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Germany, Not Greece, Should Exit the Euro
- aseembehl 14y agoAt first, I thought the article is about the soccer tournament. :)
- piquadrat 14y ago... and thereby killing the Swiss economy, thankyouverymuch. We're struggling enough with the strong Swiss Franc against the Euro as it is. A further devaluation of the Euro would be pretty devastating for Switzerland, even if a strong Deutsche Mark would mitigate the effects a bit.
- polshaw 14y agoNo offence but the competitiveness of the Swiss economy really isn't something anyone is concerned with outside of Switzerland (vs the whole EU).
- cynicalkane 14y agoThe Swiss central bank has demonstrated complete control over their currency. It's been fixed at around 1.2 to the Euro ever since they announced the peg. And it'll be immune to speculative attacks when printing presses are infinite.
- Nrsolis 14y agoThere was once a time when CHF (Swiss franc) was at least partly backed by gold. Since 2000, no such luck. You might be well advised to study a currency phenomenon called the "unholy trinity" in regards to your opinion of speculative attacks on CHF. Pick any two out of three: free movement of capital, control of domestic economy, stable exchange rates. If the Swiss wanted to defend the peg, they'd have to give up one of the other two options. You can't EVER get all three. Britain tried this with Pound Sterling, but Soros saw that their attempts to defend the currency were unsustainable. The result was predictable. It's not beyond possible that the CHF could find itself "adjusting" the peg if the ECB decided to embark on a path of massive quantitative easing. In fact, I'd wager that lots of bets are already being made on this very hypothesis.
- Symmetry 14y agoAnd its had to print far less after it announced that there was a target than before. But if the Euro loses too much value the Swiss central bank probably won't want to follow it down, so being able to maintain a peg won't actually help them in that case.
- j_col 14y agoA strong Deutsche Mark would make Germany's exports more expensive, last thing they want (see what's happening to Switzerland right now for example).
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- mtgx 14y agoI remember a lot of Germans were very upset about switching to Euro from the Mark, because for example if before a cup of coffee was 1 Mark, after that it would've become 1 Euro (~2 Marks at the time). I don't remember if they converted everyone's salaries 1:1 to Euro, too, though. If they did, I guess that worry didn't make much sense.
- Inufu 14y agoNo, they didn't. And that price upscaling was only for small things, mostly rounding up to the next largest round number. Annoying, but it didn't make _that_ much of a difference.
- j_col 14y agoThat rounding up of prices by retailers happened in all member countries, including mine. But it was short-lived.
- megablast 14y agoThis is a ridiculous statement, there were lots of measures in place to ensure that exactly this did not happen, with huge fines for anyone who tried to overcharge once the changeover happened.
- icebraining 14y agoAgreed, 'though people here (Portugal) will still tell you that stuff is now much more expensive due to the Euro. They don't seem to grasp the concept of inflation.
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- Spooky23 14y agoThe problem with the Euro is the moral hazard that it creates. People in the "PIGS" countries were able to borrow and spend based on the credit of more robust economies such as Germany. So now, the people in these countries will be suffering for years under devaluation or austerity, but the rich who were the biggest beneficiaries of the bubble are completely safe, with their fortunes migrated to strong German banks with the click of a mouse. The Germans and northern Europeans are culpable in this -- they essentially co-signed billions of loans to countries like Greece that lack the governance ability to function with a German credit line.
- gaius 14y agoThere's actually nothing to stop the EU declaring that all accounts anywhere in the EU belonging to a Greek national (say) get redenominated in Drachma.
- khuey 14y agoExcept the riots. But that might happen regardless.
- _delirium 14y agoI don't believe that would be legal under most EU countries' domestic banking laws, not to mention EU law. For example, I'm a non-Danish national (American) with a Danish bank account, and under Danish law the government could not treat my bank account in a disadvantageous way (such as confiscating it, or unilaterally redenominating it) solely because I'm American. They could pass a law forcing me to close the account (e.g. by tightening the rules on foreign-owned bank accounts), but they would have to let me withdraw my money if they did so, in the same currency as it's denominated in (DKK).
- gaius 14y agoIt wasn't "legal" for countries to stray from the stability pact either, but they did! We're in the realm of making stuff up as we go along here. Or the Greek government could declare it illegal for Greeks to hold bank accounts elsewhere. Certainly it's not tenable for the average Greek to squirrel away all his or her money in German banks, waiting for the "grexit", then cashing in.
- polshaw 14y agoAn interesting proposition (and seemingly fiscally sound), but it misses a lot of the point of the European integration, which is long term peace in Europe. Separating Germany seems a particularly bad idea in that context.
- yummyfajitas 14y agoAre you suggesting that if Germany were to leave the currency union, a war would result? If not, then why bring up "long term peace in Europe"?
- arethuza 14y agoI don't think there is any immediate prospect of war. However, I can't help recalling the start of Nial Ferguson's "The War of the World": "The world at the beginning of the 20th century seemed for most of its inhabitants stable and relatively benign. Globalizing, booming economies married to technological breakthroughs seemed to promise a better world for most people." I'm sure everyone then thought that a war in Europe was impossible - even for no other reason than how closely related all of the relevant Royal Families were. And yet we all know how that turned out.
- nhaehnle 14y agoI'm not sure that he is suggesting it, but it is a reasonable worry. Not in the near term of course, say over the next 20 years or so. Within that time frame, a war within Europe is almost unthinkable. However, combine the geopolitical situation in Europe with a new generation or two for whom the disintegration of the Euro is the defining event in their perception of Europe, and mindsets will change. In the face of declining European integration, our best long-term hope against wars would be the declining size of populations combined with a relative dearth of resources. Some people are hopelessly optimistic that this is enough, but I personally wouldn't count on it.
- yummyfajitas 14y agoAny war-related worries one might have if Germany leaves the currency union or the EU should also apply to Norway [edited] and Switzerland (not in the EU at all), as well as the UK, the Czech Republic and Hungary (in the EU, but not Euro nations). So is a war between the Czech Republic and Hungary, or Finland and Sweden a reasonable worry over your 20 year timeframe? [edit: confused Finland with Norway.]
- ticks 14y agoI don't know where I read this, but I always thought the EC/EU/Euro was an effort by the allied countries to tame a future German economy. If that's true, then Germany distancing themselves would surely defeat the purpose of the union.
- myspy 14y agoDon't be afraid, we have no interest in fighting wars and shit. I don't think this will happen. Europe has a more social view on the world than the rest, especially the US.
- EdiX 14y agoAt the moment I agree. But if the recession continues for a few more years I'm not so sure, in Greece extreme right parties are already picking up steam.
- excuse-me 14y agoRemember right wing in Europe is different from the US. Far-right in Europe means you want to keep 'socialist' free health care and schools - you just don't want to share them with anybody with darker skin.
- Nrsolis 14y agoI think this viewpoint represents the best example of the triumph of hope over experience. European history has been littered with examples of bitter and costly wars between nations and states. We (the world) are still resolving the aftermath of the Bosnian conflict. There are very smart people wringing their hands over the collapse of the EU and the kind of social turmoil that might develop if the economies of these nations fail. The riots we saw in Greece and Italy were just a teaser. In 2008, when the US was looking at its own financial crisis, one of the items on the minds of the policymakers was the very real prospects of riots in US cities. There were stories of financiers packing up and leaving the country in anticipation of what might happen. The biggest mistake you can make is to think your country is immune to ruin. History has shown us many times that it comes quickly and with little or no warning.
- EdiX 14y agoWhat would be Germany's incentive to exit given they benefit from euro's low valuation?
- JamisonM 14y agoIf the Germans do nothing at this point the Euro collapse will take down their banks as well. The other incentive as I see it is that this could also be argued as a more politically palatable solution for the ruling party since they have been (rather disingenuously) selling the line that only the Germans were responsible in the run up to the crisis and pulling out of the Euro fits rather neatly into that model of the world. My understanding is that most Germans that support the ruling party see inflation as something that is bad for them and erodes their savings and they link Euro-bonds and Euro QE with that. Bringing back a strong Mark that does not devalue would present a facade of non-inflation since there would be no QE for the Germans and no German-sponsored Euro-bonds but the new Mark would bring actual inflation because the Euro would immediately devalue. As has been pointed out elsewhere the big problem is that the Germans pulling out of the common currency would be a step backwards in the political union objectives. If you believe that there is even a remote chance of a European war between major powers then this is a bad thing (I do not). I think it is clear that the better solution is more political union in Europe instead of trying to drag the current arrangement through the crisis as-is. We have unfortunately seen a real rise of an "I got mine jack" voting all over the western world and this crisis is really not being dealt with precisely because that philosophy is tied to the right-wing parties that have risen to power (and are now maybe starting to fall) in Europe.
- danmaz74 14y agoA stronger union is the only way forward, for sure. One of the problems is that every national government in the EU found (and finds) it so convenient to blame the EU for every problem - and attribute every success to themselves - that right now public opinions aren't generally favorable to this route.
- EdiX 14y ago> If the Germans do nothing at this point the Euro collapse will take down their banks as well. Agreed, but leaving would be a big blow to their export market. Their best interest would be for the PIGS to stick around as weak as possible (to keep the euro devaluated) but still (mostly) solvent. > The other incentive as I see it is that this could also be argued as a more politically palatable solution for the ruling party since they have been (rather disingenuously) selling the line that only the Germans were responsible in the run up to the crisis and pulling out of the Euro fits rather neatly into that model of the world. Maybe, but I'm not seeing a strong push to leave from Germany. And let's not forget that there isn't any opt out procedure from the euro: do other countries have a say? > I think it is clear that the better solution is more political union in Europe instead of trying to drag the current arrangement through the crisis as-is. We have unfortunately seen a real rise of an "I got mine jack" voting all over the western world and this crisis is really not being dealt with precisely because that philosophy is tied to the right-wing parties that have risen to power (and are now maybe starting to fall) in Europe. I wholeheartedly agree with every single word of this, my fear is that we European aren't really ready to be that united and we'd all rather die leaving than get hurt to save another country in the "union" and as a result the EU will fail the only way it can: spectacularly.
- soc88 14y agoInteresting, but not much different from the age-old concept of a "North"-Euro and a "South"-Euro.
- cs702 14y agoThis article is obviously proposing something that Germany would never agree to, but in doing so the article lays bare an important truth: the adjustments necessary to save the Euro zone should perhaps come from everyone -- including Germany. Along with Greece, Portugal, Spain, Italy and all other 'peripheral' Euro zone countries, Germany is partly responsible for the current crisis: it financed the consumption and housing booms in those other countries. Let me offer a poor analogy which I find insightful: Germany acted like a rich neighbor who irresponsibly lends a ton money to his poorer neighbors so they can throw a really costly, drunken, all-night-long party, and then demands to be repaid the next day without acknowledging that he knowingly made a really stupid loan. The main implication of the article: Germany is trying to force austerity and deflation unto the Euro zone's 'peripheral' countries, but the adjustment would be a lot easier and faster for everyone if Germany simultaneously forced profligacy and inflation unto itself. (A higher rate of internal inflation in Germany would have roughly the same impact as a revaluation of a newly reissued Deutsche Mark were the country to leave the Euro zone.)
- deleted 14y ago[deleted]
- cs702 14y agojerf: I was deleting the old comment just as you posted this. I felt the substance of this comment deserved its own, separate thread. Sorry for any inconvenience this may have caused you.
- o1iver 14y agoGermany may have profited from the spending sprees of the southern nation, but it did not directly cause the problem. Lack of discipline is what caused the crisis. Germany passed difficult structural reforms in the 2000s and is now reaping the rewards, whilst the southern nations abused the availability of cheap money. Germany reformed and invested, whilst the southern nations didn't! And it is not like Germany was just sitting by doing nothing... That money going to Greece and Spain is coming from somewhere! German politicians are very hard at work keeping the German population from revolting about so much money being "transferred"! My personal opinion is that the correct way is austerity, but not like it is being forced unto Greece at the moment. The greek economy is in shatters as is, the current austerity measures are not helping. I think the solution is that Germany should lend Greece way more money than currently so that they can build up their economy, whilst enforcing structural and governmental reform (ex: taxes must be collected, bureaucrats fired, etc)... Finally the money should be paid back over the next 40 years, as the economy recovers.
- deleted 14y ago[deleted]
- yummyfajitas 14y ago"Scandal" and "social crisis" are not very descriptive. Could you explain what you mean in more concrete terms?
- deleted 14y ago[deleted]
- yxhuvud 14y agoThe second part differs from the current situation exactly how?
- deleted 14y ago[deleted]
- markessien 14y agoThis euro debates show the silliness of countries dismantling their factories: Germany has a social market economy with high taxes and large social contributions. It also has a highly skilled knowledge-based economy. In spite of that, it retains manufacturing ability and continues to develop and export machinery - having moved from simple machines to more high tech machines. That's what countries should do - continue building machines right at home. When there is competition from other cheaper countries, build more complex or better functioning machines. The countries in the south of europe have not done that, and so they cannot export, irrespective of what the euro value is. Devaluation hardly makes any sense for these countries that don't earn their money by exporting.
- mafribe 14y agoAnd indeed, which should the countries of the south do this, given that the north in general, and Germany in particular, have been giving them money for free? It would be highly irrational to do this.
- hielvis 14y agogood
- tonyedgecombe 14y agoCan you really see Greece turning its economy around from agriculture and tourism to manufacturing overnight? Not every economy can be a net exporter of technology, that just doesn't add up. Devaluation makes sense for them because they are indebted, they will devalue their debts and make imports unaffordable.
- nickik 14y agoYou woild be surpriesed how fast that can happen. There are many countys in history that have done it.
- lispm 14y agoNo. Not everyone can export high-tech machinery. Btw., Germany exports all kinds of other stuff, too. Adidas makes clothes. BASF makes chemicals. Allianz sells insurance. What Germany wants is that the other countries get their house in order: keep the housing market under control, get the banks under control, have people pay taxes, etc etc. Structural reforms. What Germany learned from Reunification is that MORE MONEY DOES NOT MAKE AN ECONOMY WORK. Work makes an economy work. Investments. Companies. Workers. Education. Ideas. Products. Services.
- RivieraKid 14y agoAll the debate about the pros and cons of a Greek exit from the euro area is missing the point: A German exit might be better for all concerned. No, this idea has been part of the debate for months, if not years. I hate that he makes it sound like it's his idea. Germany is partially benefiting from current situation because capital is moving from Greece, Spain, etc. to Germany. Also, cheap Euro helps German exports. If Germany switches to Mark it would hurt exporters a lot.
- RivieraKid 14y agoWhy the downvote?
- danmaz74 14y agoNo idea. I upvoted; that has been part of the debate here at least for months.
- damian2000 14y agoI don't know if this is a good idea, but its surely better than waiting around for a death by a thousand cuts, which is all that seems to be happening right now.
- lifeisstillgood 14y agoAre you sure this was not written by Angela Merkel? Germany is desperate not to have the euro / union explode, and is basically saying if you want any more cash then there is proper fiscal union (ie everyone follow Germany's industrial and fiscal models.) This will screw most of Southern Europe who don't manufacture anything, so cannot export anything that is not subsidised under CAP. So the Germans will only pay up if the whole of Europe agrees to tighter fiscal controls. And you don't agree to tighter fiscal controls, we just walk away. Didn't you see the positive reaction to those articles we planted :-) However the Spanish government followed the fiscal rules. It was their banks (with political connivance) that massively over reached. I think fiscal union is the only solution Europe has. But it will also need to reign in banks otherwise another Spain will occur. Presumably a combination of never trading privately (ie only over public exchanges where markets can assess the deals) and never being allowed to exceed certain crash levels (again guaranteed through the derivative markets). Oh and never letting the Greek government lie about its borrowing levels. Just like every other government in Europe has in one way or another. (The UK government uses PFI - they ask private finance to build a hospital and they rent the hosiptal grounds for 30 years. Never mind it is always cheaper in the long run to build your own, is that private debt? Yes according to UK government. But they will never ever stop paying the rent. Or let a hospital provider go bust.) Its only becoming clear to me how much debt is an addiction to banks.
- mafribe 14y agoMost German citizens would be very happy to get rid of the Euro, but the ruling parties refuse to have democratic elections of this question. What we are seeing is democracy being eroded away under the banner of European unification.
- lispm 14y agoWhat? Few German's would be 'very happy'. > ruling parties refuse to have democratic elections of this question Seems like you don't know much about the system in Germany.
- 14y ago
- lispm 14y agoThis article is absurd. The cost of doing so would be gigantic. Nobody in Europe would want to pay that. Actually the Euro was introduced to keep Germany under control: http://www.spiegel.de/politik/ausland/historischer-deal-mitterrand-forderte-euro-als-gegenleistung-fuer-die-einheit-a-719608.html http://www.spiegel.de/politik/ausland/historischer-deal-mitt... Without the Euro the Bundesbank had controlled the most important currency, the Deutsche Mark, alone. Many countries in Europe had been depending on the Deutsche Mark anyway - without being able to influence any decisions. The Anglo-Saxon press is obsessed with the Euro. I've been reading a lot now over the last years about the Euro - mostly written against it. Article over article predicted its death, often within days or weeks. The Euro is still there. Instead the articles get more laughable day by day.
- mafribe 14y agoAnd such undemocratic machinations are a really good reason to abolish the Euro. Or don't you like democracy?
- lispm 14y agowhat?
- mafribe 14y agoHave a look at voting rights in the EU and relate them to the number of inhabitants.
- iuguy 14y agoI think the parent may be referring to some of the undemocratic elements of the European Council, or the bailout fund that was proposed a while back to be run by a separate body to the ECB.
- skylan_q 14y agoWhat's a democratic money?
- tomjen3 14y ago
- bking 14y agoWhether or not I agree or disagree with the argument of this artice, it has made me ponder momentarily Europe. If my college history serves me right, it looks like the floundering countries might vilify Germany and a few of the other more secure nations. War is usually brought about by a large group being in a bad situation, finding common ground from which their pain stems, and finding a common "enemy" to blame. The better question is whether or not the Eurozone tension will diffuse before any charismatic leader can rally the troops...
- jcfrei 14y agoyou guys really need to educate yourself about europe, I can't believe this has so many upvotes. while the current crisis certainly isn't good for the political climate, we're now further away from a european war than ever - the european integration thru ECSC and now EU did really work in those regards.
- tomjen3 14y agoHa, there isn't going to be another war in Europa proper. Trust me, no european wants another war. You can have that in the US because the US doesn't typically pay the price of war, and the country knows it. The greek people know they will pay the price for invading Germany. And that price is enormous.
- waterlesscloud 14y agoWWI exacted a high price that people never wanted to pay again. The fact that it is now named with a number tells you how that worked out. Europe needs to go more than a few decades before it can declare itself the kingdom of peace.
- tomjen3 14y agoAnd everybody tried to run WWII in such a way that we would never end up like WWI. We now know that that isn't possible. We know that the cost of bombed cities, etc is prohibitily high.
- danmaz74 14y agoThe article isn't totally unreasonable, but there would be a much safer solution to the current crisis: Converting the BCE to a normal central bank, just like the Fed, Bank of England, etc. etc, ie a lender of last resort. http://en.wikipedia.org/wiki/Lender_of_last_resort http://en.wikipedia.org/wiki/Lender_of_last_resort Of course this would require a much tighter central control on each Euro country balance, one that would make it impossible for any one country to cheat the others (as unfortunately happened with Greece). But I think that all the EU countries would accept this right now to save themselves from a potentially catastrofic crisis. Greece is for now the only failed state in the EU, but it has such a tiny economy (3% of the EU GDP) that it would be much lest expensive to bail it out now, with a decisive move, than try to punish it for its mistakes and, in doing so, prolonging the crisis. Fixing the other imbalances in the EU would still require a lot of work, but it would be definitely be possible if the interest rates for the countries at the center of the crisis went back to normal (as it would happen with a Fed-like BCE).
- DasIch 14y agoGermany's economy depends a lot on exports by exiting the Euro Germany would take a huge hit in that regard possibly causing a recession. That along with the obvious conflict in political goals makes this a scenario that no one in Germany will ever seriously consider. Besides at the moment Germany is one of the most if not actually the most powerful country in the world (economically speaking). Germany currently controls the future of the Euro and with that a big part of the future of the EU and the world economy. Why give up that power?
- lispm 14y agoAnd I was under the impression that the US has much more economic power than German. Or China with its billion+ people market. The Euro is the attempt to balance this power with an European currency. The market of the Eurozone is the sum of the countries and Germany is a part of that. Germany alone is relatively small (a market of just 80+ million people - compare that to the US, China, ...).
- excuse-me 14y agoAnd it's obvious that Wall St should exit the Dollar for the same reasons
- tobias3 14y agoWe all know the Euro is a sinking ship. The idea is now to take the engine of that ship (Germany) and put it into another smaller ship. Replacing the engine by... a new one that is yet to be build. That will surely safe the Euro ship... I for one, would panic and try to get to the new currency.
- gpvos 14y ago> Other relatively strong euro-area nations, such as the Netherlands, would probably pause before following Germany’s lead. This would probably be true for most of these countries; however, the Netherlands would probably just adopt the new Deutschmark. The Dutch guilder used to be practically tied to the Mark for several decades before the Euro was introduced.
- nickik 14y agoGuys the Euro is not the problem. Under the (real not brandon woods BS) Goldstandard countrys had the same currency for a long time and it worked quite well. ECB buying tons of debt and exepting bad papers as colatoral shoud of course be stoped. These countrys should default (get ride of the debt), balance the buget (you cant live of other people forever). Iceland has done that (the stumbeld into it). If your smart you are going to put in place a new constitution and a new democratic system too.