Slipping out of joint: the very public madness of modern Europe
One of the great paradoxes is that the Greeks love a single currency that harms them, while the Germans, whom it (sort of) benefits, deplore it
Ultimately, of course, the Euro is a disaster for everyone in Europe. But one interesting point that is rarely remarked upon is that in the short and medium term it does benefit one country -- Germany.
The logic is straightforward. For the equal and opposite reason that it harms Greece by making the country uncompetitive, the Euro functions as a de facto export subsidy for Germany by making it more competitive than it would be if it had the Deutsche Mark.
Quantifying this is difficult. Michael Heise, chief economist at Allianz, was quoted in the Times on Monday as saying that a reversion to the Mark would see the German currency appreciate by 15-20 percent. It’s educated guesswork, and others think it may be more like 20-30 percent.
But, by way of illustration, what this means is that every Mercedes that Germany exports is effectively offered to customers with a “20 Percent Off“ sign plastered on the front window -- and here's the killer -- at zero cost to the manufacturer.
Consider now the situation for Greece which operates with a currency that is hugely overvalued in relation to its economic fundamentals -- possibly by as much as 50 percent, according to many estimates. If Greece reverted to the Drachma the cost of a holiday on the Greek islands could reasonably be expected to fall by about half, resulting in a massive boom for the country’s most important industry, tourism.
Exactly what Greece needs, right? Wrong, at least in the opinion of the Greek public which, according to polls, is massively in favour of retaining the Euro (surveys at the time of the recent election put support for the single currency at as high as 80 percent).
Meanwhile, a poll in Bild Am Sonntag (quoted in the same article in the Times) suggested that 51 percent of Germans now want to go back to the Mark.
To be fair to the Germans, they’re right to want to revert to their own currency. Even if they do benefit from the Euro in the short and medium term for the above stated reasons, the whole thing is ultimately unsustainable, and prior to acceptance of that reality it is German taxpayers that have to foot the bill for the single currency's structural flaws.
Nonetheless, there is something tragically symbolic about the parlous state of public discourse in modern Europe when in the country that could be held up as the primary beneficiary of the single currency the Euro is increasingly seen as an albatross round its neck and in the country that is most obviously being harmed by the single currency it is regarded as a national treasure.
At this stage, discussion could easily move into a long and worthwhile analysis of Europe’s civilisational decline and the deep seated weaknesses in its political culture.
Suffice it to say for the purposes of this short piece that something has plainly slipped out of joint. The Euro project is an unfolding catastrophe in its own right. But everything that surrounds it and underpins it speaks to a kind of collective insanity that will have far deeper implications than the fate of a single currency that no rational group of people would ever have constructed in the first place.
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