Thread: Greenspan: European Union Doomed to Fail

Greenspan: European Union Doomed to Fail

Wednesday, 26 Oct 2011 06:58 AM
By Forrest Jones

The European Union is doomed to fail, at least as a monetary bloc, because the cultural differences between northern and southern countries are just too vast to allow for one monetary policy, says former Federal Reserve Chairman Alan Greenspan.

"At the outset of the creation of the euro in 1999, it was expected that the southern eurozone economies would behave like those in the north; the Italians would behave like Germans. They didn't," Greenspan told CNBC.

"Instead, northern Europe fell into subsidizing southern Europe's excess consumption, that is, its current account deficits."

Eventually, southern European nations will no longer be able to import northern European goods.

"The effect of the divergent cultures in the eurozone has been grossly underestimated," Greenspan says.

"The only way to have several currencies from divergent nations lumped together is if they are culturally close, such as Germany, the Netherlands and Austria. If they aren’t, it simply can’t continue to work."

Others share Greenspan's dim view of the European crisis.

Nobel Prize-winning economist Joseph Stiglitz said the euro currency could dissolve “any time now,â€

Stiglitz: Euro Could Dissolve at ’Any Time Now'

Tuesday, 25 Oct 2011 04:49 PM

Nobel Prize-winning economist Joseph Stiglitz said the euro currency could dissolve “any time now.â€