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David McWilliams: EU now being threatened by its own central bank
Date 04/05/2011 14:25  Author webmaster  Hits 994  Language Global
04 MAY 2011

By David McWilliams | Irish Independent

IN the late 1980s, while studying at the College of Europe in Bruges, I was struck by just how pragmatic the European project appeared to be.

Many of the lecturers and professors were deep EU "insiders" -- distinguished academics from all over Europe who had excelled in their own fields. They seemed to be the pinnacle of cosmopolitan sophistication, enlightened and aware of the various strands that had to be pulled together carefully to make the EU work.

Back then, any moves towards more European power were characterised by patience and prescience -- a little move here, a pull back there, never overplaying the hand and, above all, the entire process seemed to be non-ideological.

Over the past 10 years, this has changed. European wisdom has been replaced by EU dogma; lateral thinking exchanged for tunnel vision. The ECB is to blame.

Those who, during the boom, pointed out that there was a central problem at the heart of the euro were dismissed as cranks. Now there appears to be a realisation that, from Ireland's point of view, the entire euro project might not have been the smartest thing to do. And from an economic perspective, it is becoming apparent that we can't get out of this mess quickly in a single currency with low inflation.

Historically, when a country has been hit by the bursting of a property bubble, a bank crisis and the destruction of the national balance sheet, this has been followed by a massive devaluation of the currency.

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