Greek government bonds are yielding 25% today. Which raises a question: what’s the next rating below junk bonds?
This has raised another round of calls for the euro zone to split into the northern euro and the southern euro. In today’s Wall Street Journal, respected economist Allan H. Meltzer calls for creation of a southern euro with the northern countries free to organize their monetary affairs as they wish. Others have also called for a split of the euro zone (see partial list below).
What is the origin of this phrase? Not a respected international monetary economist as you might expect. Instead, as far as I can tell, the first use of “northern euro” was in Gary Shteyngart’s dystopian Supersad True Love Story (Random House, New York, 2010). The novel opens in Italy where the northern euro is taken as the strongest currency in the world, with the possible exception of China’s yuan renminbi.
This is only one of the eerily accurate predictions in Shteyngart’s novel. The mystery is why no hedge fund or forecasting company has hired this guy as a consultant. At least the New York Times has noticed him: “Novelists Predict Future With Eerie Accuracy” By John Schwartz, September 3, 2011.
Many economists, probably led by Paul Krugman, have declared the euro to be doomed to failure. Prof. Krugman made this prediction in 1991. The question is how long the northern euro countries will continue to pour their national wealth into supporting the south. Especially since Spain and Italy are “too big to fail, too big to bail.”
As a side note, there is a geographical issue. The PIIGS countries are Portugal, Italy, Ireland, Greece, and Spain. If Ireland is to be included, how can this reasonably be called the southern euro?
Here’s a partial list of authors that have unwittingly followed Mr. Shteyngart’s lead. Each of them owes him a dollar — or a northern euro.
“Czech, German Leaders Daydream About Northern Euro.” Wall Street Journal, December 13, 2010.
“It’s (Long Past) Time for a ‘Northern’ Euro” by Andrew Stuttaford. National Review, July 18, 2011.
“Break-up of the euro could usher in a welcome new dawn for Europe” by Roger Bootle. The Telegraph, September 14, 2011.
“Germany needs to resist the euro’s sweet-smelling poison” by Hans-Olaf Henkel. The Guardian, March 13, 2011.
“’Super Sad’ And Satiric, Two Stories Of Doomed Love” by Michael Schaub (review). NPR.org, July 8, 2010.
