Originally conceived as part of a unifying vision for Europe, the euro is now viewed as a millstone around the neck of a continent crippled by vast debts, sluggish economies, and growing populist dissent. In Europe's Orphan, leading economic commentator Martin Sandbu presents a compelling defense of the euro. He argues that rather than blaming the euro for the political and economic failures in Europe since the global financial crisis, the responsibility lies firmly on the authorities of the eurozone and its member countries. The eurozone's self-inflicted financial calamities and economic decline resulted from a toxic cocktail of unforced policy errors by bankers, politicians, and bureaucrats; the unhealthy coziness between finance and governments; and, above all, an extreme unwillingness to restructure debt. Sandbu traces the origins of monetary union back to the desire for greater European unity after the Second World War. But the euro's creation coincided with a credit bubble that governments chose not to rein in. Once the crisis hit, a battle of both ideas and interests led to the failure to aggressively restructure sovereign and bank debt.
Ideologically informed choices set in motion dynamics that encouraged more economic mistakes and heightened political tensions within the eurozone. Sandbu concludes that the prevailing view that monetary union can only work with fiscal and political union is wrong and dangerous--and risks sending the continent into further political paralysis and economic stagnation. Contending that the euro has been wrongfully scapegoated for the eurozone's troubles, Europe's Orphan charts what actually must be done for the continent to achieve an economic and political recovery. This revised edition contains a new preface addressing the economic and political implications of Brexit, as well as updated text throughout. Europe's Orphan charts what actually must be done for the continent to achieve a full recovery.
Martin Sandbu has been writing about economics for the Financial Times since 2009. Formerly the newspaper's economics leader writer, he currently writes the newspaper's Free Lunch premium economics newsletter. Previously, he was a senior research fellow at the Zicklin Center for Business Ethics Research at the Wharton School of the University of Pennsylvania. He is the author of Just Business: Arguments in Business Ethics.
PREFACE TO THE PAPERBACK EDITION xi PREFACE xvii 1 A Giant Historic Mistake? 1 Spinelli's Proposition 1 Vindication of the Sceptics? 4 A Politics of Blackmail 7 The Disowned Currency 9 The Overlapping Goals of Monetary Unification 12 A Currency Designed by Economists 15 Misplaced Misgivings 17 Europe's Economic Drift 20 2 Before the Fall 25 A Honeymoon for the Single Currency 25 The Euro and the Genesis of the Crisis 28 One Size Fits None 29 The 'Export Competitiveness' Conundrum 35 The Euro's Lopsided Capital Flows 39 Losing the Printing Press 45 The Euro's Innocence 47 3 Greece and the Idolatry of Debt 48 The Promise of Europe 48 A Country Runs Out of Credit 51 The Difficulty of Putting Your Money Where Your Mouth Is 53 Three Great Morality Plays 55 The Costs of Compromise 59 Economic Tragedy 62 The Alternative That Could Not Be Named 67 An Escape from the Euro? 70 Killing Democracy in Its Cradle 73 Disenfranchisement without Respite 76 4 Ireland: The Private Is Political 80 An Interview Out of the Ordinary 80 One Letter and Six Months 82 Europe's Banking Addiction 85 Too Big to Fail 87 Pulled Down by a Helping Hand 90 Alternatives 93 Quid Pro Quo 98 Lehman Syndrome 101 5 Europe Digs Deeper 106 Doubling Down 106 Austere Solidarity: All Must Tighten 107 The Eurozone's Self-inflicted Second Downturn 110 Letting Zombie Banks Roam 116 Death by Accounting 118 Irreversibility Reversed 122 The Mutualisation Fix 126 The Tyranny of Technocracy 130 Germany's Conditions 133 The Logical Extreme 137 6 Righghting the Course: From Bail-Out to Bail-In 139 Learning from Failure 139 Accepting Default 140 Learning the Irish Lesson 144 Prising Loose a Deadly Embrace 146 Testing the Waters 149 Plunging In 150 Fiscal and Monetary Let-Up 155 Whatever It Takes 157 Lasting Injury 161 7 If Europe Dared to Write Down Debt 165 Renouncing 'There Is No Alternative' 165 A Stroll through Counterfactual History 166 Fail Early, Fail Often 168 Ending the Cult of the Sovereign Signature 173 Sovereign Contagion 177 Restructuring Politics: Dealing with Greece 181 Restructuring Politics: A Less Conflicted Europe 183 8 Europe's Real Economic Chahallenges 189 Three Tasks 189 Making the Eurozone Safe from Sudden Stops 190 Idling Europe's Economic Engine 197 A Pact Long in Need of Reform 204 Encouraging Long-term Growth 208 Unexploited Opportunities 215 9 The Politics Thahat the Euro Needs 217 Cracks in the Consensus? 217 A 'New Deal'? 217 Choosing an Alternative 221 France: The Duumvir that Abdicated 226 Germany: The Reluctance of the Hegemon 228 Insurrections 232 From Restored National Autonomy to Renewed European Integration 239 10 Great Britain or Little England? 243 The Real Choice for Britain in Europe 243 Counterfactual History: Crisis Policy with Britain in the Euro 244 Brown's Five Tests Today 251 Greater Guernsey? 260 The Euro and National Power 265 11 Remembmbering Whahat the Euro Is For 267 What Is at Stake 267 Exonerating the Euro: A Summary of the Argument 268 The Euro and Economic Strength 270 Unity in Diversity 272 NOTES 275 INDEX 307