Euro has better odds of survival than EU: Niall Ferguson
Published Sunday, November 13, 2011 2:45PM EST
British historian and Harvard professor Niall Ferguson says the eurozone will likely survive the economic damage from struggling members like Italy and Greece, but the European Union may not be as lucky.
In an interview with CTV's Question Period on Sunday, Ferguson said the 17-member eurozone, which shares the euro currency, is on much more stable ground than the European Union, the 27-member political organization.
He was dubious about speculation that the euro would disintegrate, or that some countries -- like Greece -- would be forced to give up the currency.
"It's much, much harder than it looks to dismantle a monetary union once you've created it. I think the euro will be around for some considerable time to come. I don't think that Greece would benefit from leaving, or that the Germans would gain from kicking them out," Ferguson said.
"However, the European Union is another matter. It's actually easy to leave the European Union, whereas it's hard to leave the single currency. So one possibility is that the euro may survive, but the European Union, the project of something that actually had a political as well as an economic character, that that might start to disintegrate."
Rising economic problems in the eurozone have created massive political turbulence, forcing the resignation of Italy's Prime Minister Silvio Berlusconi and, before that, the ouster of the Greek prime minister in favour of former European Central Bank vice president Lucas Papademos.
Ferguson said those countries essentially ran into trouble because they choose to hold off on addressing their debt problems.
"What you're seeing in Europe, particularly Italy, is a warning for North America countries -- it's a warning that if you just let your deficit grow, if you allow your public debt to rise about 100 per cent of gross domestic product, at some point there will be a reckoning," Ferguson said.
"My argument is not that things happen gradually, but that they happen very, very fast. You're fine until you're not fine. You're paying 3 per cent on a 10-year bond, and then suddenly you're paying seven-and-a-half per cent."
Ferguson, whose new book is called "Civilization: The West and the Rest," said the United States should not assume it's immune to the same financial fallout as Italy simply because it's an economic superpower.
He said the U.S. is already going through a turbulent political moment as Congress struggles with the aftermath of the financial crisis -- and the country's massive debt problem.
"If you look through history, what characteristically happens after a major financial crisis is that economically things slow down, all kinds of problems with public finance come to the surface, people are asked to either pay higher taxes or to accept cuts to the expenditure, and you tend to get a populist backlash on both the left and the right," he said.
"What you see in the United States is part of that story," he added, pointing to the Tea Party and Occupy movements -- the former has pushed for cuts in government spending, while the latter wants high taxes for the rich.
"This is a kind of polarizing process that you tend to see after big financial and economic shocks," Ferguson said.