Do you need pinching? A new political party which is anti the euro is being formed in Germany and it is made up of people who seem to be what one can only describe as moderate. Is this the most significant move yet towards an eventual break-up of the euro?
I confess I underestimated the resolve of the people and governments of the euro area. Joseph Stiglitz recently likened the remedy being prescribed for the euro area to medieval medicine. From our lofty perch in 2013, we can look back with a combination of smug amusement and horror at the way medics of the Middle Ages applied leaches and blood-letting to sick patients. The cure being prescribed during that age often made the patient even more ill, so what did the medics do? Why even more bloodletting and leach sucking, thus hastening the demise of the patient. How could they have been so stupid?
But so strong has been the conviction of so many in the euro area that the euro has to be saved; that a euro break-up is unthinkable; that I have begun to wonder if it is I who was stupid. Have I have been so fooled by Anglo Saxon bias, that I can’t see how wonderful the euro is?
I am sorry. I am trying. I am doing my level best to see how essential the euro is, but can’t help but feel that in trying to save the currency, the powers that be are forcing conditions not dissimilar to those that were dominant in Germany just before the rise of the Nazi party upon some countries.
When we look at the current state of Italian politics, we can perhaps be allowed another smug laugh from our lofty perch on the sofa or at our desk. Despite my best efforts to retain impartiality, and to see things from Italian rose tinted spectacles, I thought the cover from the ‘Economist’ a couple of week back was hilarious. The headline read: “Send in the clowns”. There was a picture of stand-up comic Beppe Grillo, who won 25 per cent of the Italian vote, and there, next to him, was Silvio Berlusconi, who the ‘Economist’ described as “being 76 (excluding the hair)”, a “horizontal prime minister’” whose party line is “‘come back to my casa and bring a friend’” and a man whose main objective from the recent election is “to stay out of jail.”
But beyond the tears of laugher, one can’t help but shed real tears. The plight of the region’s unemployment is not funny, it is tragic. And the long term consequences of such blinkered determination of the euro region’s leaders to hold onto a single currency that is causing such misery is truly scary.
I am a great believer in the idea that different times call for different ideas. What was right yesterday may not be right tomorrow. On this theme Roger Bootle surprised me today when he stated in the ‘Telegraph’ that Britain was right to join the ERM in 1987, but right to pull-out in 1988. I don’t see a contradiction in these words; as I say, different times calls for different remedies. The problem with the euro is its permanency. As a condition of the euro the Maastricht Criteria limited members’ fiscal deficit to 3 per cent of GDP and debt to no more than 60 per cent of GDP. During the noughties many countries, including Germany, failed to meet this criteria. Then a couple of years ago, Euro leaders kind of reaffirmed the criteria, and in effect said: “This time we mean it, and we won’t break the criteria, cross our hearts hope to die.” But of course, they go on doing so.
Adherence to the Maastricht Criteria is about as permanent as a one of those starburst sweets in your mouth. But we are told the euro is here forever.
In recent years Germany has been a winner from the euro because, by sharing a currency with countries such as Greece, its exporters are afforded a terms of trade advantage that under the previous currency system would not have been available. But the price of such a cheap currency is the fear in the German collective psyche that they may need to fund a virtually limitless overdraft for certain countries.
Now a new German political party called Alternative für Deutschland, which has the goal of dissolving the euro in favour of either single currencies or a smaller currency union, is being formed. One idea being considered is the formation of new currency block consisting of Germany, Holland, Finland, Austria and maybe one or two other countries, but not France. The party also believes in dismantling the European Stability Mechanism. Alternative für Deutschland is being set up by a collection of academics, and economists, but primarily intellectuals not known for their radical views. It is not certain whether the party will be finally confirmed. To do so it has to collect at least 2,000 supporting signatories in each of Germany’s 16 states.
So is this the first move towards break-up of the euro, or am I underestimating the resolve of the people of the Eurozone?
These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees