From last week, here’s a piece by the FT’s Gideon Rachman seeing the euro zone crisis the German way. It’s well worth reading in full, but check out the article’s closing paragraphs:
Much of the current German-bashing is wild and unfair. But there is one respect in which Germany does bear responsibility for the current crisis. Germany was in the forefront of the countries pushing for the creation of the euro. And yet it is increasingly apparent that creating a single currency, without a single nation behind it, is at the root of the current crisis.
When Chancellor Merkel talks of the need for “political union” in Europe as the long-term solution to the current crisis, she is acknowledging this design flaw. But political union must involve deep losses of national sovereignty. And the current crisis shows that Greeks, Germans and Italians do have one important thing in common – a deep aversion to ceding control of their national budgets.
The result is that the euro is in a dangerous and unstable position. The actions that are being urged on Germany are unreasonable. But Germany’s own solution – structural reform now, political union later – is unworkable.
Amid all these dangers, German officials remain outwardly calm. They shrug off the insults, while continuing to pledge financial aid to southern Europe and to make the case for supply-side reforms as the only long-term solution to the woes of the European periphery.
Behind the scenes, however, some of the brightest minds in the German government have a sense of deep foreboding. Twice in the past year I have found myself sitting next to different senior German officials at a dinner who have proceeded to tell me that the whole single currency was a terrible mistake. Speaking of the euro, one of my companions said: “It seems to me that we have invented a machine from hell that we cannot turn off.” The image was so bleak and Strangelovian that I laughed. But, I am afraid, it’s not really very funny.
No it’s not, and, in particular, it’s not funny to those German voters who were never asked whether they wanted this wretched new currency in the first place.
H/t: The Bear’s Lair
"creating a single currency, without a single nation behind it, is at the root of the current crisis." No, the _root_ of the crisis is deficit spending. The transnational currency makes the crisis worse, but is not the root.
Reply to this commentLinkReport AbusePeople should recall when the Euro was hatched. Germany had just gone through the "Wiedervereinigung" with the former DDR and the nation was feeling it's oats. For anyone who knew history and economics, it was clear a newly unified Germany would eventually become first among equals in the EU. Not having a long history of democratic institutions, the pols and bureaucrats did everything they could to push the Euro down the long suffering population's throat.
What was equally clear was that no nation in the EU was going to give up it's monetary and internal political power to a central bank with accountability to no one. I am sure the people who pushed through the Euro understood this at the time and for people to claim they couldn't foresee it or to express surprise at the present predicament shows a lack of candor. Once again, policies were pushed through to concentrate financial power politically and for the profit of the financial sector. Little regard was given for the other areas of the economy. Just ask small businessmen in Germany whether they had things better with the DM or the Euro.
Reply to this commentLinkReport AbuseThey can switch parts of it off: kick out the Greeks, for starters, and probably the Portuguese, Spanish and the Italians as well. Each of these countries would devalue and default - and then watch as exports soared and the economy reset at a lower but sustainable level. OTOH, Ireland and Iceland need not drop out, as each has swallowed the bitter medicine and is capable of enduring the pain of adjustment.
The euro will work for a northern European zone of nations whose publics pay their taxes and whose government are reasonably efficient and honest.
Reply to this commentLinkReport AbuseThe whole point of the Euro was to create an unstable situation that would force political union.
Now that they have actually reached this point, Europe is having second thoughts.
I find that amusing.
Reply to this commentLinkReport AbuseThe Euro zone under one currency a Hotel California, where you can check in but can never leave?
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