The End of the Euro: The Uneasy Future of the European Union Hardcover – Nov 8 2011
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PRAISE FOR THE END OF THE EURO: "An essential title for any reader with investments or interest in financial instruments." --Library Journal "Johan Van Overtveldt is a consistently insightful and incisive writer and I await each of his books with real anticipation." --Tyler Cowen, The Marginal Revolution blog "'What is striking is that the question of staying with the euro was really something for nut cases; now it is openly discussed,' says Johan Van Overtveldt, author of a book on the crisis called The End of the Euro. The concern, he says, is that divisions over the common currency in traditionally pro-euro countries like the Netherlands make additional big and painful solutions to the crisis harder to achieve, and an eventual unraveling of the common currency more likely." --Christopher Rhoades, Wall Street Journal "As the Belgian editor-in-chief of a leading news weekly Johan Van Overtveldt argues in his new book The End of the Euro, 'Before the euro, the German corporate sector had to invest, push productivity, and innovate constantly to compete with companies in countries that regularly devalued their currencies.' The unified currency changed that, much to the satisfaction of Germany's powerful industrial lobby, which still loves the euro for this very reason." --Paul Hockenos, Foreign Policy "[Johan Van Overtveldt's] analysis of the consequences for the euro project is compelling. I hope politicians will read this book before they try to put the European project back together." --Anil Kashyap, Edward Eagle Brown Professor of Economics and Finance, The University of Chicago Booth School of Business "With financial crisis sweeping the world, the economic experiment of the Euro has its future in doubt. The End of the Euro: The Uneasy Future of the European Union is a study and discussion from famed economic journalist Johan Van Overtveldt as he discusses the united currency of the European Union, as he argues that the Euro is doomed to fail... The End of the Euro is an excellent addition to community and college economic studies library collections." --Midwest Book Review "The End of the Euro is a must for all those wondering whether the euro is heading for abyss or salvation. It succinctly analyzes the causes of the euro crisis...Read history while it is unfolding." --Derk Jan Eppink, member of the Economic Monetary Committee of the European Parliament "[The Greek protest] is the latest manifestation of widespread social upheaval as Europe braces for the coming winter of discontent. Whether a glorious summer follows -- or merely more anger and economic dislocation -- is anyone's guess. But if you want to make yours an educated guess, rather than the uninformed speculation that fuels talk radio and tabloid journalism, do yourself a favor and read Johan Van Overtveldt's The End of the Euro: The Uneasy Future of the European Union." --James Brodderick, Bookpleasures.com "Johan Van Overtveldt's account is essential reading for anyone wishing to grasp the root causes of the eurozone crisis...Looking ahead, his prediction is as bold as it is pertinent: unless the euro replicates the stability of the deutschmark, it will be Germany that finally turns out the lights on the single currency." --Mats Persson, director of the London-based think tank Open Europe "A whole generation of Europeans has found comfort in the idea that economic cooperation has overruled the pull of power politics and even some basic laws of economics. This book forcefully squashes that illusion. A must-read!" --Jonathan Holslag, research fellow at the Brussels Free University PRAISE FOR JOHAN VAN OVERTVELDT'S BERNANKE'S TEST: "Here at last is a book about the US Federal Reserve that is neither impossibly technical nor populist. The author is obviously extremely familiar with the American financial and political scene." --Samuel Brittan, Financial Times, February 22, 2009 "A timely study that will help readers interpret the headlines, though it offers little comfort to those hoping for a quick solution to the present mess." --Kirkus Reviews, January 15, 2009 "Anyone who wants to understand the role of the Fed in the current crisis will find this an accessible primer." --Publishers Weekly, February 22. 2009 "Johan Van Overtveldt is a consistently insightful and incisive writer and I await each of his books with real anticipation." --Tyler Cowen, The Marginal Revolution blog PRAISE FOR JOHAN VAN OVERTVELDT'S THE CHICAGO SCHOOL: "This is an admirably detailed and thoroughly welcome history of a great centre of economic thought." --The Economist, June 23, 2007 "Overtveldt is at his best in his depiction of the ruthless yet stimulating internal culture of the department during these years...Rather than quench debate, Overtveldt argues that for those who could withstand the pressure, the intellectual hazing helped hone their economic analyses." --Kim Phillips-Fein, Chicago Tribune, June 25, 2007 "Its exploration of the interaction between institution and idea is unique and fascinating." --Publishers Weekly, March 26, 2007 "A landmark in the history of economic thought." --Tyler Cowen, The Marginal Revolution blog, June 5, 2007
About the Author
Johan Van Overtveldt is the editor in chief and managing director of Trends, Belgium's leading weekly on business and economics. He has published several books in Dutch and contributes to The Wall Street Journal Europe and other publications. Also the author of Bernanke's Test and The Chicago School, he lives in Brussels.
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Most Helpful Customer Reviews on Amazon.com (beta)
He first shows how Europe's "Economic and Monetary Union" was not fully based on economics or monetary policy. Many of the founders were pursuing political goals (a prototype for a more unified Europe, prevention of war, etc.) which forced political, not economic, decisions from the very beginning, a practice which continues today. For instance, entrance requirements were waived or fudged in order to expand the continental footprint; the "no bailout" policies are being waived in order to hold the union together.
Van Overtveldt makes a convincing case that the EMU depends on Germany. There is growing percepion in Germany that the costs of the EMU are out of proportion to its benefits. Soon, he expects, Germany's political leaders will lose patience with the the other member nations, leave the EMU and restore the Deutsche Mark.
The author makes his point up front. He shows how his conclusion is based on the full history of not just the EMU, but other monetary unions. He shows how a currency needs unified policies behind it, not just monetary, but also trade, employment, public finance and banking as well, something a mere currency provider cannot deliver.
Politics involves a succession of German and French presidents culminating with Merkel and Sarkozy trying to dominate EU action. There is very good quantitative analysis showing that neither individual countries not the EZ as a whole obeys its own financial regulations regarding interest rates, inflation, deficit and debt. For comparison to the US at 100% debt/GDP, the EZ requirement is 60%. It's a fiction that each country is sovereign. The principle of convergence doesn't seem to be working.
Chap 2 contrasts optimism with research. Iceland's recovery due to freedom to devalue suggests the same solution for Greece by leaving the union. On the other hand one of the EZ benefits for stronger national economies is immunity from currency devaluation, but with attendant loss of power over currency. A major weakness is that Germany powers the EU while Germans are becoming disenchanted with it, being tired of financing profligate benefits in Southern Europe. Germany can finance the smaller national states Greece, Portugal and Ireland but not the larger Spain and Italy if they follow the same path. There has been much creative accounting to mask problems for as long as possible. Naill Ferguson says that the lending capacity of the European Financial Stability Facility (EFSF) fund is a giant Ponzi scheme. Another problem is lack of coordination with the banking industry.
Obertfeldt compares the PIIGS cases with the bankruptcy of Argentina in 2001.
He omits the successful recovery of Sweden through austerity measures without recourse to IMF financing. In 1982 Belgium incorporated reductions in wages and social security benefits with good results. Reasons for Switzerland and Norway staying out of the EU are not considered.
The book concludes with a prescient analysis of three possible scenarios:
1.MOS (more of the same) continued bailouts, is the most likely scenario as bureaucrats are good at kicking the can down the road. Nothing happens when rules are broken.
2.TOS (throw out the system), a gradual exodus from the EZ with Germany finally breaking the system.
3.ROS (rebuilding of the structure), the best but least likely resolution. This involves a Herculean task setting the EZ structure back to square one. It involves loss of votes since it is unpopular with those favoring continued subsidies.
Germany wants a political union. France must accept a reduced relevance. Merkel says the euro will be saved “whatever it takes.” there is much doubt as to whether she means it. Economists Gideon Rachman and Martin Wolf say either ECB purchase of debt or the union continuing bailouts will result in a German exit. Obertfeldt likens the EU to the League of Nations, saying that it's probably already too late.
The book serves to update the excellent 1999 work 'Understanding the Euro' by Christian A. Chabot although events move so rapidly that this newer book is already slipping out of date. Chobot thought in 1999 that EU survival was a certainty, with collapse a legal impossibility. The EZ is now in better shape than Obertveldt describes with Ireland and Iceland recovering. Italy's premier, Enrico Setti, say on PBS news (10/16/2013) that the Italian economy had improved to the point where austerity was no longer necessary. A final resolution will likely take many years. I don't have to agree with Obertveldt's pessimistic prognosis to appreciate the book.
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