The Fourteen Speed Economy

In recent press, over the last year, Australia was described as being a "two-speed economy". The bouyant mining driven economies of Western Australia and Queensland contrasted against the more subdued, if not stagnant, economies of the eastern seaboard states. At the time is was speculated that the Reserve Bank's monetary policy was struggling to contain these two diverging economic zones. What we are seeing in Europe at the moment is in effect the "fourteen speed" economy, and it may well tear the Euro apart.

Please find attached a link to Business Spectator with an article from Martin Wolf at the Financial Times. Here Martin provides a pre-emptory autopsy of the Euro. The Euro was always an ambitous idea. Indeed it may have worked where it formed the common currency for a number of like economies operating in broad concert with each other. However as Martin outlines, the Euro has in effect contributed to, if not facilitated, many of the economic adjustments that are taking place in the PIIGS economies at the moment. These weaker member economies of the Euro need to devalue their currencies, increase there competitiveness and restart their economies. This clear is something they cannot do whilst they remain members of the Euro.

Stapling the struggling economies of the PIIGS to the economic powerhouses of Western Europe via the Euro has now been seen to be a misconceived idea. The euro may survive, or survive is a different form, perhaps within a smaller better vetted club. Then again, this decade may also see the return of some familar names, drachma, franc, and deutsche mark.