Over the course of the past 10 years, I’ve turned from a semi-supporter of the euro to a full-blown euro-sceptic. Now, I think that we have reached a point, where the legitimacy of the European common currency is gone. We need to get rid of it.

The history of the (current) European common currency is troubled. In the past, there have been several attempts to unite Europe, or at least large parts of it, under the same monetary “umbrella”.

The Latin Monetary Union, a metallic standard applied over several European countries, existed from 1865 to 1927 and suffered from constant attempts of some of the members to decrease the silver content of their coins. The Scandinavian currency area formed by Sweden, Denmark and Norway during 1873–1913 is regarded as the most successful of the European currency union attempts, but its members suffered from several asymmetric shocks.

All successful common currency mechanisms have been either federal states or confederacies, and while some currency unions of sovereign nations have lasted fairly long, they have exposed the members to both external and internal shocks. Additionally, currency unions have often been troubled by slow economic growth.

And this is why the euro is in such a deep trouble.

Currency unions and asymmetric shocks

As we know, GDP growth has differed quite radically between the members of the Eurozone. Some countries like Germany and Austria have flourished, while the GDP per capita of Italy is basically at the same level as when it joined the euro, and Greece is now poorer. The economic growth of Finland has also sputtered in the euro.

The differing growth paths of the economies of the Eurozone are a symptom of a general problem that has haunted currency unions for centuries. Competitiveness and productivity develop at a different pace in different economies over time. In a currency union, this leads to large competitiveness differences among the member countries.  During economic expansions and booms, these differences usually go unnoticed, because growing aggregate demand supports ailing fields of production.

However, when a currency union faces an economic downturn or a crisis, as the euro now has, falling aggregate demand hits less competitive industries and countries hard and the financing costs of less competitive countries jump. This is an asymmetric shock.

The detrimental economic effects of asymmetric shocks can be mitigated by transferring funds from prosperous to declining member states. In the US, this happens mostly through the federal tax system. When a state is hit by an economic downturn, her federal tax payments decrease, while federal support, like federal unemployment payments, increase. Since the Great Depression, these fiscal transfers have been essential for the survival of the dollar.

With its current proposition, the European Commission is trying to do the same for the euro, illegally.

Building a federal Europe without a mandate

The true tragedy of the euro is the stupidity or the cunning of its founders.

It should have been obvious from the over 200 failed currency unions in history, many of which existed in Europe, that the euro would not be able to sustain itself in perpetuity without a federal government, a taxing authority, to support it. So, the founding fathers of the euro were either suffering from complete historical illiteracy or they bet on the likelihood that when asymmetric shocks hit, panicked European leaders would form a federal Union. As things currently stand, the latter of these theories, no matter how conspiracist it sounds, looks more plausible.

The problem is that no one has asked the people of Europe whether they wanted it or not.

Moreover, the current rescue proposal of the Commission breaks its own rules. The proposed Fund, funded by debt issued by the Commission under guarantees of the member states, would breach the Treaty of the Functioning of the EU (TFEU) Article 310, which bans the EU from acquiring a debt. And the proposed grants the EU would provide to member nations would breach the TFEU Article 125 banning all mutual fiscal responsibility. These and the EU-wide taxes proposed by the Commission would, most likely, breach constitutions of several member countries of the EU.

Anyone who thinks that these powers would be “temporary” is fooling him or herself. As the debate leading to Brexit showed, the EU does not relinquish the power it has acquired.

Alas, what is truly striking, is that the European Commission is proposing that political ambitions, sustaining a currency, and economic emergency would trump the European constitutional state.

Have we really not learned anything from our not-too-distant past?

The common currency needs to be scrapped

It’s likely that euro could have been successful as a much smaller currency, implying that it would have fostered a smaller, economically more homogenous group of countries. The original idea was to establish the euro around Germany, Austria and the Benelux countries. This might have worked.

But, for reasons yet unclear, the European leaders decided to allow a formation of a vast, 12-country currency block. And that was the point, when everything started to go sour.

Another crucial point in the saga was the parliamentary election of Finland in the spring of 2011. The True Finns made a spectacular rise by arguing against the second bailout of Greece. The dissatisfaction against breaking the no-bailout rule (TFEU Articles 123 and 125) among the northern member countries was growing, and Finland was expected to lead the rebellion against the bailout packages.

The leader of the National Coalition Party, who won the election, Jyrki Katainen left the True Finns out from the government, which then accepted the second bailout of Greece. The no-bailout rule was dead and, in 2014, Jyrki Katainen became the European Commission Vice-President for Jobs, Growth, Investment and Competitiveness.

Since 2011, the Eurozone has been on the road to ever-increasing federalism, and her citizens have not been asked once, whether they want it or not.

The simple fact is that the legitimacy of the euro has gone. It has become a massive economic burden, and now saving it threatens to take away our national sovereignty and the constitutional state.

The euro needs to go.

Tuomas Malinen is Chief Economist at GnS Economics.