Is the Euros successful?

Euro may be on the verge of another crisis. Italy, the third largest economy in the Eurozone, has chosen what can best be described as a Eurosceptic government.

This should not surprise anyone. The clash in Italy is another predictable (and predicted) episode in the long-standing file of the flawed organisation of the common currency, in which the dominant power, Germany, impedes necessary reforms and insists on policies that exacerbate structural problems, using apparent rhetoric to fuel passions.

Italy has been going bad since the euro was created. Its real domestic production of Bruto (compatible to inflation) in 2016 was at the same level as in 2001. But the whole eurozone like the whole thing hasn't done too well. From 2008 to 2016, Its real GDP increased by only 3% total. In 2000, a year after the euro was established, the US economy was only 13% larger than the Eurozone; in 2016 it was 26% larger. After a real growth of 2.4% in 2017, it is not enough to overcome the damage of a decade of crisis. The Eurozone economy is weakening again.

If a country goes wrong, it is to blame; if many countries go wrong, the system is to blame. Like I said in my Euro book: As Europe's Future Common Threat Coin, it was an almost designed system to fail. It removed the governments' main mechanisms of belonging (refining interest and exchange rate); and instead of creating other institutions to help countries cope with different situations, it imposed new restrictions often based on controversial political and economic theories on deficits, debts, and even structural policies.

The euro was supposed to bring shared prosperity, which could strengthen solidarity and bring progress to the European goal of integration. In fact, it has done just the opposite, slowing up growth and sowing confrontations.

The problem is not the lack of ideas about how to move forward.

France's President Emmanuel Macron, in two speeches given in Sorbonne last September, and when he received the Charlie Grand Prize for Unity in Europe in May, has devised a clear vision for Europe's future. But German Chancellor Angela Merkel has effectively dumped cold water on his proposals, suggesting, for example, the ridiculous amount of money to invest in areas in which there is an urgent need for investment.

In my book, I stressed the urgent need for a joint scheme to secure deposits to avoid attracting deposits to weak places. Germany seems to acknowledge the importance of a banking union for the functioning of the common currency, but, like St. Augustine, its response has been, “O Zit, make me clean, but not now.” The apparent banking union is a reform that has to be undertaken somewhere in the future, no matter what damage is happening today. The main problem of the monetary zone is how to correct problems in the exchange course, such as those facing Italy today. Germany's response is to throw its burden on weak countries, which are already suffering from high unemployment and the low pace of economic growth. We know what all of this brings: more pain, more suffering, more unemployment, and even slower growth. Even if growth recovers GDP never reaches the level it would have reached if a more reasonable strategy was followed. The alternative is to shift some of the burden of adaptation to powerful countries, with higher wages and higher demand supported by government investment programmes.

We've seen the first and second acts of this drama many times already.

A new government has been elected, promising to do a better job in negotiations with Germany to end saving measures and to design a more reasonable structural reform programme. If the Germans don't play from the country, it doesn't change the flow of things into the economy. Anti-German sentiment increases and any government, whether belongs to the centre-left or centre-right, which suggests there is a need for reforms, is released by the office. Anti-estabilishment parties score points. The crash increases.

Throughout the eurozone, political leaders are entering a state of paralysis -- citizens want to remain in the EU, but also want to end saving measures and return to prosperity. They have been told that they cannot have both. Always with eyes on northern Europe hoping for change, governments in trouble maintain their own line as suffering for their people grows.

The socialist government of Portugal Prime Minister Antónnio Costa is exempt from this general tendency. Costa managed to lead his country to restore economic growth (2.7% in 2017) and achieve a higher popularity (44% of Portuguese people think the government was working better than expected in April 2018).

Italy may result in another exception except in a very different sense. There, anti-euro emotions are on both the left and the right. Already that the far-right North League party is in power, Matteo Salvin, the leader of this party and an experienced politician, can indeed carry out threats that beginners elsewhere dare not make. Italy is large enough, and there are numerous creative economists, to manage a de facto exit by creating in practice a two-dollar and flexible system, which can help restore prosperity. This may violate Euro rules, but the burden of leaving de jure, with all its consequences, will then shift to Brussels and Frankfurt, while Italy may believe that a paralysis in the EU could avoid final division. Whatever the consequences of that, the eurozone will remain weakened.

No need for this to happen. Germany and other countries in northern Europe can save the euro by showing more humanity and more flexibility. But, given the first acts of this drama many times, I'm not convinced that they are willing to change the script. /Project Syndicate /Reporter.al/