Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Senior German promotes breaking Europe

by Jerome a Paris Wed Aug 31st, 2011 at 10:15:24 AM EST

Hans-Olaf Henkel, the former head of the Federation of German Industries (BDI), has written a rather stunning article in yesterday's FT: "A sceptic’s solution – a breakaway currency where he suggests that Northern Europe, led by Germany (but excluding France and Belgium), launch a new currency. While that idea has been mooted here on ET as a possible solution the the current crisis, and while people here may again find it old hat to assert that Germans are on a path to break Europe, what struck me here was the rather careless tone about what this would mean for Europe:

Implementing plan “C” [Austria, Finland, Germany and the Netherlands to leave the eurozone and create a new currency leaving the euro where it is] requires that four underlying problems are addressed separately.

We must rescue banks, not countries. Stabilisation of banks on a national level should replace current European umbrellas. In many cases, this requires temporary bank nationalisation. Second, Germany and its partners in a new currency must forgo a significant portion of their guarantees to help refinance Greece, Portugal and others. As much of this money is already lost, this is an acceptable price for an “exit ticket”. Third, there must be a new European central bank based on the Bundesbank, preferably not led by a German. The new currency should not be called the “D-Mark”. Fourth, mechanics for entry would be similar to those for getting into the euro.

While many seem to have been lately blithely willing to dump Spain and even Italy out of "core Europe," this goes even a step further in explicitly calling for a superior Northern Europe and an inferior Southern Europe, and putting a hard monetary border between Germany and France (and Belgium - as one of the commenters to the article says - the Flemish region would likely do all it could to join the "Neuro"). The mind boggles that history can be so casually forgotten...


Display:
A sceptic's solution - a breakaway currency - FT.com
If planned and executed carefully, it could do the trick: a lower valued euro would improve the competitiveness of the remaining countries and stimulate their growth. In contrast, exports out of the "northern" countries would be affected but they would have lower inflation.

Exports from the Neurozone would be progressively wiped out. Henkel should be careful what he wishes for : he won't be selling any more washing powder in the "South".

France would find itself with a massive devaluation, and would presumably be the most competitive of the "Seurozone". Would its manufacturing base reappear out of the mists of the past?

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II

by eurogreen on Wed Aug 31st, 2011 at 10:31:49 AM EST
Henkel:
but they would have lower inflation.

Inflation has been such a headache for the last quarter of a century.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Aug 31st, 2011 at 04:02:13 PM EST
[ Parent ]
Well - what he probably means is 'but they would have lower wages.'

Because we all know nothing drives up inflation like aggressive wage demands.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Wed Aug 31st, 2011 at 04:54:06 PM EST
[ Parent ]
Who would be allowed to convert euros into neuros? The Neuropeans only? And how would that be determined? Up to what limit?

And which debts and which financial assets would be converted (or not) to neuros?

That would be so much fun.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Wed Aug 31st, 2011 at 10:41:15 AM EST
I know quite a few people that have some money at home (in case there is a bank failure).

My advice to them was: Check the serial letter of your bills. Only store XPNLs.

Crazy ideas.

by cagatacos on Wed Aug 31st, 2011 at 11:17:09 AM EST
[ Parent ]
Interesting questions, but I would not be surprised to find families of southerners with one or more members working in Germany or The Netherlands having family members hold euros for them.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 31st, 2011 at 11:29:30 AM EST
[ Parent ]
It would have to be based on residence, not nationality. Otherwise you get a hell of a discrimination lawsuit at the ECJ.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 02:25:45 PM EST
[ Parent ]
Your eligibility for conversion would be determined by the people who sign the paychecks of the police that is going to enforce the loans denominated in €-Mark (or, for cash and CB reserves, collect your taxes). If you can find a sovereign that is willing and able to enforce the debt you are owed, then you can convert. Otherwise, you can go whistle for your money.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 31st, 2011 at 02:48:48 PM EST
[ Parent ]
by Bernard on Wed Aug 31st, 2011 at 11:00:22 AM EST
One would hope, almost certainly in vain, that Zapetero and his "socialist" comrades would reconsider the implications of writing constitutional fisca straight jackets in to their constitution to appease Germans who might just dump them anyway.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 31st, 2011 at 11:27:08 AM EST
this makes it seem like all the Germans have dumb ideas...

Why doesn't anyone at ET promote stories like the one that Ursula von der Leyen (the head of the  Federal Minister of Labour and Social Affairs) has been trying to promote a United States of Europe? Personally, I like her vision a lot more! People like her are needed and it is refreshing to see a conservative German politician with a vision!

I am still hoping that the financial crisis in the end will have accelerated a true unified Europe...

by crankykarsten (cranky (where?) gmx dot organisation) on Wed Aug 31st, 2011 at 12:03:29 PM EST
actually, it is refreshing to see a German politician with a vision. For that matter, any politician with a vision... Sad.
by crankykarsten (cranky (where?) gmx dot organisation) on Wed Aug 31st, 2011 at 12:05:59 PM EST
[ Parent ]
crankykarsten:
Why doesn't anyone at ET promote stories like the one that Ursula von der Leyen (the head of the  Federal Minister of Labour and Social Affairs) has been trying to promote a United States of Europe?

Our German based ET members would be ideally placed to write such a diary.

by Bernard on Wed Aug 31st, 2011 at 12:12:18 PM EST
[ Parent ]
not blaming all of them - just a rather senior one.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Wed Aug 31st, 2011 at 01:11:38 PM EST
[ Parent ]
Really. Henkel hasn't hold any position of power since 2000. The man is about as relevant as Donald Trump, You should know this.
by IM on Wed Sep 7th, 2011 at 06:37:20 AM EST
[ Parent ]
Ursula von der Leyen is the insane German Labour Minister who recently proposed that Greece should collateralise its rescue with its gold reserves.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 02:24:53 PM EST
[ Parent ]
To be fair, a useless gold reserve for a useless "rescue" package is not the worst of the demands that have been placed on Greece.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 31st, 2011 at 03:47:35 PM EST
[ Parent ]
I am absolutely positive some of my old Sozialistischer Deutscher Studentenbund comrades are screaming and throwing things.  

Die Linke is saying:

To the disagreement between the CDU and FDP on the issue of Euro Bonds the chairman of the party Die Linke, Gesine Lötzsch said:

DIE LINKE demands for a long time Euro Bonds as a solution to get out of the euro crisis. But the chancellor and her economy minister continues to defend themselves against this meaningful measure to rescue the euro. They are afraid of their own party, in which ideology prevails over economic expertise.

We have to make the experience, that the Chancellor always responds only when the child has fallen into the well. She only responds to catastrophes. That was the case of Greece, and with Fukushima. Such a catastrophe-style government comes to the tax payers very expensive.

Euro Bonds are not enough. The markets need clear rules. The neo-liberal governments are afraid of implementing these rules, because first they have to solve financial dependency of the financial industry. Since Lehmann collapsed three years ago, nothing effective has been done to get the financial markets under control. On the contrary, the overwhelming power of financial markets are more threatening. Rating-agencies play God and put millions of people in fear and terror.

This can not go on like this. DIE LINKE demands from the Federal Government and the governmental parties to throw the neo-liberal concepts to the dustbin of history and finally have the financial markets in their place.

As the first step, the imposition of the financial transaction tax. The revenue from such a tax would immediately stabilize the euro, and make all anti-social reduction packages obsolete.

Die Grünen is saying:

Green financial market policy is based on the principles of liability and responsibility - in stark contrast to what we experienced recently during the global financial crisis, when these principles were flouted on a massive scale: despite bank losses running into billions and bail-outs funded by the taxpayer, bankers and shareholders are still being paid massive dividends and bonuses.

So they have their heads on straight.

I think it's more the fact we've got a relatively small percentage of German contributors so what pushback there is in Germany doesn't get the attention it deserves.
 

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 31st, 2011 at 03:17:05 PM EST
[ Parent ]
In his own warped way Henkel puts his finger on part of the solution: nationalize the banks.

Which is neither here-nor-there until Europeans decide if the EU is worth saving.  If it is then do you want the as-constituted EU or something else?

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 31st, 2011 at 12:04:59 PM EST
Likely it matters more HOW banks would be nationalized, under what goals, and what economic ideas underlie those in charge.


"Life shrinks or expands in proportion to one's courage." - Anaïs Nin
by Crazy Horse on Wed Aug 31st, 2011 at 12:15:46 PM EST
[ Parent ]
That too.

I'm focusing on the political aspect of the crisis, at the moment.  Putting it baldly, "government of the people, by the bureaucrats, for the banks" isn't going to cut it.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 31st, 2011 at 12:42:50 PM EST
[ Parent ]
There's two sensible things in what he says
  • deal with the banks (they are the problem)
  • accept that some losses now have to be borne

But there's some crazy even in that
  • where's the European guarantee to banks today?
  • what are the losses in his proposal?


Wind power
by Jerome a Paris (etg@eurotrib.com) on Wed Aug 31st, 2011 at 01:10:56 PM EST
[ Parent ]
May I suggest a prior bullet point is:

•  Recognize the global economy is in meltdown mode

?

Until the EU Decision Makers get it into their heads the world isn't going back to 2007 they will continue to make the wrong decisions, based on the wrong expectations, and continue to exacerbate the situation.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 31st, 2011 at 02:20:12 PM EST
[ Parent ]
Euro Crisis scorecard:
GDP rank Country       CAB/GDP status
--------------------------------------------
17	 Romania	-5.13% under IMF
22	 Bulgaria	-3%
 7	 Poland 	-2.41%
 3	 UK		-2.23%
16	 Czech Republic -1.21%
--------------------------------------------
12 (8)	 Greece        -10.84% under EFSF
14(10)	 Portugal	-9.98% under EFSF
25(15)	 Cyprus 	-7.92% under attack
27(16)	 Malta		-5.39% 
 5 (4)	 Spain		-5.23% under attack
 4 (3)	 Italy		-2.86% under attack
15(11)	 Ireland	-2.73% under EFSF
 2	 France 	-1.79% under attack
19(12)	 Slovakia	-1.36%
21(14)	 Slovenia	-0.73%
--------------------------------------------
 8 (6)	 Belgium	+0.5%
13 (9)	 Finland        +1.43%
10 (7)	 Austria        +2.31%
26(17)	 Estonia	+4.21%
 6 (5)	 Netherlands	+5.72%
 1	 Germany        +6.06%
20(13)	 Luxembourg	+6.91%
--------------------------------------------
18	 Hungary	+0.51% under IMF
23	 Lithuania	+1.86%
11	 Denmark	+3.42%
24	 Latvia 	+5.49% under IMF
 9	 Sweden 	+5.95%
Estonia is practically Finland anyway and Belgium is on its way to partition whereby Flanders can join the Nethelands in the North Euro and Wallonia can join France.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 02:21:55 PM EST
Given the Elop effect on Nokia profits and viability, I'm not sure Finland will be counted as a surplus country for very much longer.

One year to go !
by pi (etrib@opsec.eu) on Thu Sep 1st, 2011 at 03:52:37 AM EST
[ Parent ]
So how many "senior Germans" are there exactly? 1000? 1500? 2000? Whatever issue you take, there are surely 5% to 10% of this "elite" which will have "extreme" positions. All the FT & other Anglo, anti Euro opinion makers need to do is find and amplify the snorting of these "extremists" by giving them media space.

Some "senior French" figures (Parisot - AFP) have lately been denouncing this Anglo smear campaign, citing the WSJ's, Roubini's and Greenspan's recent slurs against the Euro. Too bad the FT's propaganda machine wasn't mentioned... which is perhaps among the worst.

by Lynch on Wed Aug 31st, 2011 at 02:21:58 PM EST
A German correspondent told me about Henkel after I complained about Henkel's earlier "contribution" to the "debate":
Don't pay any attention to that man. He is a bigot and a racist. He does not reflect German public opinion.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 04:29:30 PM EST
[ Parent ]
You should have listened.
by IM on Wed Sep 7th, 2011 at 06:40:06 AM EST
[ Parent ]
I didn't write this blog post.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Sep 7th, 2011 at 06:41:30 AM EST
[ Parent ]
Henkel is not in any way a senior anything and has not been since the year 2000.
by IM on Wed Sep 7th, 2011 at 06:40:45 AM EST
[ Parent ]
Oh, come on, Jerome, this is not "breaking Europe", this is admitting that the Euro was macroeconomically broken from the start. The Single Market remains, as does Schengen, Judicial Cooperation in Criminal Justice, and Common Foreign and Security Policy.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 02:23:15 PM EST
Comment by Jerome a Paris on 27 May 2011
1. Germany's behavior is nothing new. Its policy of strong DM was just the same before the euro, and it generated the same tensions - even worse, one could argue. And, as ARG notes; it's not just Germany - several other countries are on the same line. This is a reality which is not going to change, and quite frankly, these countries have no real incentive to go for a soft currency regime, given how a strong currency has served them in the past 50 years. Strong exports of price-insensitive goods is what allows to pay high wages;
2. Europe without either of France or Germany does not make sense, so either France joins the strong euro group (which I expect the country to want to do), and we are back to the peripherals dropping out, or Europe gets fundamentally broken up.
So far, most of the people who call for Germany to exist the eurozone are, unsurprisingly, people keen to break Europe.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 02:31:49 PM EST
Ergo, Henkel promotes breaking Europe. Nothing new since last May.
by Bernard on Wed Aug 31st, 2011 at 03:00:26 PM EST
[ Parent ]
But Henkel protests that he doesn't want to break the EU, just undo the Euro.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 03:03:16 PM EST
[ Parent ]
And ponies.

And just any old ponies ... Magic ponies.  With horns on their heads.

That dumb cluck ought to understand the EU and euro stand or fall together.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 31st, 2011 at 03:22:03 PM EST
[ Parent ]


Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 31st, 2011 at 03:54:34 PM EST
[ Parent ]
Then you'd better get cracking on a Nordic Federation and a common Kron/a/e/er/-markka.  (Assuming Finland wants to play, and I'd bet they would.)  


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Wed Aug 31st, 2011 at 04:19:33 PM EST
[ Parent ]
That's not a million miles away from Henkel's proposal. I wouldn't be surprised if Sweden and Denmark's opposition to joining the Neuro would be a lot less than to joining the current Euro which is unfortunately choke-full of swarthy, lazy Mediterraneans.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 04:52:08 PM EST
[ Parent ]
Ha, if anything symbolizes the continent up here, it is the Germans. And they are a bit swarthy too.

I would say the main reason the referendum ended with a no in Sweden was a general dissatisfaction with the results of joining the EU. A project with the Nordic neighbours (not Germany) would have higher approval.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Aug 31st, 2011 at 05:29:27 PM EST
[ Parent ]
A swedish kind of death:
they are a bit swarthy too

Everyone in the Northern Hemisphere has a southern neighbour who is dark-complexioned, shifty, and feckless.

Ask Santa Claus.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Sep 2nd, 2011 at 03:22:34 AM EST
[ Parent ]
afew:
Everyone in the Northern Hemisphere has a southern neighbour who is dark-complexioned, shifty, and feckless.

it's fractal...within england it's the same. (without the complexion part). southerners are seen as flyboys, definitely shifty, and in italy it's even worse.

seems the closer to the equator you are, the less moral fibre... there may be a grain of truth there if you're talking about civic responsibility (of a technocratic nature) and competent planning, but it's equalled out by a complementary imbalance in emotional intelligence and playfulness methinks.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Sep 7th, 2011 at 07:49:13 AM EST
[ Parent ]
A "Baltic Union" would include Russia, Estonia, Latvia, Lithuania, Poland, and Germany as well.  I don't see that happening if the EU goes poof.

Sweden's objection to joining the euro are:

A poll published in the newspaper Dagens Industri revealed that 61 percent of those questioned opposed membership of the eurozone, with only 25 percent in favour and 14 percent having no opinion.

The poll, carried out between May 27 and June 1 by the institute Novus Opinion, disclosed a sharp turnarond in public sentiment in the past year.

Results of the latest questionaire showed that the krona is seen as shielding the Swedish economy in a time of global economic crisis.

Thirty-five percent of the respondents believed that the euro would have put Sweden at a disadvantage in the worldwide meltdown that began in late 2008, against 21 percent who said the single currency would have been beneficial.

 

Given the mess the ECB has made of things, I think they have a point.  

Re: current Euro which is unfortunately choke-full of swarthy, lazy Mediterraneans

The only country in the eurozone is Finland.  The rest took a look and said, "Thanks, no thanks" before the recent crack-up.  And one reason they skipped the chance was the anti-euro campaign from the Left that said the euro was going to run a'cropper for the very reasons it is running a'cropper.  

Scandinavia is NOT the source of the Mediterranean country's problems.  I couldn't find figures for Spain but for Greece debt exposure is:

Denmark €92 million
Finland €21 million
Sweden €57 million

Now compare:

Germany €7,902 million
France €9,362 million

(I assume [Correction Requested!] the figures are similar for Spain, Portugal, and Italy.)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 31st, 2011 at 07:56:40 PM EST
[ Parent ]
Re: Baltic union: There will be a Baltic union even if the EU blows up. The Baltic Rim wants such a union because they are scared of the Large Neighbour to the East, and Germany wants one to consolidate its sphere of interest in the East. You will notice that for all the German whining about giving money to Southern Europe, nobody is commenting on the ongoing meltdown in East.

Re: Scandinavian exposure to Mediterranean debts: That's correct. The Scandinavian exposure is to Baltic debts. Which are not that much better, but much less talked about.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 1st, 2011 at 03:16:36 AM EST
[ Parent ]
The Baltics are small, but so are the Scandinavians. So, in relative terms, it might be a big problem.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 1st, 2011 at 04:12:42 AM EST
[ Parent ]
Greece and Ireland are also small. That did not prevent Deutche and SG from becoming insolvent due to exposure to them.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 1st, 2011 at 04:49:26 AM EST
[ Parent ]
A Baltic Union without Russia brings-up all kinds of problems.  They are already touchy about Kaliningrad and St. Petersburg and if there is anything a Baltic Union doesn't want is to up Russian paranoia.

Do you have the figures for Sweden, Finland, et. al., debt exposure to the southern Baltic countries at hand?


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Sep 1st, 2011 at 12:07:54 PM EST
[ Parent ]
I can't see why it should cause issues with Russia - all these countries are already in the EU, so a Baltic cooperation under the EU umbrella cannot reasonably be viewed as a provocation.

And no, my feeling about bank exposures is based on anecdata from ET coverage of the Estonian crisis and the role of major Swedish banks.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 1st, 2011 at 04:16:17 PM EST
[ Parent ]
No figures, but it is well known that Swedish banks gambled large in the Baltics and Borg - minister of finance - has said something about the public not knowning how close we were to a banking crisis. I at least read that as an admission that Latvia is suffering under IMF rule to make sure Swedish banks do not collapse.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Sep 2nd, 2011 at 02:52:08 PM EST
[ Parent ]
I don't think it's possible to find a single Swede (outside the disconnected political elites) who wants to join the euro.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Thu Sep 8th, 2011 at 08:10:26 PM EST
[ Parent ]
Public polling in Sweden gives, at most, 35% in favor.  


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Thu Sep 8th, 2011 at 09:29:39 PM EST
[ Parent ]
Funny thing: The krona was a 19th century currency union. That is the coins was made in the same denominations with the same amount of precious metal.

If I remember coorectly, it broke down under world war one when the gold standard could not be maintained.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Aug 31st, 2011 at 05:32:29 PM EST
[ Parent ]
You remember correctly.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 05:39:39 PM EST
[ Parent ]
The one accomplishment of 19th century Scandinavianism.  Although it happened after the enthusiasm had died away.

So much for the idea of a currency union leading to an ever-closer political union, huh?

 

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Aug 31st, 2011 at 06:23:03 PM EST
[ Parent ]
See also Latin monetary union...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 1st, 2011 at 04:16:28 AM EST
[ Parent ]
Thanks.  Didn't know about that one.


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Thu Sep 1st, 2011 at 12:09:07 PM EST
[ Parent ]
See also the Zollverein.

Though of course under the gold standard currency unions were symbolic expressions of spheres of interest rather than actual political commitments. Which is why they all went tits-up when the gold standard collapsed and maintaining a currency union would have required real political commitment.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 1st, 2011 at 04:21:41 PM EST
[ Parent ]
No one around here want any unions at all. Well, except possibly with the Finns and the Norwegians (and the Danes), but only because it would make us feel like the Swedish empire was back. Which is exactly why the Finns and Norwegians don't want to be in any kind of unions with pompous big brother Sweden.

I think what this crisis has told us (among other things) is: floating currencies? What a great idea!

Before anyone gets any ideas about future currency unions, we'll need a massive focus on things such as optimal currency areas...

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Sep 8th, 2011 at 08:17:23 PM EST
[ Parent ]
I don't know about "union," per se, but the idea of a Nordic Federation has a bit of support.  Concede that percentage would drop - like a rock? - once serious discussions were started.
 

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Thu Sep 8th, 2011 at 09:37:23 PM EST
[ Parent ]
I'm sure Eastern Sweden (aka "Finland") and Western Sweden (aka "Norway") could be talked around.  Not so sure about Southern Sweden (aka Denmark.)  

:-)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Thu Sep 8th, 2011 at 09:39:22 PM EST
[ Parent ]
Just call it the Kalmar union and you should have a sporting chance of roping in Denmark ;-P

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 9th, 2011 at 04:50:48 AM EST
[ Parent ]
Number One in a series.

(Where is Magaret when you need her?  :-)

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Sep 9th, 2011 at 11:51:19 AM EST
[ Parent ]
Saying "we need to focus on saving Europe, not the euro" is nice and all, but the most important is what he (and other "Senior Germans") does, not what he says.

OK, Henkel is not "keen" - or so he says - but given the current climate, it's difficult to see how the end result of his "plan C" won't result into a more or less severe break in the EU.

Do you see any such thing as the EU structural and cohesion funds continuing to "the profligate South" (defined as everyone outside of Neuro)?

by Bernard on Wed Aug 31st, 2011 at 03:24:08 PM EST
[ Parent ]
The Euro cannot be saved because the German economic policy establishment will not allow it to be reformed in the direction that it needs to be reformed in order to make it viable.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 04:27:54 PM EST
[ Parent ]
Migeru:
the German economic policy establishment will not allow it to be reformed in the direction that it needs to be reformed in order to make it viable

Not without duress, apparently. But if this establishment believes such a plan can be carried out without any negative consequences to Germany and to them, then they're even more delusional than I thought.

by Bernard on Wed Aug 31st, 2011 at 05:09:25 PM EST
[ Parent ]
Hans-Olaf Henkel's earlier contribution to the Euro debate: Germany needs to resist the euro's sweet-smelling poison (the Guardian, 13 March 2011)
The only EU competition is a race to take the most. We should break away from the free-spending southern eurozone states
The same old insistence (humorously exposed by Krugman here) that this is a crisis of fiscal profligacy despite the fact that France and Germany watered down the GSP, and did so twice, in the last decade when it looked like the Commission was going to act on their breaches of the Pact. Still no acknowledgement that the Euro Convercence Criteria, GSP and Competitiveness Pact obsess over public debt while ignoric private debt. Still the same ethnophobic message we heard from Germany and the Netherlands in the run-up to the Euro.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 02:57:46 PM EST
Talking to a Dining Room Table - NYTimes.com - Blog - Paul Krugman

We talk about the euro crisis. They say, "Clearly, this was about fiscal irresponsibility, and we need to enforce much stricter rules." I say,

No fiscal rule would have constrained the Spanish housing bubble and its consequences.

And they say, "Thank you for your contribution. Clearly, this was about fiscal irresponsibility, and we need to enforce much stricter rules."

by Bernard on Wed Aug 31st, 2011 at 03:03:07 PM EST
[ Parent ]
I recall proposing an "neuro/seuro" divide as a possible solution to the existing fiscal policy needs of the different areas. However, it would be pointless unless the "seuro" area political leaders had coherent ideas about a common "seuro" political economy, especially concerning when, why and on what they should deficit spend. Putting Yanis Varoufakis in charge of common economic policy, creating a "Seuro Central Bank" and a "Seuro Investment Bank" would be hopeful steps, but to whom would he report? Are there two or three sane politicians in the entire "seuro" area who could provide leadership? And how would two monetary unions fit into the existing EU structure? It makes my head hurt.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 31st, 2011 at 02:59:21 PM EST
Are there two or three sane politicians in the entire "seuro" area who could provide leadership?
Spain wouldn't know a sensible monetary policy it if hit it in the face.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 03:25:40 PM EST
[ Parent ]
Oh, I'm sure Trichet would be available <ducks>
by Bernard on Wed Aug 31st, 2011 at 03:30:01 PM EST
[ Parent ]
But is a seuro meaningful? The euro was a political project to unite EU, the neuro if the southern countreis are expelled is business as usual for the remaining countries, but for the expelled to unite in a seuro would be because of what?

As I see it the meaningful levels of currency are the same as the political levels. If we could have a seuro with functioning rules, then we could just as well reform the euro. If we can not do that, we can not have an EU currency and then memberstate becomes the default level.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Aug 31st, 2011 at 03:43:03 PM EST
[ Parent ]
But is a seuro meaningful?

Yes.

But it may not be a meaning that the Hanseatic League (sorry, Neuro countries) will like.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 31st, 2011 at 04:00:49 PM EST
[ Parent ]
Size matters. If there is a neuro-zone comprised of the current surplus countries their economic weight would make the remaining EU countries more vulnerable to market attacks, among other problems. It is a version of PIIGS UNITE! If such a seruo-zone could issue bonds and invest in needed infrastructure and were it willing to take on the function of a transfer union or its equivalent equivalent it could serve to boost the welfare of all members. The trick would be embodying a mechanism for growing economic activity and well-being in all member states instead of having predatory members who played winners and losers within the union. It would then also serve as an alternative for neuro-zone countries that find themselves uncomfortable with now being at the bottom of their currency union pecking order instead of towards the top.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 31st, 2011 at 04:18:02 PM EST
[ Parent ]
how would two monetary unions fit into the existing EU structure?

It might be helpful were there a better answer to the question of how ONE monetary union fits into the EU. Seems that the best answer we have to that question is "badly".

This is likely the consequence of attempting to pretend that economics is a completely separate sphere from politics. That assumption, which has been spread far and wide, stultifies any attempt at meaningful discussion.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 1st, 2011 at 09:34:29 AM EST
[ Parent ]
ARGeezer:
how would two monetary unions fit into the existing EU structure?

It might be helpful were there a better answer to the question of how ONE monetary union fits into the EU. Seems that the best answer we have to that question is "badly".

But two would fit worse, because we have one parliament, one commission, one investment bank and so on. Yes, we need a treasury that can do contra-cyclical spending (and a stronger parliament and other changes), but fractioning institutions in accordance with import/export balances is imo unlikely to help. Should the Seuro-zones SEIB and SECB have oversight from a South European Parliament?

As I see it, if the leaders of the import countries could make a functioning seuro, they could use that knowledge and skill to reform the euro. At present, the TINA-approach in the south is an almost as big a problem as the TINA-approach in the north.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Fri Sep 2nd, 2011 at 03:24:04 PM EST
[ Parent ]
Before there was a Euro there was an ECU (European Currency Unit). So even if the Eurozone breaks up the EU would presumably still do its accounting in Euros...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Sep 2nd, 2011 at 05:38:13 PM EST
[ Parent ]
Should the Seuro-zones SEIB and SECB have oversight from a South European Parliament?

Under a Neuro/Seuro scenario, both would be run under the enhanced cooperation rules, rather than under Parliament/Commission authority.

Besides, you can always declaw a federal central bank it by making it issue Seuro only to cover internal balance of payments imbalances within the Seurozone and undercut speculative attacks between Seurozone member currencies.

Not that I see any pressing economic need for a Seuro at all. I can see the political point, but frankly I am not convinced that it is worth the trouble of setting up an enhanced cooperation framework just to give the middle finger to the BundesBank.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Sep 3rd, 2011 at 11:45:16 AM EST
[ Parent ]
Henkel:
Having been an early supporter of the euro, I now consider my engagement to be the biggest professional mistake I ever made. ...

I have three reasons for my change of heart. ...

...

Third, instead of uniting Europe, the euro increases friction. Students in Athens, the unemployed in Lisbon and protesters in Madrid not only complain about national austerity measures, they protest against Angela Merkel, the German chancellor. Moreover, the euro widens the rift between countries with the euro and those without. Of course Romania would love to join, but does anybody believe Britain or Sweden will find it attractive to join a "transfer union"? Meanwhile, dissatisfaction with the euro drags down the acceptance of the EU itself.

Poor, poor Angie, she who has nothing but good intentions towards the ungrateful untermenschen in Southern Europe.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Wed Aug 31st, 2011 at 04:25:05 PM EST
Accusing Merkel of being a racist is Still Not Helpful.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 1st, 2011 at 03:24:27 AM EST
[ Parent ]
All I have to do is quote Der Spiegel... Merkel's Clichés Debunked by Statistics The Myth of a Lazy Southern Europe (19 May, 2011)
In less statesman-like vocabulary, what she really meant is this: "We aren't going to give our hard-earned German money to lazy southern Europeans." The chancellor made it sound as if Germans are financing some sort of easy prosperity for these countries. While there may not be anything new in the substance of that message coming from Berlin, the tone certainly is. They are the kind of statements that appeal to voters concerned these countries might be getting a free ride at their expense. But is Merkel correct?


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 1st, 2011 at 04:15:06 AM EST
[ Parent ]
That is certainly an indication of insufferable ethnocentric arrogance, but not of Nazi racial theory.

Get today's issues in focus.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Sep 1st, 2011 at 04:19:24 AM EST
[ Parent ]
Oh, I have been doing that too. Do you want a list of commented links?

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 1st, 2011 at 04:23:23 AM EST
[ Parent ]
No, I want you to stop shooting yourself in the foot. You want to have the "what she did" conversation, not the "what she is" conversation:

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Sep 1st, 2011 at 04:54:12 AM EST
[ Parent ]
Maybe I should write that what she did diary about how she undermined Euromediterranean cooperation in a fit of one-upmanship with Sarko...

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 1st, 2011 at 04:56:02 AM EST
[ Parent ]
I'm aware of that, of course. But unless you consider Nazi ideology to be still inspiring German elites, and are willing to produce an historical argument in favour of that thesis, then the Nazi allusions are (at best) distracting chaff.
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Sep 1st, 2011 at 05:04:35 AM EST
[ Parent ]
And referring back to Nazi ideology just rhetoric.
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Sep 1st, 2011 at 04:15:49 AM EST
[ Parent ]
Eurointelligence: BoI says Italy cannot afford a 300bp spreads to bunds forever (31.08.2011)
Tobias Piller argues Italy is not worthy of German solidarity

Frankfurter Allgemeine Zeitung's economic Italy correspondent Tobial Piller condemns the Silvio Berlusconi's government for watering down its reform and spending cuts package. He says Italy is asking Germany to take courageous steps and to accept Eurobonds and to underwrite the Italian debt. But according to Piller their own reform package is nothing but a incoherent collection of small reform that do not tackle Italy's real problems. "Whoever asks his European partners to show courage must first start by showing courage himself", he concludes.



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 1st, 2011 at 10:20:59 AM EST
Eurointelligence: BoI says Italy cannot afford a 300bp spreads to bunds forever (31.08.2011)
Juppé warns rescuing the euro is a question of war and peace in Europe

Talking to Frankfurter Allgemeine Zeitung the French foreign minister Alain Juppé warned rescuing the Euro was a question of war and peace for Europe. "Young people seem to think that peace is secured for all times", he said referring to the current euro crisis. "But if we look around in Europe there is new populism and nationalism. We must not play with that."



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Thu Sep 1st, 2011 at 10:23:40 AM EST
A Tale of Three Germanys: Is Germany Preparing to Exit the Euro?   Marshall Auerback  New Economic Perspectives

Marshall Auerbach starts by noting that Germany agreed to the euro project because it would prevent its European trading partners from devaluing their currencies.

Recall that there are basically 3 Germanys:

Germany #1 being the Bundesbank and "finanzkapital", which retains huge phobias about the recurrence of Weimar-style hyperinflation, and retains an almost theological belief in "sound money".  It is the Germany of closet gold bugs and Austrian economists, who believe in hard money, "responsible" fiscal policy and the like, and who were basically always antithetical to the euro as a big and broad union.  Then you had the "Europeanists", led by Kohl who essentially argued that you solve the "German problem" by binding Germany ever more fully into a pan-European framework, the currency union being a key part of that.  The swing vote was Germany #3, Industrial Germany which bought into the idea of the currency union precisely because it locked Germany's industrial competitors at a fixed exchange and removed the expedient of devaluation.

It seems to me, however, that the swing vote is beginning to have 2nd thoughts, as they wrongly consider the "costs" to the country through these repeated bailouts.  This concern seems to be overriding the obvious benefits of having "profligate" Mediterranean countries buying yet more German imports.  It is striking to me that Henkel, a big player in the German industrial complex, is now leading the charge for withdrawal.  It might suggest that an important political dynamic in Germany has shifted. German policy makers would have to conclude there is no plausible exchange rate for the Neuro and the Pseudo (or Soro?) that would cause a problem for their current account surplus and their export led growth strategy. Or they would have to conclude that is the "least worst" option given the political backlash of more subsidized loans to Greece, Portugal, etc.

The other point is this:  Multinationals don't care about where demand comes from as long as it is increasing somewhere and they are allowed to go after it. Labor arbitrage is the additional icing on the cake.  So policies that build unsustainable imbalances between countries and have bad social outcomes are fine with them as long as they can roam the globe freely to take advantage of the demand wherever it pops up.  

This probably remains true so long as the ultimate price of these polices don't get shared with the multinational (in the form of taxation or additional regulation). So far the multinationals have it good in that costs are falling disproportionately on others. That could well change if there was a "solidarity" tax imposed on profits instead of the populace.


I recall from a previous discussion in ET that Jerome was hopeful that the German industrialists would moderate the course Germany takes so as to preserve the commercial advantages Germany enjoys from the euro. That seems disconfirmed by Herr Henkel's article in the FT. How widespread are the opinions he expressed within the leadership of the German industrial sector?  And how likely would it be that any German state would impose a "solidarity tax" on profits of German multinationals?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Sep 1st, 2011 at 11:13:28 PM EST
Auerbach:
Multinationals don't care about where demand comes from as long as it is increasing somewhere and they are allowed to go after it.

True. But if "somewhere" has to pay in greatly appreciated DMs (or Neuros), the demand might just look elsewhere.

As I've noted before, there is a fundamental contradiction between German monetarism and German mercantilism. The Chinese don't get this wrong.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Sep 2nd, 2011 at 02:44:28 AM EST
[ Parent ]
Out of interest, where did you note that? I'd like to read your analysis.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 2nd, 2011 at 05:20:04 AM EST
[ Parent ]
I was thinking of this, which doesn't actually use the same terms, and is a note rather than an analysis.
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Sep 2nd, 2011 at 09:58:55 AM EST
[ Parent ]
I thought it was in my diary To Save the Euro, Germany Has To Quit the Eurozone but apparently not. I am better at remembering the sense or "take away" of something than the source. Not to say that my memory of the sense might not be partly defective.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Sep 2nd, 2011 at 10:19:59 AM EST
[ Parent ]
You really, really shouldn't you take your information about german politics from such clueless sources.

(He ignores the positions of the entire left, a omission totally idiotic regarding current political trends)

Another thing:

"It is striking to me that Henkel, a big player in the German industrial complex, is now leading the charge for withdrawal.  It might suggest that an important political dynamic in Germany has shifted"

Henkel hasn't been a big player in german industry since a decade. The man is a kind of Donald Trump.

by IM on Wed Sep 7th, 2011 at 07:05:15 AM EST
[ Parent ]
He ignores the positions of the entire left, a omission totally idiotic regarding current political trends

You mean the SPD pulled its head out of its ass and is now willing to coalition with Die Linke instead of CDU? That's great news.

Henkel hasn't been a big player in german industry since a decade.

You mean he hasn't been a big player, or you mean he hasn't held any official positions?

Those are not quite the same thing.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Sep 9th, 2011 at 05:04:17 AM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]