by Peter Franklin
Monday, 23
January 2023
Explainer
15:00

Why would South America want a single currency?

The fragility of the Eurozone should be a warning for Brazil and Argentina
by Peter Franklin
Are they serious about the sur? Credit: Getty.

According to the Financial Times, Argentina and Brazil are “starting preparatory work on a common currency”. Eventually, the plan is to invite other South American nations to join — which would create the world’s second biggest monetary union (after the Eurozone). 

What would the new currency be called? One suggestion is the sur, which means ‘south’ in Spanish. However, a more appropriate name would be the loco — because the entire notion is completely mad. It’s not that South America is somehow unworthy of what Europe has but, rather, that the European Union’s disastrous experiment should be a warning to the rest of the world.


Like what you’re reading? Get the free UnHerd daily email

Already registered? Sign in


The greatest danger posed by a single currency is to its economically weakest members. In Europe’s case, the peripheral economies thought they’d benefit by sharing a currency with wealthier countries. And for a while, countries like Greece were able to borrow on much more favourable terms. 

But we know what happened next. The Global Financial Crisis begat the Eurozone crisis — and the money markets then turned against the so-called PIIGS. Unable to adjust their interest rates or devalue their currencies, these countries were forced to accept savage austerity programmes instead. To this day, they remain beholden to the European Central Bank — which is inevitably run in the interests of the richest and most powerful people in the richest and most powerful member states. 

In the absence of a full fiscal union — which compensates for geographical inequalities through the substantial transfer of wealth from rich to poor — monetary union can only endure if the poor surrender their economic sovereignty to the rich. 

One could argue that, compared to Europeans, there’s greater cultural unity — and thus cross-border solidarity — among South Americans. For instance, most people speak one (or both) of two closely related languages: Spanish and Portuguese. However, other differences go deeper. Just look at GDP per head, where some of the disparities are huge — such as that between Uruguay ($18,083 in 2022) and Bolivia ($3,431 the same year). 

Then there’s the matter of size. The Brazilian economy is over three times bigger than the next biggest South American economy, that of Argentina. In the Eurozone, Germany is the biggest economy by a clear margin, but it isn’t several times the size of, say, the French economy. Though German interests dominate, there is at least some counterweight. 

Political risk is another problem. Right now, South America is comparatively united, with most countries led by politicians of the democratic Left. But that can’t be taken for granted. The pendulum could swing back the Right, which, in cases like Brazil, means the far Right. There’s also a history of Left-wing governments descending into populist misrule. 

Ironically, it is this record of instability that makes the idea of a single currency so attractive. In theory, the discipline imposed by a shared central bank should act as a constraint on national governments. In practice, however, this is putting the cart before the horse. It is not monetary union that sustains a stable political system but the reverse. 

Remember that the Eurozone has only survived (so far) because the EU establishment is willing — and able — to do “whatever it takes” to defend the system. In the case of the last crisis, that meant overriding the democratic will of the Greek people and condemning them to permanent austerity. 

Is this really the future that progressives want for South America? 

Join the discussion


To join the discussion in the comments, become a paid subscriber.

Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.

Subscribe
Subscribe
Notify of
guest
54 Comments
Most Voted
Newest Oldest
Inline Feedbacks
View all comments
Paddy Taylor
Paddy Taylor
15 days ago

The Euro was a folly born of hubris and poor political calculation.
Trying to maintain a single currency among countries with such radically different economies, without full political and fiscal union, was always going to be risky – if not downright impossible, but Brussels wanted to grow the Eurozone because bigger was perceived – wrongly – as safer. In their zeal to expand the EZ the EU admitted member states who were, by any honest metric, not in any way ready to join.
Why on earth would anyone think that obviously flawed experiment would play out any differently in South America?
The current situation with the Eurozone is unsustainable – though some people try to ignore that fact, smply because the situation has remained unchanged for many years now. It is only truly eye-watering sums of QE that have maintained the illusion that the Eurozone is solvent. During the pandemic, the ECB bought assets worth more than €1.3 Trillion – 12% of last year’s euro area GDP, under the PEPP alone. Together with the purchases under APP, they currently hold around €4.5 trillion worth of securities on their balance sheet.
It is, in effect, a public-funded Ponzi scheme. This, unlike a private Ponzi scheme, can (theoretically) go on indefinitely – but only full fiscal union, with centralised tax resources and mutualised debt has a hope of rescuing it. Something that the wealthier Northern nations simply won’t countenance, as they still blame the Eurozone’s problems on the profligacy of their neighbours to the south.
As the article points out, the economies of Brazil and Argentina would dwarf those of smaller S American nations. Surely no leader, or finance minister, of any sovereign country in S America would want to tie themselves economically to any other. So who is driving this daft and dangerous idea? Another supranational body with imperial pretensions, who wish to see the very notion of the nation state eroded. Democracy has proven to be quite fragile enough in South America over the years, without the meddling of those who’d wish to take control – without ever gaining the consent of those they’d seek to govern.

Ian Stewart
Ian Stewart
14 days ago
Reply to  Paddy Taylor

Agreed. I wonder how long it can keep going for.
It’s so clearly flawed that you’d think it was a Russian idea to undermine the EU – certainly a great idea for fomenting revolution.

Brendan O'Leary
Brendan O'Leary
15 days ago

“A history of left-wing governments descending into populist misrule” is present-day reality.
Particularly in Venezuela.

Bruce Edgar
Bruce Edgar
15 days ago

From all reports, Venezuelans were/are happy enough with their current and previous presidents. I think the misrule you refer to must be tied to the suffering and deprivation caused by sanctions unilaterally imposed on their economy by the USA. The stifling effects of these are fueling a dramatic increase in their asylum requests–as with the Cubans as well. Most of these requests are driven by the desire for a better economic future. Other wise, we have never had a chance to see what these two states might be able to accomplish were they left alone by the Northern Bully. Were you aware that the USA still recognizes a non-entity named Guido as the legitimate president? Un-elected, minor former member of their congress, and one who still holds this recognition (but no power) even though he has been out of any office for quite some time now. This bizarre opportunist and his small band of followers are still in charge of all Venezuelan consulates around the world–not Maduro, who continues to be their fairly elected leader.

Last edited 15 days ago by Bruce Edgar
Ian Stewart
Ian Stewart
14 days ago
Reply to  Bruce Edgar

Is that you Roger?

Ian Stewart
Ian Stewart
14 days ago

And one of life’s extreme, and intriguing, anomalies is Roger Waters support for the Venezuelan bampots. A fine example of treasuring the art of someone who is politically stupid.

John Riordan
John Riordan
14 days ago
Reply to  Ian Stewart

One of my favourite albums is the underrated Final Cut by Pink Floyd in which Waters is given full reign to indulge his post-war nostalgia infused existential angst, and which clearly takes potshots at the 1980s Thatcher/Reagan governments for their apparent bellicosity and which seems to align them with the sort of authoritarian regimes that in fact they opposed.

I’ve always wondered what he’d say if anyone asked him about this. I doubt he’d admit he’d been talking complete bollocks, anyway.

However this doesn’t change the fact that as an artisitc effort it is deeply moving and original. It’s easy, I suppose, to shoehorn simplistic political ideas into art, and I’m guessing it must be near impossible to do the same for Adam Smith, Friedrich Hayek and the rest of the right wingers who have to be content with merely being proved right after they’re dead.

Ian Stewart
Ian Stewart
14 days ago
Reply to  John Riordan

Yeah his lyrics when ‘general’, and thus open to interpretation, are fantastic, but his politically directed lyrics reveal he is very short on logical analysis – like almost all artists, rather disappointingly.

Rasmus Fogh
Rasmus Fogh
15 days ago

Seeing that Franklin has brought up Greece, it would be great if he or some BTL commentator could comment on how Greece should have avoided the permanent austerity. Ideally with something better than the Varoufakis plan that the German taxpayers should simply have picked up the bill.

Paddy Taylor
Paddy Taylor
15 days ago
Reply to  Rasmus Fogh

There was no way for Greece to avoid permanent austerity – it was forced on them by the ECB, ECJ and Commision, all to cover the bad bets made by (mainly German and French) bankers.
Prof Mark Blyth is pretty good on the subject:

“….. by 2010 when the crisis hit, French banks held the equivalent of nearly 465 billion euros in so-called impaired periphery assets, while German banks had 493 billion on their books. Only a small part of those impaired assets were Greek, and here’s the rub: Greece made up 2% of the eurozone in 2010, and Greece’s revised budget deficit that year was 15% of the country’s GDP—that’s 0.3% of the eurozone’s economy.

In other words, the Greek deficit was a rounding error, not a reason to panic. Unless, of course, the folks holding Greek debts, those big banks in the eurozone core, had, over the prior decade, grown to twice the size (in terms of assets) of—and with operational leverage ratios (assets divided by liabilities) twice as high as—their “too big to fail” American counterparts, which they had done. In such an over-levered world, if Greece defaulted, those banks would need to sell other similar sovereign assets to cover the losses. But all those sell contracts hitting the market at once would trigger a bank run throughout the bond markets of the eurozone that could wipe out core European banks.”

And so the Greek people were -shamefully – put on the hook
None of the supposed “Bail-out” money ever landed in Greece for long enough to make a drachma’s worth of difference to the Greek people. All the “bail outs” were loans used to repay the banks for debts the Greeks had not, themselves, incurred.
What angers me is how left-leaning Europhiles support this. It is indefensible. It seems so blatantly hypocritical until you realise that their belief in a benign EUtopia could not survive a truthful rendering of how a member state was sacrificed to cover the bankers’ greed and ineptitude.

Jeremy Smith
Jeremy Smith
15 days ago
Reply to  Paddy Taylor

Mark Blyth is wrong – I was there (Investment Banking, CMBS desk – London 2006-2011).
Greek people were on the hook because the governments they elected had borrowed vast amount of money to spend it on their political clients (aka the Greek people).

Last edited 15 days ago by Jeremy Smith
Dougie Undersub
Dougie Undersub
14 days ago
Reply to  Jeremy Smith

Indeed. In Greece then, perhaps still, paying income tax was essentially optional, vast amounts of EU subsidies were claimed for tobacco crops that were of too poor quality to use (I suppose that did align with the EU ban on cigarette advertising) or didn’t exist. Porsche SUV sales to Greece were the highest outside Germany itself.
Perhaps the politicians were more to blame than the Greek people but the latter certainly enjoyed the party while it lasted.

John Riordan
John Riordan
14 days ago
Reply to  Jeremy Smith

You are missing the point. A currency union is supposed to include a guarantor system in which the debt of the central bank is underwritten by the taxpayers of that same currency union. If this is not the case, then the currency union is a defective union. The fact that successive Greek governments borrowed irresponsibly is certainly a problem requiring a solution, however it doesn’t mean that Eurozone taxpayers simply get to reject liability.

It’s a little like getting a joint bank account and then discovering your spouse has run up the overdraft without your consent: everyone sympathises, but you’re still on the hook for the liability.

Please note here that I’m describing how a proper, functioning single currency union works. The Euro doesn’t work like that because it’s a defective system in which fiscal transfers and mutual debt guarantees don’t exist. This is the whole point of the article.

Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  Paddy Taylor

If the Greeks had ‘not themselves incurred’ those debts – who took out those loans? Was it not the Greek government? Is Greece not a democracy?

Paddy Taylor
Paddy Taylor
14 days ago
Reply to  Rasmus Fogh

When the euro came into existence in 1999, not only did the Greeks get to borrow like the Germans, everyone’s banks got to borrow and lend in what was effectively a cheap foreign currency. And with super-low rates and a continent-wide credit boom underway, it made sense for national banks to expand private lending as far as the euro could reach.
The French & German banks were making loads of money on their loans, through interest rates, from the dysfunctional euro construction.
Debt is the modern-day colonial gun boat, deliberately encouraged and supported by the dominant EU countries to enslave the periphery to the strategy of the Commission and keep them under their control.
If any step out of line then they will be punished through the bond markets – Athanasios Orphanides, the former Governor of the ECB made it plain when he said – “They threaten governments that misbehave with financial destruction. They try to scare them into voluntary acceptance of policies,” … “They cut off refinancing and threaten to kill the banking system. They create a roll-over crisis in the bond market. “

Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  Paddy Taylor

I understand that if an indivudual owes more than he can repay, he is pressured into making a voluntary agreement with his creditors. Generally under threat of, yes, financial destruction, and the conditions are harsh. This is not a nice situation to be in, but I would not get very far if I claimed it was the fault of HSBC for forcing the money on me in order to enslave me, or that they had a moral obligation to forgive my debts and keep lending me more money.

Paddy Taylor
Paddy Taylor
14 days ago
Reply to  Rasmus Fogh

You cannot pretend that individual Greeks – and their admittedly laissez-faire attitude towards paying Tax – caused the problem. That was a drop in the ocean. It was the ECB and the banks – and their refusal to accept fault – that led to the ruination of an EU member state. The Greeks were sacrificed to save face.
On a rather simplistic level – I’d suggest that the background to the situation in Greece would be as follows:
The 1st mistake was allowing Greece to join the EZ in the first place – that was the joint mistake of the ECB and the Greek Govt. None of the S European economies were ready to join but the EU wanted to grow the Eurozone because bigger was perceived – wrongly – as safer.
The 2nd was allowing interest rate spreads on sovereign bonds issued by Greece to fall almost to zero between 2002-07. Despite budget deficits and debt levels that far exceeded the limits of the Stability and Growth Pact, Greece was able to borrow almost as easily as Germany.
Some small part of the blame belongs to international investors who grossly underestimated risk, and some belongs to the rating agencies who proved as useless as indicators of European debt troubles as their US counterparts. BUT the majority of the blame must lie with the ECB – as, quite rightly, both investors and ratings agencies will point out that throughout the ECB was accepting Greek debt as collateral, on a par with German debt.
The largest error from the ECB was in the immediate aftermath of the 08/10 financial crisis. They broke all their own rules and took what might have only been an embarrassment for them and instead turned it into an existential crisis that will bankrupt a member state for several generations.
It’s not as though this wasn’t foreseen – the Maastricht fiscal criteria and No Bailout Clause and the Stability and Growth Pact – were specifically to counter such a problem. Written at the behest of Germany, as German taxpayers feared they would be asked to bail out some profligate Mediterranean country.
But, when the crisis hit, the senior apparatchiks of the ECB deemed it “would not look good to the world” if a Eurozone member state had to turn to the IMF so they played for time. They presented the problem as one of mere illiquidity rather than insolvency, thus creating further problems as they kicked it down the road until German banks, now frighteningly exposed, persuaded the German chancellor – and by extension the ECB – that the EU would now step in and force a punishing austerity on Greece.
Of my many Greek friends, not one of them lives in Greece any longer.
What was done to Greece BY THE EU was an absolute scandal. Europhiles HAVE to deny reality because otherwise they’d have to recognise that the organisation, in which they’ve invested so much faith, acted SHAMEFULLY, and frankly indefensibly.

John Riordan
John Riordan
14 days ago
Reply to  Rasmus Fogh

“Ideally with something better than the Varoufakis plan that the German taxpayers should simply have picked up the bill.”

The “Varoufakis plan” as you put it is actually the primary mechanism by which differing regions of the same currency union balance the books while allowing frictionless capital flows within itself. It’s up to you to come up with a workable alternative to this, not to criticise Yanis Varoufakis for pointing out a flaw in the design of the Euro.

Last edited 14 days ago by John Riordan
Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  John Riordan

Whatever the economics, the idea that German taxpayers should cover Greek overspend with a blank checque – without ever having agreed to do so – was a non-starter, politically. Any Greek – Varoufakis included – who chose to rely on a non-existent German guarantee for their loans was pissing in the wind.

John Riordan
John Riordan
14 days ago
Reply to  Rasmus Fogh

But this is the whole point about the single currency project: you can’t just say “whatever the economics” as a means of blithely dismissing a fatal structural flaw in the system.

A single currency zone MUST possess a stable means of balancing regional capital flows. It is a defining characteristic. Whether the Germans agreed to this specifically or not is irrelevant: they joined the Euro and they must either agree to the capital flows in the form of taxes, or they must agree to them in the form of debts that can never be repaid. The Target2 ledger is the evidence showing that the Germans (and the rest of the northern creditor bloc) have accepted the second option by default.

Last edited 14 days ago by John Riordan
Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  John Riordan

Aren’t you a Brexiteer? How would you react to the claim that as a consequence of joining the EU, or NATO for that matter, Britain MUST do all kinds of things that were never mentioned in the treaties? There may well be a fatal structural flaw in the Euro area, but you cannot argue (as Varoufakis did) that this means that Greece is sovereignly free to borrow, and that (e.g.) Germany has an obligation to cover her debts.

One alternative plan would be for Greece to not incur all those debts in the first place, or to do what is necessary to pay them back once they are there.

John Riordan
John Riordan
14 days ago
Reply to  Rasmus Fogh

I would react the same way I reacted over Brexit: that irrespective of what any treaty may claim in its wording or intent, the real world consequences of it are what matter. That is why for instance I believe that Britain is in its rights to denouce the NI Protocol under the Vienna Convention, and why I also believe that the Lisbon Treaty never had any legitimacy due to the manner in which the ECJ ruled that Protocol 30 was never intended to bind the European Commission despite the fact that it was relied upon by the UK Parliament in enacting said Treaty into UK law.

However this doesn’t apply to what Germany is really doing: it is benefitting from the perverse effect of Euro devaluation on global markets which helps its own export-dependent economy and which transfers demand from the periphery nations to the creditor nations, but is refusing to recognise that it owes anyone else for the benefit.

I will also repeat my point already stated above that it is impossible to avoid the effects in question in a single currency zone. It makes no difference what the treaties say and what they commit a member nations to: the reality of the single currency bloc must be coped with in one form or another. It is not possible to legislate your way out of the hard choices in question. Germany’s taxpayers may well not be obliged to fund fiscal transfers to the Eurozone periphery, but that simply means that by not doing so, they have sent the same amount of money to the periphery as a loan that they’ll never get repaid.

So what exactly are you defending here? It’s all very well saying the Germans don’t owe the Greeks the money, but the Greeks have got the money nonetheless, and this keeps getting topped up with more money all the time as the defects of the Euro continue to wreak havoc.

Germany treats this outgoing cash as part of a debt that everyone knows cannot ever be repaid, so it’s doing this in the knowledge that this is indeed the one-way fiscal transfer that, officially, Germany has no obligation to provide.

Are you still going to assert that the Euro is a scheme worth copying?

Last edited 14 days ago by John Riordan
Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  John Riordan

In short, you believe that treaties, contracts, etc. are null and void, essentially irrelevant, because the only thing that matter is the ‘real world consequences’, judged my some unspecified entity.

Remind me of never entering in a contract with you.

John Riordan
John Riordan
14 days ago
Reply to  Rasmus Fogh

Actually that is not what I said above, nor would your objection be relevant even if I had said that.

Do you have anything to say about the unavoidable fact of the Target2 ledger balances and that as a consequence Germany has been making fiscal transfers to the periphery irrespective of the lack of a treaty obligation to do so?

You’re defending the Euro by reference to its political intentions instead of its real world effects, which I say is a bunch of crap. And because you don’t have an answer you’ve had to resort to getting personal.

Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  John Riordan

We should probably stop discussing the substance, but (asking forgiveness from other readers) let us try to clarify: what are we disagreeing about, exactly?

I do not particularly want to defend the Euro – my country is outside it, and a good thing too. I have no quarrel with people saying that it was misconceived, or that Germany is eventually obliged to make fiscal transfers, one way or the other, to keep the show on the road. Or that the whole thing has proved to benefit Germany at the expense of other countries. So far, fine with the ‘real world consequences’. I am just sick and tired of people complaining about “overriding the democratic will of the Greek people and condemning them to permanent austerity“. The Greek people, through their democratically elected government, decided that they wanted to join the Euro, and that they wanted to borrow and spend a lot of money. When they got into trouble over that, they then democratically decided that someone else – Germany – should pick up the bill. The Greeks are adults, not children. If I choose to borrow all I can and spend the money on the racetrack, I cannot come afterwards and claim it is all the fault of the bank and the bookmaker and they are infringing my democratic right to spend what I want and decide I do not want to pay it back.

As for ‘believing that contracts and treaties are null and void’, Britain freely signed up to the NI Protocol. Within just a couple of years, after nothing substantial has changed, you are in favour of refusing to honour your signature based on “irrespective of what any treaty may claim in its wording or intent, the real world consequences of it are what matter.” To me that sounds exactly like ‘Never mind what we agreed – you cannot expect us to do this’. Or- more precisely ‘No fair – it was not supposed to be that hard’? If that is not how you approach your private obligations, why do you take that attitude to those of the nation?

Sam Hill
Sam Hill
15 days ago

There’s nothing wrong as such with a single currency, or even all the dislocations created by a single currency, provided that the public at large understand that it is a profoundly political project. There was nothing like that in Europe and certainly not in the UK where Tony Blair stood up and told us all the euro was an economic project and not a political one.
Greece (and others’) debts are hardly a problem. The ECB owns the euro and the ECB Governing Council can create and cancel euros at they see fit. One press of a keyboard can delete all Greece and Italy’s debts. The problem is that doing so writes off the assets of northern countries. I can certainly understand why German or Dutch populists would not like that very much. What we see in the EZ is an extraordinary failure – a project that was supposed to bring convergence has resulted in a clear divergence.
What the Greeks did not I think understand was that in a currency union and particularly the euro the institutions are not there for and in the interest of the Greek national at large. They are not even really there to collect debts per se. Rather the purpose of the monetary institutions in a political union is to keep integration going at any cost and prevent anyone leaving. To give into Greece would have opened the door to every other struggling country. To their credit the ECB have been grimly effective. Of course not having democracy worthy of the name helps.
The euro monetary institutions can effectively use liquidity restrictions to force a country to introduce capital controls. Greece was ‘frozen out’ of its own currency. As long as the South Americans are happy with this sort of institutional arrangement forever then all’s well and good. I just hope it’s all explained to them.

John Riordan
John Riordan
14 days ago
Reply to  Sam Hill

Actually the Germans are fine with writing off Greek and Italian debts – as long as the ECB simply prints the couple of trillion Euros required to cover the Target2 “assets” held by the Bundesbank and the other central banks of the northern creditor bloc.

The ECB and Brussels generally, of course, don’t want to do any such thing because it would tank the value of the Euro globally, as well being a political admission that a key claim about the self-balancing nature of Eurozone internal capital flows was actually simply not true.

Last edited 14 days ago by John Riordan
Sam Hill
Sam Hill
14 days ago
Reply to  John Riordan

Exactly. The TARGET2 (im)balances are plain-as-the-nose-on-your-face evidence of divergence in the EZ.
There is, of course, nothing at all inherently wrong or ‘impossible’ about a form of a single currency. In the past the EU had an ECU and that worked perfectly well. The objection to the UK idea of a ‘hard ecu’ was always political and not economic. The idea was not to have an EU parallel to states but to have it supreme over them.

Fran Martinez
Fran Martinez
14 days ago

The Far Right in Brazil, really? How come Lula is not the Far Left then?

Jackie N
Jackie N
14 days ago

Most countries in the region are poor, and left-wing dictatorships are having a hard time staying in power as poverty rises. This claim to make a single currency in the region seems to be one more sign that Lula’s Party intends to support these dictatorships as it has done in the past during his party’s government, using Brazilian money. Several loans were made to countries like Venezuela and Cuba that were not repaid. Furthermore, this currency would facilitate Lula’s dream of uniting Latin America with him becoming the head of “Patria Grande”.
Democracy here means what leftist rulers decide is good for the people (and especially for them). And the will of millions who take to the streets to support the opposing candidate is called the extreme right. But people are free to believe what they want, for now.
Obviously, the vast majority of Brazilians do not want the single currency. The result of the previous government of Lula´s’ Party was recession, unemployment and an increase in the number of poor. This is what is believed to happen again. If not, worse.

J Bryant
J Bryant
15 days ago

Some very educational comments on this article.
The question the author never addresses (and I realize he’s writing to a tight word limit) is why any South American government might believe a single currency is a good idea given the history of the euro?

Steve Jolly
Steve Jolly
15 days ago
Reply to  J Bryant

My theory is that he doesn’t give an answer because he knows the answer but for whatever reason doesn’t want to actually say it, that this is being driven by international finance and big banks, same as the first time, and for the same reasons, and they don’t really give a rip what’s good or bad for the South American people, or any people really besides their bosses and their stockholders.

Jeremy Smith
Jeremy Smith
15 days ago
Reply to  Steve Jolly

by international finance and big banks

LOL. Let’s go with that.

John Riordan
John Riordan
14 days ago
Reply to  Steve Jolly

The rule in 21st century geopolitics is basically that any supranational organisation is an automatically good idea no matter what it costs everyone else.

Mônica
Mônica
14 days ago
Reply to  J Bryant

He never addresses your question because he seems to know very little about the subject (too busy finding ways to criticize the euro – the fixation by some in the British media is remarkable). First off (and contrary to what some commenters on here say), this is not a new idea. It’s been around since at least Alfonsín-Sarney (1980s). Second, there’s no plan for a single currency. The discussion taking place is about a common currency (each country keeps their own, and a standard currency would be used in trade between them). Whether that’s good or not can be debated, but that won’t be achieved by articles such as this, aiming at scoring points with Brexiteers instead of actually discussing the situation in South American.

Steve Jolly
Steve Jolly
15 days ago

Let’s see if I got this straight. Here we have a scheme for a single currency over a large area that will result in a transfer of de facto political power from the poorest nations and people to the wealthiest nations and people. Who would promote such a ridiculous thing? Could it possibly be the same people that promoted the same ridiculous notion the first time, a bunch of globalist multinational oligarchs, banks, and corporations who care more about profits and ‘efficiency’ than about the opinions of the people whose lives they would effectively rule? Could it be that the wealthy and powerful are attempting to gather more power and wealth to themselves at the expense of who even cares how many poor benighted peasants? No, couldn’t possibly be that. That’s just silly populist revolutionary nonsense that no serious person would believe. The South Americans just don’t have enough political unity for this to work. After all, that’s why the euro is failing. Not because its a scheme to redistribute power from the the poor to the wealthy or that it’s fundamentally undemocratic and results in supranational unelected quasi-public banks with no political accountability being handed vast political power. It’s failing because of political disunity and language barriers and because the Europeans just can’t get past their historical differences and go for a full on political superstate. /facepalm.

Jeremy Smith
Jeremy Smith
15 days ago
Reply to  Steve Jolly

The failing EUR has fully outperformed £.
I take that kind of failure every single day.

John Riordan
John Riordan
14 days ago
Reply to  Jeremy Smith

The point you’re missing is that the Euro’s value is held up through draconian burdens imposed upon the Eurozone periphery. It is effectively a means by which the strongest regions of the Eurozone prosper while ensuring that the poorest regions can make no transfer claims upon the wealthier parts of the bloc.

It’s not difficult to maintain a currency’s value on global markets by means such as this. Whether that’s something you’d actually want to be part of is entirely a different matter, and even if it is, the fact is that one of the Euro’s primary justifications was to assist political integration. On those terms it is not merely a failure, but a scandalous failure at that.

Finally, the whataboutery in which you compare the Euro to the pound is irrelevant. The Euro can be judged in absolute terms, comparisons with the pound don’t help you defend it.

Last edited 14 days ago by John Riordan
Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  Steve Jolly

This is not about ‘transferring power from the poorest nations and people to the richest nations and people’ in the EU. It is about the regrettable fact that the poorest nations will have less power than he richest ones, EU or not, single currency or not. Arguably the EU actualy helps here – which is why everybody except the UK wants to join – because as a small nation in the EU the big boys have to at least pretend to listen to you and give you something.

As they say “It is better to be rich and healthy than poor and sick”. It can’t be helped.

John Riordan
John Riordan
14 days ago
Reply to  Rasmus Fogh

If we are discussing the Euro – which we are – then it is indeed very much about ‘transferring power from the poorest nations and people to the richest nations and people’, because that is actually one of the effects that the Euro has had.

If you think the argument isn’t about that, then you’re simply in a different argument and haven’t noticed.

Last edited 14 days ago by John Riordan
Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  John Riordan

Without the Euro those countries would still be weaker, would still suffer from it, and would still have to oblige the stronger countries in various ways. The mechanisms would just be different. Anyway, they did not have to join the Euro – Denmark and the UK did not, for instance. Presumably Greece thought it would be a good idea at the time.

John Riordan
John Riordan
14 days ago
Reply to  Rasmus Fogh

The point you’re missing is that the Euro was meant to make those countries stronger by integrating them into the more successful regions of the currency bloc. This is what has failed. You are not going to win this argument. The facts will contradict your wishful thinking at every turn.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
4 days ago
Reply to  John Riordan

More to the point it was always going to work that way.
It was inevitable that the southern countries of the EU would use the credibility bestowed by the Euro to borrow and spend at levels that the markets would never have tolerated had they still had their own currencies.
It was inevitable that a large part of this money would be spent on gods an service from northern Europe and in particular Germany.
It was inevitable that they would end up in financial difficulty and since they would be unable to devalue the only option would be to drastically cut Government spending.
The Germans must have realised that having Greece, Italy and Spain in the Euro would suppress its value and make the Germany economy artificially competitive. It could be said that Germany was effectively exporting its poverty.

Steve Jolly
Steve Jolly
14 days ago
Reply to  Rasmus Fogh

It goes without saying that relationships between nations are never equal. That said, single currency, free trade, free movement zones require the countries to give up a significant amount of influence and control over their own economies and internal workings. A sovereign nation can, if it wants to, devalue its currency, weighing the consequences of that decision according to its national interests and the will of its people, stop immigration into its borders when it causes social and political upheaval, or use tariffs and import laws to protect native industries from predatory practices while they develop and build them into national strengths. A eurozone member cannot do any of these things. This is why Britain left. It doesn’t really matter whether they’re better off or not by some economic measure or some calculation of geopolitical power. What matters is that the British people, by a small but clear majority, weighed the value of their governmental autonomy as greater than the economic gains from being a part of the EU. These are subjective judgements that can certainly be debated, but never reduced to anything objectively provable. Those who adopted the euro, in essence, traded national autonomy for economic gain. That’s also fine, but since that time, many have noticed that while some have realized that gain, others haven’t, and one can hardly blame them for pointing it out. Can’t say I blame the Greeks for their buyer’s remorse. I think it serves as a cautionary tale to others who might make the same mistake out of greed. Further, I do not buy into the notion that large and powerful nations are necessarily better and healthier than smaller and weaker ones on an a priori basis. That holds for individuals perhaps, but not for nations which are comprised of millions of people and where the measures of success and health are themselves debatable saying powerful and wealthy = healthier is a gross oversimplification. There’s really very little that a sovereign nation small or large can’t do through wise leadership and prudent investments to build national strength. Consider the strategic importance and success of Taiwan, which has been so successful and made itself so strategically important that the world’s two largest powers are preparing to go to war over it. You’ll never convince me that surrendering independence and autonomy for economic gain is a good bargain for most nations. It’s clearly worked out well for Germany and France, but less well for most others. Not everything that counts can be counted, and not everything that can be counted counts.

Last edited 14 days ago by Steve Jolly
Rasmus Fogh
Rasmus Fogh
14 days ago
Reply to  Steve Jolly

That all makes a lot of sense.

Coming from a small, European nation myself, I would say, though, that a lot of the independence and autonomy of a small nation is more pro forma than real. Few nations can be as successful as Taiwan or Singapore in practice (and the strategic importance of Taiwan comes from its location and history as anciently Chinese, not from its economy). A small European nation will anyway have to adapt to the standards, practices and desires of its bigger neighbours – at least if it wants to trade with them and integrate with their economies. Being part of the committee meetings, working to set the rules, having to OK the final result without too much fuss, you can influence the playing field. Staying outside, your companies will anyway have to adapt to whatever standards rule in the bigger neighbours. And any disruptive move that gains a major advantage over said neighbours can be blocked by predatory practices from the neighbours, in the absence of some set of rules to prevent it. What does it help if your farms are much more efficient, your safety regulations are cheaper to implement, or your finance industry is world class, if EU rules prevent you from selling in Europe anyway? Given wise leadership and prudent investments, you might make a success of EU memebership a well as outside it.

There is definitely a case for getting out of the EU and be free from meddling in social policy, immigration, etc. and the eternal drive towards more centralisation and ever closer union. There is a similar case for breaking with the Court of Human Rights. No one could have quibbled if the Brexit referendum had been fought – and won – on the slogan ‘we will be poorer, but we will be FREE!’ Freedom is priceless – but it is not cheap. But building your case on the unsubstantiated hope of future wealth, on wise and successful policies that no one even now knows what they should be – and on having your cake and eating it – is closer to either wishful thinking or false advertising.

Huw Jenkins
Huw Jenkins
14 days ago

This article incorrectly conflates a common currency with a single currency.

Jackie N
Jackie N
14 days ago

Most countries in the region are poor, and left-wing dictatorships are having a hard time staying in power as poverty rises. This claim to make a single currency in the region seems to be one more sign that Lula’s Party intends to support these dictatorships as it has done in the past during his party’s government, using Brazilian money. Several loans were made to countries like Venezuela and Cuba that were not repaid. Furthermore, this currency would facilitate Lula’s dream of uniting Latin America with him becoming the head of “Patria Grande”.
Democracy here means what leftist rulers decide is good for the people (and especially for them). And the will of millions who take to the streets to support the opposing candidate is called the extreme right. But people are free to believe what they want. For now.
Obviously, the vast majority of Brazilians do not want the single currency. The result of the previous government of Lula´s’ Party was recession, unemployment and an increase in the number of poor. This is what is believed to happen again. If not, worse.

Roger Mortimer
Roger Mortimer
9 days ago

Monetary union without fiscal union is half an arch – it can’t stand on its own. But it would be a mistake to think only the sceptics realise this – it’s 100% intentional. Each stage of integration is designed to create the need for the next. Like the writer, I hope South America doesn’t start down this path.

Ethniciodo Rodenydo
Ethniciodo Rodenydo
9 days ago

It would just be another opportunity for individual and national fraud on a massive scale.
Those that create the system will write the rules in such a way that they can game it

Frank McCusker
Frank McCusker
14 days ago

Should the UK have a single currency? After all, London subsidises most of the rest of the UK.  

Nicky Samengo-Turner
Nicky Samengo-Turner
9 days ago

Simple… it would be called Andrex, and be available in rolls, as well as having an additional use…

Jeremy Smith
Jeremy Smith
15 days ago

It is quite fascinating (in a depressing kind of way) to read the usual Brexiter crowd (like the author and the commentators below) bang on about the “failing” EUR.
Guess what, EUR is still around and it has outperformed £.
What people do not understand (old dogs don’t learn new tricks I guess) is that in the era of global capital movement your currency is not a protection against markets – remember Liz Truss budget, £ and the bond yields?!
US can get away with it but other countries can not.
How much of a debil do you have to be to still bang on about devaluations in interest rates to “adjust” your economy.
Economic problems (think of UK) are structural and can not be fixed by moving Interest Rates of sending £ down. Surely by now the endless devaluations of £ (since 1948) would have turned UK into an economic exporting powerhouse like Germany?

Peter B
Peter B
14 days ago
Reply to  Jeremy Smith

How are you measuring the success of the Euro ? In exchange rate terms, your argument has some merit. In gross EU economic terms, the picture is rather different – rapidly declining share of world trade and GDP, loss of technological leadership (20 years ago world leaders in most areas of mobile phones and joint leaders with the US and Canada in fixed line telecoms – pretty much all lost to Asia and the US), appalling youth unemployment, massive and increasing regional disparities (brain drain from poorer countries to richer ones) … .
There is little doubt that the creation of the Euro has created major problems within the EU – mainly between richer and poorer countries. As well as having several important advantages (lower transaction costs, faster transactions).
Yes, the UK has some serious economic problems that we have not faced up to and fixed. Importing masses of cheap unskilled labour really did us no favours – it’s a major reason why we’ve made so little progress in productivity. However, the UK is – and has long been – an export powerhouse in many high value service industries, not least professional and financial services. No way I’d trade our prospects for Germany or France’s.
In case anyone’s arguing that “small currencies” are weak and unstable, I’d just like to remind them about the Swiss Franc. People don’t park their money in Euros when they’re worried. It’s dollars, Swiss Francs or gold. For good reasons.

Andrew Martin
Andrew Martin
14 days ago
Reply to  Jeremy Smith

The US won’t get away with it not after Biden’s unfunded $1.7 trillion binge last year. The Mail’s City Editor Alex Brummer believes the treasury will run out of money by August at the latest. That the date when they will not be able pay Government salaries whilst stopping their pension contributions months before.