A book review from today's Financial Post:

Bust: Greece, the Euro and the Sovereign Debt Crisis By Matthew Lynn Bloomberg Press 282 pp; $33.95

When the euro was launched on Jan. 1, 1999, it was regarded as an elixir that would improve the health of trade in Europe, remove foreign exchange uncertainty, create a massive trade bloc second only to the United States in economic power, and produce prosperity for the continent.

Nobody imagined Greece would wreck the plan.

Greece doctored its books, took expensive goods out of its price index, removed massive public boondoggles from its public accounts. It also concealed the central fact of Greek public finance: Tax evasion is a sport practised by nearly everybody including every member of the Greek parliament, all of whom use phony home price values to avoid property taxes.

Public finance seldom makes for a juicy read. But Matthew Lynn, a financial journalist who, as a sideline, writes military thrillers, turns central banking into a seesaw of ghastly revelations and roaring hilarity.

Bust is solid macroeconomics, practical trade theory, and fiscal policy that anybody can understand. It’s valuable reading for anyone investing in euro-denominated assets and a morality tale too.

The story starts with Greece’s admission to the euro. Just after the new currency was introduced, government announcements admitted accounting errors. In a series of Nortel-like moves of re-re-restatements, Greek public debt climbed from 102% of GDP to 114%. The government had kept Greek military budgets off national accounts because, it claimed, disclosure might endanger national security.

Then there are pensions. Unmarried daughters (but not sons) of retired civil servants carry on receiving their father’s government pensions even after their parents have died provided they remain unwed.

Then there is the railroad. Total salaries on the state-run system amounted to more than four times the annual ticket sales for the railway system in 2008. Mr. Lynn and others have noted it would be cheaper to pay for taxis for every passenger for every trip than to keep the rail service going.

Default is bound to happen, Mr. Lynn concludes. It will happen in 2011 or 2012 or 2013, driven by Greece’s incurable deficits. That will lead to a breakup of the euro itself, he predicts.

While awful when it happens, the demise of the euro will push nations back to fiscal responsibility, he claims. In the new order, “Europe won’t be able to borrow out of trouble anymore, nor paper over the failing of their own economies with more and more debt.