{"id":596656,"date":"2025-11-27T07:10:20","date_gmt":"2025-11-27T07:10:20","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/596656\/"},"modified":"2025-11-27T07:10:20","modified_gmt":"2025-11-27T07:10:20","slug":"why-euro-breakup-is-necessary","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/596656\/","title":{"rendered":"Why Euro breakup is necessary"},"content":{"rendered":"

\u201cInsanity is doing the same thing over and over and expecting different results.\u201d This saying is often wrongly attributed to Albert Einstein. It\u2019s unclear who coined the expression, but – regardless – it applies perfectly to the Euro. The countries that make up the Euro zone have highly unequal levels of government debt. Last year, Germany\u2019s debt was 63 percent of GDP, far below Italy (135 percent) and Spain (102 percent). Whenever a bad shock comes along, Italy and Spain are unable to issue debt at low interest rates and – as a result – are always on the verge of a debt crisis. The ECB, which wrongly sees any debt crisis as an existential threat to the Euro, has pivoted to cap yields with its TPI anti-fragmentation tool, which allows it to push yields back down to what it deems fundamentally-justified levels. It should surprise no one that – with this distortion to incentives – the number of high-debt countries is growing rapidly. French debt was 113 percent of GDP last year and is forecast to rise further.<\/p>\n

A few weeks ago, I wrote a series of pieces on Euro breakup. I began by explaining that the ECB – because it equates survival of the Euro with avoidance of debt crises – no longer represents<\/a> the interests of low-debt countries like Germany. The only way to fix this imbalance in my opinion is for Germany to exit<\/a> the Euro or – at least – to credibly threaten exit. This would force debt write-downs<\/a> in Italy and Spain, which would create the fiscal space needed to confront external threats like Russia and China. At a time of elevated geopolitical risk, Europe can no longer afford to blunder along in its current debt delusion.<\/p>\n

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Needless to say, my posts met with strong disapproval. I\u2019ll summarize the main pushbacks below, but let\u2019s be clear about one thing: the status quo is unsustainable and will end. My favorite way to illustrate this is the chart above. The horizontal axis shows nominal GDP in 2021. The vertical axis shows aid commitments for Ukraine across key European countries. Despite their large size, neither Spain (ES) nor Italy (IT) provide meaningful aid. Both countries claim they don\u2019t have a debt issue, but actions speak louder than words. These countries\u2019 lack of fiscal space – and their refusal to address this – makes them a geopolitical liability. Unless this gets fixed, Europe will be increasingly marginalized on the global stage.<\/p>\n

There\u2019s three broad categories of pushback to my Euro breakup view:<\/p>\n