This is an outstanding, must-read article by Wolfgang Münchau, published in the FT. Check it out!
via The wacky economics of Germany’s parallel universe – FT.com.
Having been close to this subject for over three years, I commend Wolfgang Münchau on his clarity of explanation.
Personally, I agree with the conclusions namely:
Germany is exporting ordoliberal ideology to the rest of the single currency bloc. It is hard to think of a doctrine that is more ill suited to a monetary union with such diverse legal traditions, political system and economic conditions than this one. And it is equally hard to see Germany ever giving up on this. As a result the economic costs of crisis resolution will be extremely large.
In recent months, I have been respectful of the German position that Southern Europe (including France) needs structural reform, like freeing up labor markets. I have been optimistic that with a little genuine structural reform from Southern Europe, Germany will countenance massive Keynesian stimulus in the form of investment. This is further supported by the European Commission’s changed position too.
Now I fear that I am close to admitting defeat. With Germany still at the economic helm in the Eurozone, it will be continued pain for all. Once again, the winners will be the privileged and the wealthy. If economic policies are unworkable, there will soon be social and political crises – this will include the increasing power of both the Far Left and the Far Right of the political spectrum.
Dr Alf is right and eventually German economic policy will have to change and the PIIGS will have to reform.
If this does not happen the EU and the Eurozone will both fail which on balance I see as inevitable because national traditions are different between member states, economic cycles are out of synch and both Germany and the UK want to run things and are re-enacting centuries old rivalries.
The UK has to rethink its position with fractious Scots, Welsh, Irish and Cornish people threatening trouble now that the cupboards are bare.
UK Local Authority Chief Executives are also at it by pretending that if they got their hands on Westminster cash they would create jobs for people other than their own bloated staffs.
The Scots are the worst because they now threaten a new referendum, unless Labour agrees to not apply austerity to the Scots and agrees to let Scotland and the SNP have Devo Max.
It is time to draw a line in the sand, grant Scotland, Wales, Cornwall and Northern Ireland some independence and save £33 billion gbp on the Barnett Formula.
It is time to leave the EU to Germany and let that continent work out its own future.
We should become a tax haven plus City State with a bicycling Monarchy.
All the rest of the hangers on, flunkies and fawning supplicants need to experience the smell of “napalm in the morning”.
The EU is a busted flush and to remain in it we have to accept German control and German rules or do our own thing.