Brexit

[Oracle]

Are you suggesting that subsequent events (in Italy, Greece...)have turned what was a good idea at the time into a catastrophe rather than that the governments of countries outside the Paris/Berlin axis were at fault in not seeing ahead?

I dispute it was ever a good idea, come as it did after the failure of every currency union preceding it! for example the Latin, Austro Hungary, Scandinavian, Currency Snake, ERM. All the currency unions have one thing in common - they all failed for over a century! One of the closest analogies was the rouble zone, in the sense the clearing structures were similar to the Euro. That failed as well!

The fundamental problems are there are few controls over an economy. Take Interest rates / money supply and the self adjusting relief valve of the exchange rate. Now imagine taking a dozen aeroplanes, and linking their throttles and elevators on a single remote controls despite massive differences in engine size and efficiency and dead weight pay load (in this case debt). In order to stop one going too high, or another stalling, a third will crash into the ground. Only if the aeroplanes are very similar will they even stay aloft for any significant time Even then they will crash in time. There is no relief valve. The analogy is very real. The interest rate that is killing Italy because of debt, is creating a property bubble in Germany. One size simply cannot fit all.

What is supposed to happen is exchange rates reset values, so the consequence of German export dominance is demand for Marks grows, so does the price, so the price of importing from Germany becomes prohibitive, meanwhile the exchange rate of the other country makes their goods seem far cheapr so manufacturing locally becomes cost effective and local industry and employment gets a boost.
It is relatively self regulating, so long as you dont invite a business and job destroyer like Corbyn into power. The alternative to exchange rate drift involves slashing local wages in real terms which is politically impossible (remember Greece?), and invites a mass exodus. So the combination of fixed exchange rate and free movement is completely unstable. A disaster inevitably happens. With free movement of capital it deserts the struggling economies too.

The problem of forcing countries to balance budgets has massive consequences too. Less productive countries are forced to put up taxes to balance their books, which is why the poor countries not only have low wages, but also tax the least well off, where we and Germany have substantial zero tax bands. That encourages two other things. First the destructive migration, but also the black economy. In places like portugal and italy "cash under the counter" is the normal way of doing business, which further erodes the economy, and in southern italy encourages organised crime to flourish. You cannot blame the countries. The wages are half ours before they are taxed! The poor countries are forced to tax the wealthy and business excessively, so they all leave too.

Germany is at least in part an architect of the problem. They allowed Greece to join with an economy that was simply not good enough. They then blame Greece for their own bad decision in allowing greece into the Euro in the first place. I still dont understand why Greece didnt bail. I suspect varoufakis would have done it if he could.