Thursday 25 May 2017

Jeremy Warner: Unscrambling the eggs might be difficult, but the break up of the eurozone would not be apocalyptic

Radoslaw Sikorski, Poland's foreign minister, makes the standard case against eurozone break up in this morning's Financial Times (£), albeit in somewhat hysterical terms. "The break up of the eurozone would be a crisis of apocalyptic proportions", he says; it is unlikely the single market or the EU could survive such an event. Europe would retreat back to its old fractious ways, and in the process condemn itself to decades of decline.

But is this really true? It is natural that the foreign minister of a smallish, comparatively underdeveloped, formerly Soviet-controlled economy that has benefited hugely from membership of the EU should be worried about any threat to the great project of ever closer union. And it is certainly the case that a disorderly break up of the eurozone would have some potentially devastating economic consequences. Once the omelette has been made, it cannot easily be unscrambled. Integration through finance, trade and contract is already too far gone to allow for a simple return to sovereign currencies.



But the degree of trauma would depend crucially on how it was done, while the idea that you are going to get more economic progress than otherwise by integrating more deeply is based on a fallacy. It is basic economics that the greatest degree of progress is delivered by having the maximum possible of competition.

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