Germany and the Eurozone

Being a German with foreign parents I have had the opportunity to get somewhat of an insider’s and outsider’s perspective. A year I wrote that there was no way we’d bailout Greece or risk inflation because the problem itself was simply too large and that in knowing that politicians wouldn’t even be so daft as to consider it. Well, we haven’t printed because that’s been a German taboo so far, but bailouts had been a taboo once as well. You have to understand that the current leadership and many Germans value the integrity of Europe beyond anything, they would even sacrifice their own country for it. Talking with Germans I don’t get think they understand the concept of ‘national interest’ in the same way Americans or Chinese do. To the decision-makers ‘national interest’ is tied up with Europe. One of the leading magazines, Der Spiegel, recently had an article why Spain’s government dynamics were supposedly better than Germany’s. In what other country would people basically turn against their country to support another one in the name of regional integration? If you look around you can see that the groundwork is being laid to hammer into German’s minds that a) it’s a liquidity crisis and if only the ECB intervened all would be fine and b) that printing money doesn’t equal Weimar. Merkel has been saying for weeks the same thing: ‘if the Euro fails, Europe will fail’. They’d rather print and find excuses for it rather than see the Euro collapse.

It now comes to this, German inflation-angst versus war-guilt and the sheer will to keep the Euro and thus Europe intact. My money is on the will to keep the Euro intact. Yes there’s a way to keep Europe and the EU working without the Euro but try telling that a German…

There’s two caveats though. One is that markets move faster than the Germans are willing to let the ECB print. Secondly, Germans don’t seem to understand that reforms, even if succesful, take time and market’s won’t wait long enough. It is simply absurd to claim that things will be in the markets once reforms are pushed through. Far from it, reforms take time and austerity is going to bite into growth initially. My prediction thus, Germans will let go of their Weimar-induced inflation-angst and let the ECB print to keep yields at a punishment level of around 6%. Obviously this won’t be much of a help without guaranteed future transfer payment because the competitiveness gap within the Euro is simply too big at this moment, the necessary deflation which is needed in Southern economies can’t occur due to the high debt stock. But that’s a problem for another day.

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2 comments
  1. In der Einschätzung der Deutschen haben Sie, leider, wohl Recht. Viele mosern zwar, aber am Ende haben sie doch die Hosen voll, und dass wir unser nationales Interesse nicht nachdrücklich verteidigen, ist leider nur zu wahr.

    Interessieren würde mich freilich noch, ob Sie zu Ihrem Satz
    “Yes there’s a way to keep Europe and the EU working without the Euro but try telling that a German…”
    irgendwo eine Erläuterung gepostet haben, wie das funktionieren soll?

  2. Firat Uenlue said:

    Eine Erläuterung dazu habe ich nicht geschrieben, weil man ja gesehen hat, dass die EU auch vor dem Euro funktioniert hat. Merkels ‘scheitert der Euro, dann scheitert Europa’ scheint dies irgendwie nicht zur Kenntnis gezogen zu haben…

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