First there was Greece, then...

It has come to this. Almost a year and a half after rescuing Greece from default, Europe is staring into the abyss. The bailout has proved insufficient. Greece needs more money, and it can't borrow from private markets where it faces interest rates as high as 25 percent. There is no easy escape!
What's called a "debt crisis" is increasingly a political and social crisis. Already, unemployment is 14.1 percent in Greece, 14.7 percent in Ireland, 11.1 percent in Portugal and 20.7 percent in Spain.
Some causes of Europe's plight are well-known: the harsh recession following the 2008-2009 financial crisis; aging populations coupled with costly welfare states. But there's also another less recognized culprit: the euro, the single currency now used by 17 countries.
Launched in 1999, it aimed to foster economic and political unity. For a while, it seemed to succeed. In the euro's first decade, jobs in countries using the common currency increased by 16 million.

It was a mirage. For starters, the euro fostered a credit bubble that led to booms in housing, borrowing and consumer spending. But one policy didn't fit all: Interest rates suited to Germany and France were too low for "periphery" countries (Greece, Ireland, Portugal and Spain).
Money poured into the periphery countries. There was a huge compression of interest rates. In 1997, rates on 10-year Greek government bonds averaged 9.8 percent compared to 5.7 percent for similar German bonds. By 2003, Greek bonds fetched 4.3 percent, just above the 4.1 percent of German bonds.
"The markets failed. All this would not have occurred if banks in Germany and France had not lent so much," says economist Desmond Lachman of the American Enterprise Institute. "It was like the U.S. housing market." Both American and European banks went overboard in relaxing credit standards.
Few economic statement make my hair stand straight up more than that bit of complete nonsense from Lachman. The markets did not fail. Bureaucrats who dreamed up the Euro failed.
Those bureaucrats devised a currency union with nothing more than suggestions on fiscal controls. Making matters far worse, countries in the Euro-Zone have widely differing political philosophies and policies. That currency union was not brought about by the market. The free market would never have done such a silly thing.
The rationale of The Independent was "It's different this time".
The economic arguments that, on balance, Britain will be better off inside the currency union than outside are persuasive. The discipline of a permanently fixed exchange rate would significantly reduce the risk of a return to high inflation and create greater certainty for companies and investors. There would also be lower transaction costs. There is no doubt that a successful single currency would strengthen Europe's position on the global economic stage.
The opponents of the single currency do not agree. They argue that the experience of the ERM and events since Black Wednesday show that to be locked into a single currency is damaging. Exchange rates, they point out, can act as important "shock absorbers" in times of unexpected crisis. These are powerful arguments. They are most powerful when applied to some EU members - notably Spain, Portugal and Greece - whose less developed economies would make the exigencies of a single currency regime punishing, unpopular and potentially disastrous.
But this is not the condition of Britain today. In 1992 the needs of the British economy were at odds with the priorities of the Bundesbank. They were trying to control inflation, we needed to get out of recession. By contrast, in 1999 six or seven countries will find themselves at the same stage in the cycle, with very similar economic priorities. So things are likely to be different. Points of Failure Predicted In Advance Things were not different were they?
Ironically, in that 1995 article, The Independent pointed out the exact points of failure: Spain, Portugal and Greece.