Poor Eurozone performance compared to the UK shows it is unwise to have a single currency unless you are a single country.
While Friday's revised growth figures reveal the UK to be the fastest-growing economy in the developed world, the latest Eurozone statistics, released Thursday, form a dismal contrast. France's growth stands at zero, while Germany's economy has actually shrunk.
France's stagnation will come as little surprise to UK citizens across the political spectrum bemused by President Hollande's brand of ideological socialism, which has long betrayed the fragility of his grip on economic reality. Far more unexpected is the news that Germany, hitherto considered the EU's economic 'locomotive', has chugged into reverse.
The outlook for the Eurozone is bleak. Poor performance is a matter of course for economic basket cases such as the infamous 'PIGS' (Portugal, Italy, Greece, and Spain). But when France and Germany - founding pillars of a united Europe - begin to tremble, the whole edifice looks unsteady.
Can the Euro be saved, or is it an albatross around the neck of its leading members, putting at risk not only their economic wellbeing but the survival of the entire European Union? To put the question differently, why are the foremost Eurozone countries doing so poorly in comparison to Britain?
An initial diagnosis does point to the single currency as the root of France and Germany's current difficulties. Britain's comparative exuberance is all the more remarkable given that Chancellor George Osborne has missed earlier self-imposed economic targets and failed to make dramatic cuts in either taxes or public spending.
What Britain has been able to do, unlike its Eurozone competitors, is print money at will (so-called 'quantitative easing') and lower interest rates to boost growth, as well as setting its own agenda for deficit reduction. As Eurozone members, France and Germany lack direct control over the European Central Bank's printing press and are subject to central interest rates (although these have been kept very low). Moreover, under the European Stability and Growth Pact they are bound by strict deficit reduction requirements, with an annual borrowing target of only 3% of GDP. As a non-signatory of the pact, Britain has been able to borrow far more, with our deficit standing at 6.6% of GDP. In a way, the Eurozone's fiscal stringency shows admirable discipline, but George Osborne has been able to use Britain's more generous borrowings to maintain spending and avoid tax hikes, which - he would probably argue - has contributed to our impressive recovery.
However, while the Euro may be a contributing cause of France and Germany's economic woes, it is not the only one. City AM editor Allister Heath's pronouncement last year that "France's failed socialist experiment is turning into a tragedy" begins to look prophetic, with persistently high unemployment, low investment and now (according to the President) a real risk of deflation. Critics of Hollande point the finger of blame at various pet policies of his such as the introduction of a 75%tax rate, which has driven many wealth creators to pack their bags and leave France, and his failure to liberalise Te country's over-regulated labour market. Certainly, Hollande's ideological dogmatism prevented his presidency from being the shining example of workable socialism that some hoped for.
If domestic policy is partly to blame for France's misfortune, in Germany's case some ills come from outside the EU altogether. The crisis in Ukraine has hit the German economy hard. But can the conflict completely explain Germany's miserable performance, with an economic shrinkage of 0.2%? Either way, PR-friendly but costly policies from Germany's coalition government such as the introduction of a minimum wage do not seem timely in light of the worsening economic climate.
Yet even if other factors beside Eurozone membership have contributed to France and Germany's financial decay, the countries' underperformance in comparison to Britain - hardly a model of exemplary economic stewardship itself - does indicate the shortcomings of the Euro's one-size- fits-all model. Simply put, it is unwise to have a single currency unless you are a single country. As long as full political union in a United States of a Europe is out of the question for Eurozone members, the general rules adopted to preserve the bloc's overall stability risk hampering specific efforts by individual nation states to tune up their domestic economic performance.