George Soros on the eurozone is very long but very good. His bottom line:
Germany is likely to do what is necessary to preserve the euro – but nothing more. That would result in a eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer of payments. That would turn the European Union into something very different from what it was when it was a “fantastic object” that fired peoples imagination. It would be a German empire with the periphery as the hinterland.
I have no idea whether this is a likely outcome or not, but the one point I keep wanting to make about this is simply that this would be a very banal outcome. Very small countries like Singapore may be different, but every large currency union I’m familiar with operates on precisely this principle—you have prosperous parts of the country and you have backwards laggards, and the prosperous parts make large open-ended transfer payments to the laggards. If Germany returned to standalone status, the west would subsidize the east. In Italy the north subsidizes the south. In the United Kingdom the south subsidizes the north. In the United States the coasts subsidize Appalachia and the Gulf Coast. China has rich coasts and a poor interior.
Lots of things about the European Union are unusual, but the existence of persistent place-to-place gaps in income and productivity aren’t on the list. That’s just how the world works.