Dean Baker made a brilliant observation, Germany Leaves the Euro Zone, and the Problem Is? This goes along with my general theory that there really is something wrong with the German people. And I say this having once had a wonderful time in Germany. Hell of a place and hell of a people. But that’s if you are drinking with them. If you are on the outside, well, let’s just say that they are not the most empathic of people.
Throughout the crisis in the European Union over the past six years, Germany has behaved atrociously. The whole time, they have told themselves a narrative that is both self-congratulatory about their own success and dismissive of the pain of others. In this narrative, Germany is doing well because of their strong work ethic and fiscal rectitude. The countries of southern Europe are suffering because they are lazy and were fiscally profligate before. That’s just not true in either case. In fact, people in southern Europe generally work more than Germans. And other than Greece (Really: how long are conservatives going to continue to reduce everything to Greece?!) the other European governments did not misbehave.
Because Germany is the largest economy involved with the Euro, the strength of the Euro is pretty much dictated by Germany. In order for the other countries to recover from the current economic stagnation, Germany needs to allow itself a little inflation: let wages go up! But instead, Germany has kept wages artificially low both before the crisis and since. What this means is that German exports continue to be overly competitive compared to exports from, say, Spain. I could accept that better if Germany didn’t pretend that this situation was great and if everyone just acted more German everything would be fine.
Really, I don’t want to overstate this. But it seems to me that Germany is bullying Europe very much as they have in the past. It is just that now they are doing it economically instead of with tanks. There is even the same kind of ideology present: Deutschland über alles! That’s not in the sense of Germany destroying all others. But it is in the sense of Germany thinking it is better than everyone else. I’ve seen this same kind of repugnant attitude in myself, “Why isn’t everyone as smart as I am? Why isn’t everyone as thin as I am? Why isn’t everyone as whatever as I am?!” Generally, if it is even true (and it isn’t for Germany or me), it is due to things we have no control over and shouldn’t be something that we take pride in.
Right now, Germany takes pride in its fiscal rectitude, but its effect is to harm the rest of the Eurozone. Matt O’Brien was discussing how maybe the European Central Bank (ECB) could do some quantitative easing, even though it is outside its charter. He noted that this might cause Germany to leave the Euro. And Baker’s response was, “So what?” As it is, Germany gets a great advantage pegging the Deutsche Mark to the Euro. And the rest of the countries would be better off without that.
It’s really very simple. If Germany left the Eurozone, the Deutsche Mark would go up in value relative to the Euro. This would immediately cause all the other countries in Europe to be more competitive in exports. It would create jobs. It would be great. The down side is that people who had a bunch of money stored in the Euro would see it go down in value one time. But even this would be reversed to some extent by the rebounding economy.
I think this is a great idea. A bunch of little countries leaving the Euro could be disruptive. But a single, orderly exit of Germany? It sounds like a great, pragmatic solution to the problem in Europe. Of course, Germany won’t do it. It is getting too much benefit from staying in the Eurozone and pretending like it is doing everyone else a favor.
Let’s be clear about a few terms here. First, the European Union is the group of states that are linked politically and economically to a degree. The Eurozone is the group of European Union nations whose national currency is the euro. So, for example, the United Kingdom is in the European Union, but not in the Eurozone.