Long before the UK referendum, many argued that monetary union was undermining the European Union. Many had expected Greece to be forced out not once but twice.

There is a cottage industry of books forecasting the demise of EMU.  Johan Van Overtveldt, the former Finance Minister of Belgium, penned “End of the Euro” in 2011 and its captures the spirit of the genre. Jen Nordvig, a currency strategist, authored “The Fall of the Euro: Reinventing the Eurozone and the Future of Global Investing” in 2013, and anticipates the of EMU. The same year Dimitris Chorafas’s, “Breaking up of the Euro” was published. 

Not to be outdone,  a couple of months ago, Nobel Prize-winning, a former economist at the World Bank Joseph Stiglitz brought us “The Euro:  How a Common Currency Threatens the Future of Europe.” He anticipates that Greece and Italy will leave the monetary union.  He has also advocated that Germany leaves as well. He calls for an amicable divorce and the subsequent creation of a northern and southern currency bloc.  

To the contrary, we were among the few that did not expect Greece to leave the monetary union or be expelled.  Paul Krugman, another Nobel Prize winner,  sought to explain why he was wrong about Greece leaving, admitting that the political will was not sufficiently appreciated. We have long argued that Europe, the EU, and EMU are political constructs. The monetary union itself was an economic solution to a fundamentally political problem:  Under what conditions can Germany be reunified after the Berlin Wall fell?

We make two points here.  First, many observers compare monetary union to some perfect model that they dream up rather than ground it in the historical record and existing conditions. In this, they are utopians Second, the EU that exists today is not the same EU that existed before the crisis.  

European Economic and Monetary Union is almost 17 years old. Consider where the US was 17 years after declaring independence from the greatest empire at the time (and the first and true Brexit!).  It was not clear that the new republic would survive and indeed another war with England was around the corner (1812). The colonies fought the Redcoats under Articles of Confederation, which required unanimity in decision-making, a weak central government with no power for the federal government to tax or raise an army.