Haha, funny. I wonder why US and UK publications publish this topic over and over.
There is zero chance that Germany will go back to the Mark.
Ireland and Greece are tiny countries. Their problems are totally blown out of proportion. Germany has a GDP of around 2.5 Trillion Euro. The EU has a GDP of 12 Trillion Euro. Ireland has a GDP of around 160 Billion.
The Euro being under pressure? How is that bad news for Germany's export oriented economy? It is not.
Second, the countries like Greece and Ireland under pressure? That's also great for the greater EU. It makes everyone aware that changes in economic policy are needed. Up until now in many areas the EU and Eurozone countries have different economic policies that are not really adjusted to each other. There is now some chance that this will change.
The internal problems in Europe have been caused by a few factors:
* the banking system took a lot of risks and also invented fancy new products (aka ponzi schemes)
* bubbles in a few countries, especially the housing bubble in the UK, Ireland, ...
* budget deficits for example in Greece, UK, ...
The financial crisis has exposed these problems. Giving up the Euro does not solve any of these problems.
The single currency market of the Eurozone has been given such a boost to the economy that very few people would be willing to give that up. The only real question that is worth discussion is how to repair the broken parts.
All other speculation in this area is wishful thinking and market manipulation from people who want to profit from the manipulations.
"I wonder why US and UK publications publish this topic over and over."
"Ireland and Greece are tiny countries. Their problems are totally blown out of proportion."
I think you answered your own question, I bet if you asked a number of Americans which had the larger population of Ireland or Germany, a significant number would not know or would even guess Ireland. I also bet if you asked a number of Americans which had the larger population of Ireland or Massachusetts, a large majority would say Ireland, even residents of Massachusetts.
I understand your argument that "it makes everyone aware that changes in economic policy are needed. ", however isn't the Euro basically a straightjacket preventing each individual country from setting its own monetary policy?
For example, the Central Bank of Ireland can't set its own interest rates, and basically needs to follow whatever Germany decides. Or Greece can't devalue its currency to attract more capital, etc.
I'm far from the expert but this has been my understanding so far.
Yeah this problem can easily be resolved by looking at Irelands GDP. After all, if Irelands economy collapses the UK won't be affected. Each individual Irish citizen only spends about £4k a year on British products & services.
And hey, if the UK economy is severely affected then that won't affect the rest of Europe!
Small population, small landmass, small GDP, the worlds second largest software exporter.
Do you honestly believe GDP is a real indication of a countries ability to affect the economy of those it is surrounded by and nothing else should be considered?
There is zero chance that Germany will go back to the Mark.
The Germans have a history of spending silly money on contingency plans for things that will never happen. Oh wait, they don't.
Grow up, look at the bigger picture and face facts.
I think you should read about LTM and what it wrought. Look what Lehman's collapse did. When everyone is over leveraged then it doesn't take much to get a crisis rolling. If Ireland and Greece aren't propped up then Deutche Bank will suffer. It was German and French banks that lent to Greece and Ireland. Do you really think DB would survive if their Irish and Greek bond holdings become worthless?
The main funding powers in Europe are Germany, France and the UK. The UK has a unique position in that it is a net contributor to Europe, bails other countries out but does not have the Euro. To claim that the UK is somehow insulated from effects of the Euro is disingenuous. A large part of our trade is with Europe, and Europe or the US being adversely affected affects us.
France is another big player in the Euro and will contribute to bailouts, but only so far. Germany will look to the UK to make up the difference where possible, then countries like the Netherlands and so on until it finds someone.
If Germany pulls out of the Euro thats it, the Euro is over. However if the Euro dies overnight then expect massive upheaval in Europe, rising nationalism and the potential for war. This however is unlikely thanks to the Lisbon treaty, a treaty that centralises European power. It is likely that the EC will want to transfer control of financial policy to Brussels for those that receive larger bailouts (as they can no longer be trusted to run their own economies without risking the rest of Europe - this will be one of the reasons put forward) and Lisbon will be the vehicle to do it.
What I would love to see is actual reform of the EU as an institution as well as reform of financial obligations from member states, but sadly it's more likely we'll see the European equivalent of the old republic trying to extend it's reach in order to protect itself.
Our interest in bailing out Ireland was unusual in the level of exposure our recovering banking sector has to Ireland. Possibly, because of our traditional support for national sovereignty within the EU, we're even more willing than most countries to do so without compelling the Irish to address their budget imbalance by raising their artificially low taxes. I'm not sure the same self-interest in applies to aiding Portugal though.
The fragmentation of the Euro would undoubtedly have consequences for the UK, but I'm not sure that they would be wholly negative in the shorter term (a bankrupt country unilaterally withdrawing and allowing the Euro to appreciate might even be good for UK exports). Given the parlous state of our own finances, I'm not sure the economic case for contributing to a bailout of other countries is clear cut (given that it's by no means guaranteed to succeed...), and certainly it would be politically disastrous for the British government to commit to any additional spending.
Other countries have more invested in making the Eurozone a success, but ultimately the survival of the Euro depends largely on the continued support of France and Germany as the rest of the Eurozone isn't exactly inundated with money, which leaves inevitably aligns its future very closely with the interests of those countries.
All germans know that this is not going to happen. The euro is here to stay, and germans (at least those who generate most of the GDP for germany) are willing to pay in order to keep it. After all, we can do the math.
"The German economy has hugely benefited from a cheap euro" - this is complete crap. It is the first time I hear that the euro is cheap. If the euro is so cheap why it did not benefit to other countries? If the euro is so cheap why is France lobbying to devaluate it? If Germany benefited from cheap euro, how comes that Germany was always supporting the policy of the ECB to maintain a strong and stable euro.
Alone this quote makes this article to lose credibility. For me this article is pure propaganda.
One euro was worth about $1.60 in the middle of 2008. It's worth about $1.35 now. Was worth about $1.20 back this summer. And in mid 2001 it was worth about $0.85.
On the last page it says "Currency union without fiscal union is bound to fail -- and we are seeing the failure right now."
I guess the argument is that if each country has their own currency, they can devalue it when they are having problems and get out of trouble and the Euro prevents that possibility? But does anyone know how things worked in terms of this issue back when gold was more the common currency and before paper money was more common?
The next big ones are Italy, Belgium and *France*.
France is in trouble, too? I hadn't heard that. I'd be interested to read about it, if anyone has any links. (I'm not French, despite the username. :-)
Angela Merkel warned that Germany could abandon the euro
"Angela Merkel at the EU summit on 28 October. According to witnesses, during an discussion with the Greek prime minister at dinner, she said: "If this is the sort of club the euro is becoming, perhaps Germany should leave."
"The German chancellor, Angela Merkel, has warned for the first time that her country could abandon the euro if she fails in her contested campaign to establish a new regime for the single currency, the Guardian has learned."
[+] [-] lispm|15 years ago|reply
There is zero chance that Germany will go back to the Mark.
Ireland and Greece are tiny countries. Their problems are totally blown out of proportion. Germany has a GDP of around 2.5 Trillion Euro. The EU has a GDP of 12 Trillion Euro. Ireland has a GDP of around 160 Billion.
The Euro being under pressure? How is that bad news for Germany's export oriented economy? It is not.
Second, the countries like Greece and Ireland under pressure? That's also great for the greater EU. It makes everyone aware that changes in economic policy are needed. Up until now in many areas the EU and Eurozone countries have different economic policies that are not really adjusted to each other. There is now some chance that this will change.
The internal problems in Europe have been caused by a few factors:
* the banking system took a lot of risks and also invented fancy new products (aka ponzi schemes)
* bubbles in a few countries, especially the housing bubble in the UK, Ireland, ...
* budget deficits for example in Greece, UK, ...
The financial crisis has exposed these problems. Giving up the Euro does not solve any of these problems.
The single currency market of the Eurozone has been given such a boost to the economy that very few people would be willing to give that up. The only real question that is worth discussion is how to repair the broken parts.
All other speculation in this area is wishful thinking and market manipulation from people who want to profit from the manipulations.
[+] [-] efsavage|15 years ago|reply
"Ireland and Greece are tiny countries. Their problems are totally blown out of proportion."
I think you answered your own question, I bet if you asked a number of Americans which had the larger population of Ireland or Germany, a significant number would not know or would even guess Ireland. I also bet if you asked a number of Americans which had the larger population of Ireland or Massachusetts, a large majority would say Ireland, even residents of Massachusetts.
[+] [-] jscore|15 years ago|reply
For example, the Central Bank of Ireland can't set its own interest rates, and basically needs to follow whatever Germany decides. Or Greece can't devalue its currency to attract more capital, etc.
I'm far from the expert but this has been my understanding so far.
[+] [-] Reality_Check|15 years ago|reply
Yeah this problem can easily be resolved by looking at Irelands GDP. After all, if Irelands economy collapses the UK won't be affected. Each individual Irish citizen only spends about £4k a year on British products & services.
And hey, if the UK economy is severely affected then that won't affect the rest of Europe!
Small population, small landmass, small GDP, the worlds second largest software exporter.
Do you honestly believe GDP is a real indication of a countries ability to affect the economy of those it is surrounded by and nothing else should be considered?
There is zero chance that Germany will go back to the Mark.
The Germans have a history of spending silly money on contingency plans for things that will never happen. Oh wait, they don't.
Grow up, look at the bigger picture and face facts.
/rant
[+] [-] yequalsx|15 years ago|reply
[+] [-] shin_lao|15 years ago|reply
I run a business in Europe and everyday I'm thankful for this currency that makes paying a bill in the Netherlands as easy as buying a baguette.
I'm always amused to read about the weakness of the EU and the supposed problems with the Euro currency.
EU's GDP is 20% bigger than the USA. Spain is the 9th economy by GDP (to be compared with Ireland which is 38th...).
Your "made in China" stuff was built with German machines, your cosmetics are French and your wife dreams of Italian clothes.
There are a lot of issues in Europe but I'm not aware of a country where there is none.
[+] [-] varjag|15 years ago|reply
He doesn't - it's in the article.
[+] [-] _b8r0|15 years ago|reply
The main funding powers in Europe are Germany, France and the UK. The UK has a unique position in that it is a net contributor to Europe, bails other countries out but does not have the Euro. To claim that the UK is somehow insulated from effects of the Euro is disingenuous. A large part of our trade is with Europe, and Europe or the US being adversely affected affects us.
France is another big player in the Euro and will contribute to bailouts, but only so far. Germany will look to the UK to make up the difference where possible, then countries like the Netherlands and so on until it finds someone.
If Germany pulls out of the Euro thats it, the Euro is over. However if the Euro dies overnight then expect massive upheaval in Europe, rising nationalism and the potential for war. This however is unlikely thanks to the Lisbon treaty, a treaty that centralises European power. It is likely that the EC will want to transfer control of financial policy to Brussels for those that receive larger bailouts (as they can no longer be trusted to run their own economies without risking the rest of Europe - this will be one of the reasons put forward) and Lisbon will be the vehicle to do it.
What I would love to see is actual reform of the EU as an institution as well as reform of financial obligations from member states, but sadly it's more likely we'll see the European equivalent of the old republic trying to extend it's reach in order to protect itself.
[+] [-] notahacker|15 years ago|reply
The fragmentation of the Euro would undoubtedly have consequences for the UK, but I'm not sure that they would be wholly negative in the shorter term (a bankrupt country unilaterally withdrawing and allowing the Euro to appreciate might even be good for UK exports). Given the parlous state of our own finances, I'm not sure the economic case for contributing to a bailout of other countries is clear cut (given that it's by no means guaranteed to succeed...), and certainly it would be politically disastrous for the British government to commit to any additional spending.
Other countries have more invested in making the Eurozone a success, but ultimately the survival of the Euro depends largely on the continued support of France and Germany as the rest of the Eurozone isn't exactly inundated with money, which leaves inevitably aligns its future very closely with the interests of those countries.
[+] [-] dmoo|15 years ago|reply
http://www.spiegel.de/international/europe/0,1518,731798,00....
[+] [-] danmelnick|15 years ago|reply
[+] [-] stupidsignup|15 years ago|reply
[+] [-] unknown|15 years ago|reply
[deleted]
[+] [-] reirob|15 years ago|reply
Alone this quote makes this article to lose credibility. For me this article is pure propaganda.
[+] [-] huherto|15 years ago|reply
[+] [-] neworbit|15 years ago|reply
Cheap is relative.
[+] [-] JeffL|15 years ago|reply
I guess the argument is that if each country has their own currency, they can devalue it when they are having problems and get out of trouble and the Euro prevents that possibility? But does anyone know how things worked in terms of this issue back when gold was more the common currency and before paper money was more common?
[+] [-] Estragon|15 years ago|reply
[+] [-] noverloop|15 years ago|reply
[+] [-] perlgeek|15 years ago|reply
[+] [-] anigbrowl|15 years ago|reply
[+] [-] jeroen|15 years ago|reply
[+] [-] chailatte|15 years ago|reply
"Angela Merkel at the EU summit on 28 October. According to witnesses, during an discussion with the Greek prime minister at dinner, she said: "If this is the sort of club the euro is becoming, perhaps Germany should leave."
"The German chancellor, Angela Merkel, has warned for the first time that her country could abandon the euro if she fails in her contested campaign to establish a new regime for the single currency, the Guardian has learned."
http://www.guardian.co.uk/world/2010/dec/03/angela-merkel-ge...