Source: Business Week

The euro has become another "subprime" currency, afflicted by debts, funny bookkeeping, regulatory failure and widespread street protests in Greece and Spain. It's ironic that more violence-prone Americans didn't hit the streets, and throw rocks, when their living standards were sliced dramatically. Not yet anyway.

The euro began falling quickly after Greece hit the wall and it was discovered that the Euro's central banker had not required independent audits to monitor the financial behaviour of the euro's 16 user-nations. Its regulators took their finance ministers' words for it. This lapse in oversight sounds similar to the Bush regime, which let its financial institutions and Wall Street cowboys run amok, all in the name of its libertarian religion.

Currency traders last year began shorting the euro because of the "PIIGS" -- profligate nations Portugal, Ireland, Italy, Greece and Spain. Now it's obvious that these countries are the European equivalent of Fannie Mae, Freddie Macand Wall Street. So much for Sarkozy's Gallic finger-wagging in Davos recently where he accused, again, the "Anglo-Saxon" (i. e. U.K., U.S.) economies and their laissez-faire regulatory regime for ruining the world.

Like the reckless American financial institutions, these countries are demanding massive bailouts by Germany, the uber-euro economy. This is so they can continue to live beyond their means, escape consequences for their spendthrift ways and earn obscene bonuses, which, in Europe's terms, are cushy public-sector jobs, short work weeks, long vacations and retirement at 63. But German Chancellor Angela Merkel is hanging tough.

The rhetoric has become quite heated and led some to speculate that the eurozone itself will wither. But in fact, the existence of the currency has saved Europe from a disastrous round of devaluations by the mismanaged countries that would have made matters worse for everyone. The euro and the U.S. dollar are shock absorbers for their giant, disparate economic areas. Consider, for instance, if each U.S. state had its own currency: California, which is bankrupt, cannot pay bills, cannot raise taxes and cannot cut spending because of referendum laws.

There's likely too much hysteria over Greece, but not enough concerning Spain and Italy, which are also badly managed and collectively larger than Germany.

Spain's GDP -- about the size of Canada's -- shrank by 3% because it is the "Florida" of the EU. Its housing and banking sectors reel from a building binge to serve up condos, stores and infrastructure for the continent's Baby Boomer demographic. Others point to its unemployment rate of nearly 20% and its budgetary deficit of 11.4% of GDP, which prevents tax cuts or stimulus to kick start activity.

It all makes Canada and Australia, and our currencies, look pretty sound by comparison, but that's small comfort if the Americans and Europeans don't recover.