Well, to be fair, the euro was french initiative, where they dragged Germany in, in exchange for allowing Germany reunification. I don't think that the French had ANY idea that the euro would be the pefect gift for Germany, rather than the golden cage and that the french economy itself would fall victim. But what happened, was that Germany soon after, took over the euro area and despite that the French continue to illude themselves otherwise, the Germans are now running the show and simply try to give a political bone here and there to France , in order to show that they aren't dominating Brussels. Same as Renzi, who domestically has been saying for years "this thing can't continue, we will make our voice heard" and as soon as he goes to Berlin and sees Merkel, he ****s his pants.
The fact is, that the way that the euro conversion was made, it became a very seemless procedure for Germany, because it was 1:1 conversion. So nothing changed. In Italy for example, 1936 lire was converted to 1 euro. This, in real life, led to round up in prices, because it was very unpractical to make perfect conversions and so all prices went up. This on its turn caused some salary hikes, to compensate this and absorb the social impact. While doing this, the Germans, had a reform, where the froze their wages. They also breached the stability pact to absorb the social cost of doing that, by spending more money for welfare. At the same time, the competitors of Germany, found themselves, with an overvalued currency, increased wages and to make things worse, without eurobonds. So you have Germany, which is like the firstborn, the strongest inside the nest, getting stronger and the others getting weaker and as time passes, Germany becomes even stronger, becoming like a black hole for the EU trade. Which is how from a neutral trade balance before the EU, they are now at +25 bln.
At the same time, Italy for example has told them "OK, at least give some raises to your workers, so that they can buy more things, so that we can sell more to them too". Germany only recently decided to give a small raise to them. For the past years, the german reply was "our surplus is ours and if you want to get your share back, reduce your wages". At the same time, we had to do that, but without breaching the stability pact. To make things worse, it's the absense of eurobonds. So, what happens is this: You are in a position, where your "partner in union" is effectively sucking dry everything around you and he can borrow money to throw on his economy at 0% interest rate, while you can do that for 2% or more (Italy arrived to 4 or 5% during the last years). So, you are playing catch up, against someone who is your "partner", but is also your competitor and he not only starts from advanced position, but he also gets to throw money on his economy which his borrows much cheaper than you. So, how are you supposed to catch up with him? "By doing austerity". Unfortunately austerity has the bad effect of bringing also recession, which makes the debt go up. So it's like chasing your own tail. This is chart of Italian (red) and German (blue) industrial output over the years. Grey area is the euro introduction. There is the big fall due to the US imported crisis and then there are the effects of the austerity:
Greece is the living proof of that policy, where in 2010 it asked "help" with debt at 120% and 6 years after "saving" it, they have a debt of like 180% of GDP and we all pretend that this is a success, that Greece will pay it back etc. Because, the EU since the US 2008 crisis, is throwing money to save banks, not countries or people. The bail out of Greece, was in reality a bail out of the french and german banks (italian were much less exposed). The absurd thing of this situation, is that had the EU thrown a small fraction of the money that wholeheartedly gives for bank saving to the real economies of the europeriphery, these economies would bounce back, much like the Marshal plan made the post-war Europe bounce back too. Instead, we play the "discipline game", where we must follow the rules to the bitter end. For example, in Italy, there have been because of the austerity, countless small and medium businesses that shut down. This means, they produce nothing, they don't generate the money that they were, they are not giving the jobs that they were. Wouldn't have been better to use money that is thrown to bizzare bureaucratic projects or to bank saving to support those businesses? Then, you have the Brussels Company, shocked, about how the image of EU doesn't seem "appealing" in many EU countries and are shocked because of Brexit.
Some time ago, a friend sent me this, which i think explains how distorted the decision making in Brussels is. It's a continuation of the Geithner testimony if you will. The basic conclusion to which i came, is that, those bureaucracts aren't so much interested into solving a problem, as they are into "setting an example" and "enforcing our policy to others, no matter the cost".
^ I found this video deeply disturbing, both because of the mentality and for the undeground mechanisms of power that exist in the Brussels Palace and we know little about.
The interesting part, is this. Italy has partecipated in the bail out of Greece, Ireland, Portugal, in equal amount as France. And, looking at it, we 've burnt money to literally save 2-3 important banks and the german obsession about "austerity", even if this means, more burnt money. Well, at least on paper. In reality, we didn't really give actual money, the ESM has made some long term loans guaranteed by the EU members and we gave warranties. We 'd lose money if Greece was unable to repay in the distant future. Those that are definitely bailed out, are Deutsche Bank and PNB Paribas, that had the biggest exposure on Greece and got paid with hot cash from the ESM (the european mechanism). Which leaves, Ireland, saved, but with increased debt, Portugal barely saved, but with increased debt, Greece not saved and with such debt that they may as well put a sign on their door "sold out to creditors", cause they will be paying a humongous debt until the end of time (they got the worst of both worlds, they got bankruptcy effects without the debt cut that a normal bankruptcy gives),, Italy hoping for 1% growth and 133% debt, Spain with unemployment over 20%, France pretends that there is nothing wrong and that it is as strong as ever, while they had violent protests for the new labour law and the extreme right Marie Le Pen is galopping to power and in polls something like 60% of French have negative opinion of EU and Le Pen is asking for FREXIT referendum too.
At the end, i guess one could argue that the Brexit is just the slap on the face of the Brussels beauraucrats that all this time have been pretending that this situation is a functional union.