• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Article: Germany, not Brexit could destroy Eurozone

Infinite Chaos

DP Veteran
Joined
Oct 28, 2007
Messages
26,343
Reaction score
23,131
Gender
Male
Political Leaning
Independent

Interesting article, I don't think a Brexit would cause problems of many future exits for the EU, it could be the making or breaking of the UK (we don't know which) but there definitely has been prior talk of how Germany has done really well because of an artificially weak Euro.


Germany providing the lion's share of historic Eurozone growth, you wonder whether if the case made in the article is true whether it would have been far better for Germany historically to follow a policy to reinvest some of those huge profits and growth into weaker economies to help grow them.
 

I discussed that point with a school friend and at the time a German Staatssekretär at the Witschaftsministerium all one afternoon at the club. He is a lawyer and very good at that. But he did not understand why the trade balance could not remain so deeply in surplus now that Euroland had a single currency unless the money was transferred back to the spenders. I pointed out that, if his ministry did not take action the economies to the south would fail and there would be massive costs and possibly unrest putting the EU as a whole in danger. The crisis came. Let's see how it runs and how bad it goes.
 
You got a link to the article or am I blind and missed it in the OP?
 

Yeah, I don't imagine Germany set out to have the Euro run this way but certainly once it became clear they were benefiting at cost to fellow members then you can point fingers and say - "do something about it.."

PeteEU said:
You got a link to the article or am I blind and missed it in the OP?
Click to expand...

Sorry - thought I put one in and then got distracted looking for Eurozone GDP growth since inception.
 

TBH IC, this is almost exactly what those of us who were so critical of the Troika's dealing with Greece were saying about the German, Dutch, Finnish positions and Eurozone's strategy in general. I agree that the impact of Brexit would be less severe for the Eurozone than it would for the UK economy, but add that to the ongoing mismanagement of Eurozone strategy by Dijsselbloem, Schäuble, Merkel, Draghi et al and you might be looking at a perfect storm.
 

Actually Kohl was not an economist and thought history more important than the present in any event. He also needed money for reelection etc. So he allowed Germany to enter at a too high exchange rate that made investments by the rich in other Euroland countries cheaply but priced German labour out of the market. That put the German economy into a recession/stagnation (sick man of eurooe) that lasted about 7 years. 4.5 million workers were without work, while real estate prices for upmarket stuff exploded, where capital flowed out to where it bought more than in Germany.

The stagnation was fading in 2007. The flip side were bubbles in a number of markets and member nations that collapsed after the external shock at the time. Unemployment is still rather high.
 

It is impossible to tell, what the consequences would be. They could be positive, near zero to massively negative for all, depending on how Brussels acted.
 
Ironically the creation of the common currency set out from totally different expectations and, just as ironically, subsequent disillusion left the initially most enthusiastic with a hangover and the most sceptical on a high.

The Kohl government (specifically Kohl himself) saw the creation of the currency as something in the (preferably) distant future, at the time being viewed with great distaste by the German voters so in love with their (admittedly) hard DeutschMark. So, at least initially, Germany stalled more at the project than actually furthering it.

Then, history tending to be a comedian, the GDR collapsed. Finally.

Leaving everybody stunned and Bonn most of all. Most of all in that the most immediate and direct consequences were hitting Bonn in the prospect of having the greater part of 16 mill. people flee westward in the attempt to finally participate in the "economic miracle". Which, such was the general feeling, would not be possible by staying in a now more free but nevertheless totally broke state that would still be called GDR (as a scenario a possibility, albeit such plans turning out to be very brief).

(Re-)unification was an immediate must, to a large extent for ideological and emotional reasons on both sides but mostly (even where not everybody realized it) for economic reasons. Main drive resting in inducing at least some part of the inevitable human flood to stay home by throwing incentives East.

Of the occupying powers (yes, that was still Germany's official status) the US made favourable noises, the USSR under Gorbachev could clearly be bribed, but France and Britain screamed blue murder.

That's when Kohl gave up his reluctant stance on the common currency and started throwing it as a sop, specifically at France since the Iron Lady was justifiably seen as a hopeless cause.

And, irony abounding in hindsight of today, France, fearful of being alone in such a set-up with this overly brawny neighbour, insisted on having Italy aboard. Something that Kohl and Co. resisted as long as they possibly could, basically on the same argumentative lines that apply even today, namely that on the one hand Italy's lower financial and productive (in short economic) potential would drag the currency down and that on the other hand it would be demanding the entry of its Mediterranean sisters. Successfully so in that France, in its desire to make "the club" as large as possible so as to put more checks onto the Teutons, would heavily support such extensions.

Which is exactly what happened.

What did not happen (even to Germany's surprise) was the curbing of German success, the effect of all these supposedly useful control mechanism developing into the exact opposite direction of what had been envisaged.

For reasons I'll muse upon in a later post today lest this one become a case of tl;dr.

I beg patience with this digression here, it is not however totally OT.
 
joG said:
It is impossible to tell, what the consequences would be. They could be positive, near zero to massively negative for all, depending on how Brussels acted.
Click to expand...
No, it doesn't all depend on how Brussels reacts, it depends on how markets and corporations and governments both in and out of the EU react.

You're correct that the consequences are certainly unknown and largely unknowable, however I can foresee many scenarios in which the British economy could suffer horrifically from Brexit. I can't see any credible argument for believing it will benefit.
 
What brought about the current scenario of German predominance was (not exclusively) initiated by a left of centre administration taking a hard look at figures (joG has already referenced the stagnation that Germany suffered) and then coming down on the Germans like a ton of hot bricks.

Cutting pensions, raising eligibility age, liberalising employment laws (read as enabling easier hiring and firing), putting the wage and salary structure into free flow, doing away with practically unlimited (in time) unemployment benefits and generally signalling to the German people that, with goodwill (sic) and a simple hole punching tool, you can actually tighten the belt all the way till you reach the buckle from the other side.

It cost Schroeder the next election. No great tragedy for him (Gazprom was waving with attractive positions) but a catastrophe for the Social Democrats that they're suffering from ever since.

Ironically Merkel, who then won alone over this issue, has been basking in the obvious success of the measures ever since and probably believes by now that they were her doing. Even more ironically the Germans appear to believe that as well, having meanwhile completely forgotten the howling rage they went into at the time.

The measures conveniently remembered only when they serve as a basis for pompously lecturing others (primarily the undisciplined louts populating the Northern Mediterranean seaboard) on the need to tighten belts and not be so darn whiny about it.

Of course that's a generalisation but it need be seen that the government position (unashamedly taking this stance) finds wide support.

What is seen less clearly is that the German "success", where perhaps not primarily and certainly not exclusively based upon exploiting the South, is to a significant part due to actually rolling those countries over.

By out-competing them in virtually everything, sapping more finances out than ever flow in via EU aid, letting own banks do one killing after another there by loaning recklessly and letting the taxpayer pick up the tab (not solely the German taxpayer but the EU taxpayer) when it comes to bailing those own banks out, once the local finance institutes go belly up as they must.

Etc., etc.

Of course Germany is far from being the only one but I'd wager it profits most.

And there we have it. Everybody knows that this "model" cannot be sustainable and Germany is among the first to point this out. But does as little about it as everybody else does, alone on the difficulty of finding some common grounds (within itself and with others) on what would actually hold some sense.

Which indeed does not consist of throwing money around but, instead, would find a start in working towards a spreading of the competitiveness that the EU is so supposedly about.
 
As to the article premise presented in the OP, I hold neither a possible Brexit nor Germany's economic position capable of destroying the EU.

The fundamental problems faced (if indeed they were) lie in neither.
 
 
gunner said:
I disagree that we can be sure either way.
Click to expand...
How can you disagree with something I didn't say. Being able to foresee scenarios isn't the same as saying 'this will happen'.
 
Andalublue said:
How can you disagree with something I didn't say. Being able to foresee scenarios isn't the same as saying 'this will happen'.
Click to expand...

Fair enough.
 

The private sector will act as they see the situation forming up. If they see that the EU means no harm and nothing changes? Why change business models? That would probably even strengthen GB.
If the EU grandees act like jerks and make a hash of it like they did with Schenhen or Maastricht, it's had to give a prognosis, but that it could do enormous damage all through Europe to the point of others exiting.
 
Infinite Chaos said:
Sorry - thought I put one in and then got distracted looking for Eurozone GDP growth since inception.
Click to expand...

Thanks.. but sorry to say the article is a load of anti-EU/europe bs from an anti-Europe newspaper from what I can see.... zero actual facts.

1) To make a fair comparison, you need not only the actual data but also data about current accounts from before the Euro for each of the countries mentioned.
2) Germany is the second biggest (until recently the biggest) export nation on earth.. of course it would have a current account surplus..

But why no actual numbers or sources (from what I can see)? What are they hiding? Why current account and not balance of payments?

Lets see the current accounts then.. even though balance of payments would be better.. but hey!

In % of GDP from this

Germany.. positive 7.6% of GDP. Logical since it is the second biggest exporter.
Netherlands.. positive 10.3% of GDP.. WTG Dutchies.. also a big exporter plus Royal Dutch Shell...
France.. negative 1% of GDP. Hmm not too bad.
Italy.. positive 1.9% of GDP. Wait what? According to the article that should not be possible!
Spain.. positive 0.8% of GDP. What.. this one shocks me, because Spain has historically been a deficit nation.

EU wide current account is positive 0.9%. So there must be a lot of negative ones right? Greece!!! no.. positive 0.9%. Who is the big sinner!???

Oh yea.. the UK with negative 5.5% of GDP. Why does the article not mention that?

So how on earth does the Telegraph get to these numbers?
 

Considering it has a yearly balance of payments deficit of over 120 billion euros.. by far the largest in Europe... then I dont see where the hell the Telegraph has the balls to come with this article.. Even Spain has a surplus!
 
You must log in or register to reply here.
Menu
Log in
Register
Cookies are required to use this site. You must accept them to continue using the site. Learn more…