07-06-12, 10:07 PM
Quote:Yes! The assumption was that the "weaker" economies would be elevated to the position of the "stronger"The first problem was membership fever. Countries who were desperate to get in, cooked the books, and the bigger economies overlooked this in their desire to make the Euro instantly massive.
The next problem was nobody limited the weaker economies access to cheap credit. So they borrowed and borrowed, and built and built, and asset prices soared. On top of that nobody was tightening up weak tax regulations, so not enough was coming in to secure the loans. Meanwhile the big strong economies got bigger and stronger selling manufacturing to the weak countries with the cheap credit. Germany make a packet out of this, the UK didn't because it gave up on manufacturing years ago.
The third problem was credit was being created on the back of inflated asset prices, and asset packages were being passed around to create even more money that didn't exist, the UK was doing this big time too. Brown's miracle economy was based largely on printing cash.
Of course Germany is fine, as it now has big demand for it's huge manufacturing base in the developing countries. The UK is focced, because it ran down it's manufacturing base in favour of banking and series.