Easter read (4) | Two years digging an empty grave for the euro

Many economists and the Anglo-Saxon financial gurus have been killing the euro month after month since early 2010. But, even if their doomsday predictions have miserably failed so far, their negative influence over the markets can not be neglected.

By Fernando Barciela, in Madrid | PART 3 | Some banks, especially in the UK, were not far behind the panic wave and at that time announced that they had intensified their contingency plans before the more than probable failure of the euro. After highlighting that European leaders said they would not need a Plan B in spite of what might happen, the New York Times quoted the words of Andrew Bailey, from the UK’s Financial Services Authority, who abounded in the idea that

“We can not ignore the possibility of a disorderly unwinding of some euro area countries.”

The U.S. newspaper, always critical about the feasibility of the European common currency and the policies implemented by Merkozy, mentioned among other entities with salvage such plans Merrill Lynch, Citibank, Barclays Capital and Nomura, all of which had published further reports about the possibility of the euro zone break up.

Do they feel like killing the euro, or is it all simply realism? Maybe it is a mixture. It’s no secret that the advent of the euro in 1999 was criticised quite severely by most economists and politicians in the U.S. and UK. They never quite trusted the ultimate success of our currency.

Even in early 2010, when the euro troubles were just beginning to come up to the surface, Krugman recalled that

“I always thought that the euro has been a big mistake.”

A few months later, the economist stressed the same idea (“the euro was a horrible mistake”) lamenting that European leaders had been engaged in a kind of ‘magical thinking’ on the single currency, which eliminated all the possible negative effects of its implementation. The New York Times has stated the same on numerous occasions in its editorial pages, as in December 2010, when published that

“the seeds of the current crisis were planted a decade ago, when Europe got into an ambitious project of monetary union without having provided the necessary means to ensure the discipline of its members.”

Assuming that the euro was a mistake (a conviction for which they are willing to go to the stake), the prevailing political and economic thought in the Anglo-Saxon world is that, despite everything, the euro could perhaps have some chance had in this crisis existed a political class willing to put all eggs in one basket to come out in defense of the currency and suddenly stop in their tracks destructive speculation. Their certainty, that the euro will eventually collapse, is based, they say, on the poor job the current leaders in Europe, especially France and Germany, do.

“European leaders” said the New York Times even in early 2010, “have not understood at all the dimensions and urgency of the financial crisis in Europe.” In another editorial, and later that year, the newspaper warned that “the more you deny reality and take time to put a solution to the problem, the greater the investor panic and the possibility of a chain reaction of sovereign bankruptcy and banking.”

Market Watch noted in those days that the EU response to the problem and the ECB had been disappointing for the markets, because investors expected swift and bold action.

Irritation of the Anglo-Saxon press against a leadership that they have characterised as lost and ignorant has been regularly made with scathing and dismissive tone. Krugman acknowledged last November that he was

“terrified and bored at the behavior of some European governments, which still insist on failed formulas failed.”

In the Anglo-Saxon world, many have shown its indignation before the tendency of European governments the blame the markets for everything.

“If you want to excite a European politician,” rejoiced Münchau in the Financial Times, “tell him about a secret dinner in New York, between hedge funds managers to conspire against the euro.” Getting serious right away, the columnist warned that “what every European politician needs to know is that the most experienced and intelligent investors around the world are more and more convinced that the euro has only one future: none.”

This year, we can bet, we will hear it again. And again. And again. And again. And the most experienced and intelligent investors will, perhaps, wonder.