My view is that things are getting worse. If you just want one metric just look at unemployment. Overall euro-zone unemployment now keeps grinding up, it’s at 9 or 10 percent now. Youth unemployment is in the 20s. Or look at Spain. Spain isn’t a Mickey Mouse economy. They’re at 26 percent unemployment and youth unemployment is 60 percent. This is a social explosion waiting to happen. And what is the policy recommendation? They need to do more austerity. They need to stay the course. Greece has been in recession for five years, and they still need to tighten their budget. . . .I think the Europeans need to accept that the Euro was a disaster they should move on from. If they don't, some country will soon elect a Fascist or Anarchist government, and things will get ugly fast.
Italy has been in recession for seven or eight quarters. In Spain, unemployment is around 26 percent. This has messed up public finances, but it also causes a political reaction. So look at Italy, which is much bigger than Cyprus, over the last month. They had an election in which they basically have a political stalemate. Sixty percent of the electorate said they don’t want this austerity anymore. So why does it keep happening? Because they’re constrained, they’re forced into a policy path leading you nowhere.
The basic plan behind the Euro was use the common currency to force Europe to become a sort of United States. But European voters, it turns out, don't want to give up their national sovereignty. This creates the absolutely unworkable situation of independent countries trying to share a single currency. If greater political unity cannot be created now, the currency has to go.