. DAX is also of that option, so at least I'm not in discredited company. I also firmly believe that at whatever point the euro would be introduced ... it was never a question of "if", it was only ever a matter of "when" ... some conditions other than the Maastricht criteria needed to be met:

1. Joining could never be optional. If you're in the EU, you come into the Eurozone. Nevertheless, some reasonable leeway could be negotiated for each country.
2. An EU finance minister had to be appointed to manage it; individual countries would all be bound by all the same rules.
3. The European Central Bank was to become a publicly-owned central bank with the power and authority to print money.
   

By not doing that, we have run into to-be-expected difficulties. When we consider Greece, as the current configuration is the euro is too strong for the Greek economy. They have no leeway to devalue their own national currency in light of the pressing economic and fiscal problems they are facing.

To put this in perspective: the Greek economy represents only about 1.5% of the EU economy as a whole. That's like saying that if Louisana went belly-up tomorrow, the United States as a whole would implode. That is, of course, ludicrous, but one of the reasons that the US would have fewer problems is that they have a real central bank and the same rules apply to everyone in the federation (that is, in the United States as a whole).

The Eurozone has a different central-bank structure and which functions differently, and each of the "states" in Europe is still, literally (not figuratively as in the US) an independent country. This makes all the difference in the world.

There are a number of options circulating regarding how to solve the problem, but upon closer examination, we find that most of them would cause more problems than they would solve. The one that many have pushed for – in particular American economists – is that Greece (and the second patient, Cyprus) should just be pushed out of the Eurozone and return to their own native currencies. But that's not really an option at all. It turns out that if they leave the Eurozone, they have to leave the EU itself, and it is unclear whether there is a sound legal mechanism to allow for that. For better or for worse, it is up to Europe to get its house in order, and as we shall see in what follows, the last thing they need is a lot of advice from outsiders.

What we've seen up until now, however, is interesting enough:

1. the euro itself is not the problem, but the structure of the euro is (but it's internal to Europe);
2. the size of the Greek economy is not the problem, but how it can be managed is;
3. at present, Greece is still a sovereign nation and should, at least in my estimation, have some say in its destiny (especially since foreigners have been calling the shots there for almost 2,000 years); and
4. a sound financial and economic reorganization is absolutely necessary, sooner rather than later, but expecting the Greeks to save themselves to prosperity is cruel and unusual punishment.

OK, it was an editorial summary, but it is still important for what comes next.