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The mechanism by which Germany has benefited at the expense of other Euro countries is the large trade surplus vs exchange rates. Normally a big country's curr
by zurn 11y ago
The mechanism by which Germany has benefited at the expense of other Euro countries is the large trade surplus vs exchange rates.
Normally a big country's currency will appreciate once they start running prolonged large trade surpluses, but the Euro has enabled Germany to keep siphoning in wealth in a way that wasn't possible before the Euro. Similarly pre-Euro the southern countries would have seen their currencies depreciate and get a break in competitiveness.
Hartz is also part of it, Germany has kept labour costs down while southern countries in the same currency area experienced high inflation due to masses of cheap money coming in again due to the Euro.
And of course Germany has been leading the austerity brigade in response to the crisis.
http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/03-germany-trade-surplus-problem http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/03...
- istvan__ 11y agoI am not sure if Germany at fault here, bringing in the euro was not forced by them and Greece was cooking the books to get in. http://www.forbes.com/sites/timworstall/2011/09/12/greece-was-lying-about-its-budget-numbers/ http://www.forbes.com/sites/timworstall/2011/09/12/greece-wa... I think most of southern Europe should be not in the euro zone at all, their economy would have better time on a weaker currency. http://stephansmithfx.com/articles/how-a-weak-currency-affects-an-economy/ http://stephansmithfx.com/articles/how-a-weak-currency-affec...
- r00fus 11y ago> I am not sure if Germany at fault here, bringing in the euro was not forced by them and Greece was cooking the books to get in. s/Greece/people running Greece at that time/ If you asked the who didn't profit from joining the Euro, likely you might have gotten a negative reply. Seriously it's not a fault issue here because multiple parties (including the vampire squids that are multination financial corporations like Goldman) conspired to profit from it. Question is what is going to be done to right the ship and avoid calamity?
- atmosx 11y agoGiven the situation, I don't think that Greece has anything to gain from staying in the common currency. After ~ 8 years of Troika mismanagement the country is in dire situation and there has not been the slightest perception of improvement. So even if SYRIZA choose to blink, the next government wont.
- zurn 11y agoSingling out Greece's creative accounting in Euro accession as the main problem is blaming the victim here. A lot of the countries did it to some extent, the EU turned a blind eye. And most of Greece's budget deficit happened only after joining the Euro. Greece is despite their own share of f-ups largely a casualty of the systemic problems and EU's failure in handling of the crisis.
- Bootvis 11y agoCome on, they cooked their own books and noone forced them. They may suffer from that now but pointing that out is not 'victim blaming'.
- gizmo 11y agoSpain is also suffering and they didn't cook their books. It was also an open secret that Greece's numbers were manipulated, but the ideal of a united Europe with one currency overruled economic pragmatism. Even if Greece had no corruption at all they would still be in a nearly indistinguishable position. They still would have been flooded with debt (simply a consequence of interest rates dropping during the boom) and they would still get a crushing depression (because that's what happens when you share a currency with larger and economically stronger countries). When Greece joined the Euro the outcome was nearly inevitable, so blaming Greece for this makes little sense. The austerity policies the troika imposed on the Greek people were brutal and completely unnecessary, though. So that's the outrageous part.
- fulafel 11y agoAnother good article about the German situation is this post from Simon Wren-Lewis: http://mainlymacro.blogspot.com/2013/11/the-real-problem-with-german.html http://mainlymacro.blogspot.com/2013/11/the-real-problem-wit...