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It's more like "for the euro to work, Germany must spend more" The Euro isn't sensible from an optimal currency perspective. In a good currency union, labour w

by graeme 7y ago

It's more like "for the euro to work, Germany must spend more" The Euro isn't sensible from an optimal currency perspective. In a good currency union, labour will be extremely mobile. But though labour can move freely in Europe, people tend to prefer their home country. Contrast to the US where people move much more readily and follow jobs. So monetary policy has been too tight in areas like Greece that would have simply devalued their currencies in the past. Meanwhile policy seems to be too loose for Germany. If you want to keep the monetary union, you can't crush Greece and other southern countries. So the Euro must devalue a bit to help them. But this cuts interest rates in Germany, discouraging spending. Hence "Germany must spend more". It's more of a mechanical statement than a moral one. Also spending could be using capital to buy a business abroad or infrastructure or somesuch, I think. Needn't necessarily be consumer goods.

Nimitz14 7y ago
This is also how I understand the situation. Btw I think you've got a typo: > for the euro to work, Germany must save more
- graeme 7y ago
  Thanks! Fixed it
chii 7y ago
the fundamental issue with the euro zone is that each member country still considers themselves a separate nation (and i m not talking about policy, but about the people). A greek national considers himself a greek, and not german. In america, when a state has low revenue or high cost, it is subsidized by federal taxes. I.e., people from richer parts of the country "pays" for the poorer parts (e.g., infrastructure, or education etc). In eurozone, this is rarely the case. I think a person in the US won't bat an eye if taxes are redistributed to a different state, but the amount of backlash that eurozone sees from this sort of redistribution (see brexit - they even believe in lies because it conforms to their worldview!). Until the eurozone culturally and societally accepts itself as a single country with a single identity, there cannot be financial unity. Euro is a failure because of this imho.

by graeme 7y ago

Nimitz14 7y ago

This is also how I understand the situation. Btw I think you've got a typo: > for the euro to work, Germany must save more

graeme 7y ago
Thanks! Fixed it

chii 7y ago

the fundamental issue with the euro zone is that each member country still considers themselves a separate nation (and i m not talking about policy, but about the people). A greek national considers himself a greek, and not german. In america, when a state has low revenue or high cost, it is subsidized by federal taxes. I.e., people from richer parts of the country "pays" for the poorer parts (e.g., infrastructure, or education etc). In eurozone, this is rarely the case. I think a person in the US won't bat an eye if taxes are redistributed to a different state, but the amount of backlash that eurozone sees from this sort of redistribution (see brexit - they even believe in lies because it conforms to their worldview!). Until the eurozone culturally and societally accepts itself as a single country with a single identity, there cannot be financial unity. Euro is a failure because of this imho.