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I hate admin law. I threw this assignment away last Friday so I wouldn’t have to deal with it until after my Property exam. Now its back. And it won’t go away until after Monday.

So in lieu of actually writing my assignment, here’s a short, punchy and irritable post about the European debt crisis.

Why did anyone let Greece into the Eurozone? It’s been perpetually on the verge of default every two years or so since the dawn of modern finance. It had, during the boom years of 2001, a national debt level equal to 100% of GDP. That means… it would have taken an entire year’s economic output to repay all of its debt. Every single dime bought and sold in the economy for a year.

The reason is because people get confused between economic policy and foreign policy. Yes, I know both of them use big words, and any predictions made in either field are inevitably wrong. That doesn’t mean they’re the same thing.

People wanted to bring in Greece, Portugal and Turkey into the Eurozone to improve the economic conditions of those people. (In the case of Turkey, they also did it for purely social reasons – if it were tied to the European continent permanently, it was less likely to move towrd radical Islam). Those are valiant aims. But not when you risk the economic prosperity of every single other country in the Eurozone.

This was always going to be an inevitable outcome. Economic regions without an integrated economy should not have a single currency because there is only one interest rate for that currency. If the central bank raises that interest rate, it slows down the economy of that entire country – regardless of whether the economy is overheating or not. Australia faces this problem – with the resource-intense Western Australia and Queensland economies overheating whilst the service-dominated Sydney, Brisbane and Melbourne economies slowed during  the GFC (especially Sydney, where the financial sector is primarily located). Less well known is the fact the US economy faced similar difficulties, with California, NY and Florida racing ahead whilst other parts of the US did not (lol, Michigan) during the last economic boom in the 2000s. Such tensions are only overcome with a strong, central government which can liaise with a single central bank to manage the problem. That is not the case with the European Union. Every economic policy-maker should have been tempted to stop the idiocy of spreading the Euro so far. They did not.

I know that synonyms can be a difficult concept to grasp. But economic policy is not a synonym for foreign policy.


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