Tobias Ellwood: Is the end in sight for the euro?
Unless your name is Robert Peston, understanding the current plight of the euro might not come naturally - and your interest may well be limited to "it looks pretty bad - glad we are not in the Euro Zone'. So here is an attempt to explain (not least to myself), without that peculiar accent, what is going on.
Simply put, the rules for those 16 countries in the Euro Club are not well enforced. Bound by a single currency and single interest rate indeed - but they all pursue very different strategies in managing their local economies. Were there to be full liberalisation of services, trade and a common energy policy, life might be very different.
The club was created in the boom time (1999) where basic rules for entry included, firstly, a maximum budget deficit (total amount you spend versus the usually lower amount going into the pot from taxes etc) not exceeding 3% of GDP in any year. Germany's deficit last year was 3.3%, Spain 11.2% Portugal 9.3% and Greece 13.6%. Not that we faired much better here in the UK coming in at 11.2%.
Secondly, the maximum public debt (how much total debt a country accumulates) must not exceed 60% of GDP. Last year Germany's total debt was 77%, Spain 50%, Portugal 75%, Greece 108% and the UK 68%. There are therefore a lot of us breaking these rules - well not us specifically as we are not in the Eurozone - but this is why there is so much panic.
Greece's present troubles are however hogging the spotlight - and rightly so, for the scale of their hidden debt should have prevented them from bluffing their way into the Eurozone in the first place. They, along with other Mediterranean countries in a similar mess, are now pleading for a bailout from the northern countries' that were better able to stay within the rules. Put another way, the North European boys have run up huge trade surpluses, while the Party Animals in the south have run bigger and bigger trade deficits.
As BBC's Stephanie Flanders commented this week, German exports to Greece have risen by 133% since 1999, in contrast to Greek exports to Germany which have only risen by 13%. The resulting trade gap eloquently illustrates the two tier Eurozone (and also Angela Merkel's enthusiasm to help as she is now sitting on so much Greek debt).
Despite the offer of €750bn to stabilise the problem, the bond markets are unimpressed and the future looks about as rosy as a Greek tragedy. Expelling the naughty countries from the Eurozone has, for the moment, been ruled out for fear of bringing the entire EU house of cards down. Some are calling for stricter rules to prevent such huge debts accumulating or even obliging Brussels to scrutinise national budgets - which really would take us towards a United States of Europe.
Three things are now very clear: Britain's wisdom in staying out of the Eurozone; the reality check for 16 economies sharing a single currency with such huge fiscal disparities; and the Euro - in its current form - is probably finished.