We all know what the problem is: Europe has a single currency but no central treasury - no overall financial supremo who can collect revenues and disburse them across the 17 eurozone countries on the basis of need and fiscal responsibility. As they head inexorably toward default, the Greek people are quite rightly furious at being blamed for the financial crisis. Ok - their public sector was bloated and pensions were extravagant - but they aren't alone in that. And yes, the Greeks aren't particularly fond of paying taxes. But this was hardly a secret - and the European banks who lent £400bn to the former Greek government were fully aware that Greece was a fiscal basket case. So why did they give them the money? What about due diligence? Why didn't someone notice that the government was cooking the books? The lender has a responsibility too.
But it's not just the irresponsible behaviour of French, German and British banks. When the single currency was introduced, without any safeguards, it played havoc with the less advanced economies like Greece. How could they compete with the Germans, who suddenly found that they were able to sell their cars and engineering plant at an artificially low price. Yes, an artificially low 'rate of exchange'. Just as the Greek euro was 'overvalued' , so the German euro was 'undervalued' - it got a massive trading advantage. This should have been recognised by the authorities and appropriate action taken. That's what happens in Britain with the Barnett Formula for Scottish spending, which transfers some wealth north to compensate for the fact that all economic activity tends to be attracted to the south east of England.
Ok, let's not bring up Barnett with all its baggage. The point is that there is a mutual interest between Germany and Greece in getting some equitable solution to the absence of fiscal union. . Punitive austerity clearly is disastrous - for Germany as well as Greece. German economic growth has come to an abrupt halt as Europe prepares for "D" day - default day.. To get all the countries of the euro going again there is going to have to be a central political and economic authority. And it has to happen now. And there really is no alternative.
