Some lowlights from a doom-and-gloom BBC report on economic conditions in the eurozone:
“The yield on Spanish 10-year bonds, which are taken as a strong indicator of the interest rate the government would have to pay to borrow money, rose above 7%, while Italian bond yields rose to 6.1%.
Yields above 7% are considered to be unsustainable in the long term.”
“But, as BBC Europe correspondent Chris Morris says, by sending its borrowing costs higher, the markets are sending a message to the eurozone that plans to help Spain are not convincing.”
In the year 2000, at a Bank of Canada conference, the great economist Milton Friedman had this to say about the then-forming currency:
“I think the euro is in its honeymoon phase. I hope it succeeds, but I have very low expectations for it. I think that differences are going to accumulate among the various countries and that non-synchronous shocks are going to affect them. Right now, Ireland is a very different state; it needs a very different monetary policy from that of Spain or Italy. On purely theoretical grounds, it’s hard to believe that it’s going to be a stable system for a long time. …
If we look back at recent history, they’ve tried in the past to have rigid exchange rates, and each time it has broken down. … So the verdict isn’t in on the euro. It’s only a year old. Give it time to develop its troubles.”
Over a decade later, the “troubles” are at hand.
P.S. Notice how Friedman zeros in on Ireland, Spain and Italy.