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I understand the sentiment, but you're overlooking one big factor. In a true free market scenario with freely floating currencies, currencies in countries like
by credo 16y ago
I understand the sentiment, but you're overlooking one big factor.
In a true free market scenario with freely floating currencies, currencies in countries like Spain, Italy, Ireland, Greece would have devalued. Germany's currency would have strengthened. This would have made German exports (to other EU countries) much less competitive than they currently are.
However, the Euro tightly integrates these other countries with Germany and makes it very difficult for them to revive their economies.
Using a single currency without a single federal government was a risk for all countries involved. Germany has a huge interest in keeping the Euro alive and the EU as a single unit. It shouldn't be surprising that many people in other European countries expect something in return (for having given up the options that they had before the Euro)
- fxj 16y agopeople in germany are very pissed about the "rettungsschirm" which guarantees in principle the bail-out of all the other euro countries (PIIGS, portugal, italy, ireland, greece, spain) because it is german money that is given to the other countries. if there would be a referendum about the euro, german people would vote for leaving the euro zone. they want their deutschmarks back. the euro is a political instrument and was never welcome by the people in euroland.
- danssig 16y agoThis is absolutely true. I would personally like few things more than to see the Euro gotten rid of (though that's nearly impossible at this point thanks to speculators).
- HSO 16y agothanks to speculators?! try politicians, imposing their priorities on the population. soeculation has about zero relevance to this question. it's a matter of political will.
- danssig 16y agoNo, the issue is that which ever country steps out of the Euro first is going to be hammered by speculators. Personally, I would expect countries getting back to their own fiat currency to do better but the currency itself will certainly be worth less. And no matter how much money I had I wouldn't be willing to bet against everyone else' shorting.
- darklajid 16y agoDon't use terms as "people in Germany" (implying all), "german people would vote" and "was never welcome (sic) by the people". I'm from Germany, I'm not pissed. I wouldn't vote against the currency and was actually glad when it was introduced. qed.
- fxj 16y agohttp://www.manager-magazin.de/politik/deutschland/0,2828,736655,00.html http://www.manager-magazin.de/politik/deutschland/0,2828,736... Jeder Zweite will zurück zur D-Mark Every second german wants the D-mark back Date: 27.12.2010
- sgift 16y agoFrom this follows that every second german doesn't want the D-mark back. Far from "people in Germany". Also, this poll was done after a big campaign by BILD (german tabloid) that other european countries are bleeding Germany, which probably skewed results in favor of abandoning the Euro.
- yummyfajitas 16y agoTelling people the facts "skewed" results in favor of abandoning the Euro?
- route66 16y agoHow do you conflate a tabloid campaign with "telling facts"?
- yummyfajitas 16y agoSgift described the campaign as informing readers that other countries are "bleeding Germany" (presumably money, not literal blood). That doesn't sound inaccurate. Tabloid != incorrect, you know. Tabloid is merely a pejorative label applied to newspapers which don't attempt to hide their opinions.
- BvS 16y agoI'm German and am very happy with the Euro and don't want the mark back. the problem ist that many people kind of understand the "Rettungsschirm" but don't understand the benefits of the Euro, especially that other European countries can't devalue their currency withe respect to Germany. This is a HUGE benefit for the German economy and therefore it makes sense that Germany pays more than other countries.
- chalst 16y agoBy "kind of understand", I think "don't understand" is most common. Knowledge that the "parachute"/"bailout" is refinancing as opposed to assuming the debts doesn't seem to be widely spread. Likewise the German opposition to default is not widely examined: weak German banks, esp. the Landesbanken, are heavily exposed to peripheral Euro debt (who was better placed to offer loans for those shiny German exports?), and the farce that was the stress tests would quickly be exposed if there were defaults in Greece, Ireland, let alone Spain. Why was the Germany finance ministry to openness about the stress tests. The problem is a hangover from a slack money culture that existed before the crash, and slack money requires more than feckless borrowers, it also requires irresponsible lenders. There may be a morality tale in here somewhere, but it's not the simple good country bad country one from the Bild.
- deleted 16y ago[deleted]
- yequalsx 16y agoWithout the Euro Germany wouldn't be quite the exporter it is now. Italians can buy German products because of the Euro. Initially Germany wanted to keep Italy out of the Euro but the Italians pointed out that they would devalue their currency and then German milk, cars, etc. would not be able to be bought in Italy. The Euro may not have been welcomed by the people but it was welcomed by corporations and banks. Corporations and banks had (have) more power.
- fxj 16y agowould it be bad, if italian people would by milk, cars, etc from their own (italian) producers?
- yequalsx 16y agoI don't think so but the Italian government at the time wanted to be part of the Euro. I happen to think trade barriers are good (at some level). I'm opposed to free trade because there is no agency to regulate against negative externalities.
- deleted 16y ago[deleted]
- Stormbringer 16y agoHuh, you'd think they'd be used to bailing everyone else out after the massive devaluation to their Deutschmark retirement savings after monetary union. Personally, I find the success of Germany not terribly surprising given that they were going okay before union. The thing that perplexes me is these other countries that are falling apart, as they didn't strike me as so terribly fragile either. People say "oh, they are lazy", but laziness creates a vacuum, and somebody will step in to take advantage of the opportunities.
- jules 16y agoI don't get this argument. Doesn't that mean that Germany are currently selling their stuff for cheap, and buying for too much?
- fxj 16y agoExactly! this means that german workers cannot get an increase of their salaries but some multi-national banks and cooperations earn billions. At the moment the european economy is more neo-con that the american ever was.
- cx01 16y ago> In a true free market scenario with freely floating currencies, currencies in countries like Spain, Italy, Ireland, Greece would have devalued. Germany's currency would have strengthened. This would have made German exports (to other EU countries) much less competitive than they currently are. Well, even without free-floating currencies, countries like Greece could just lower the wages, which would in turn reduce the price-level of Greek products, making them more competitive.
- yequalsx 16y agoYes, but this would not help the debt of the people (and government). In fact, it would make things worse. This is the problem that Greece and Ireland are facing. Those governments are reducing expenditures but their debt payments remain the same. They are getting squeezed. In a truly free market situation the bond market likely would have stopped buying Greek bonds because of the fear of currency devaluation long before their structural problems became overwhelming. Sometimes though the bond markets make a bad bet and currency devaluation becomes necessary. That's the free market. There's risk in buying bonds. However, in the EU the bonds have an implicit guarantee from the ECB, Germany, and France.
- deleted 16y ago[deleted]
- chalst 16y agothe bond market likely would have stopped buying Greek bonds because of the fear of currency devaluation There's a reason why this kind of thing might be true, because bond holders might hope for intervention, as indeed happened. But I doubt it in this case: (i) the Euro treaty forbade intervention, and (ii) the CDS markets, which one would think would be very sensitive to risk of default, were not worried until shortly before the bond markets proper were.
- yequalsx 16y agoI was talking about a scenario in which Greece wasn't part of the Euro. The bond market would have attempted to factor in the risk of default or currency devaluation in its purchases of Greek bonds.
- orijing 16y agoI agree with your point, but doesn't this analogy extend to the states too? I don't know which states import more than they export, but should they be saying "Where's the handout?" Ironically the states most in need of help have been saying "Nope, don't give me any stimulus money. Don't give me money for high speed rail"