Wolfgang Ishinger, ex-deputy foreign minister of Germany, published and op-ed article in the October 12, 2011 edition of The New York Times in which he argues that for prime minister Angela Merkel to convince her countrymen on saving the Euro, the arguments must be couched in the importance to Germany of preserving the European union, rather than placing emphasis on saving the Euro. Most Germans, according to Mr. Ishinger, never liked the Euro in the first place and wish they had the German Mark back.
They should be careful, lest their wish comes true.
The whole Euro project was built on flimsy foundations from the very beginning, and its current travails should come as no surprise. A common currency joining disparate nations, languages and cultures without common and enforceable fiscal policies cannot and will not work smoothly, neither in theory nor in practice.
Sure, there was at the outset a mutual undertaking of fiscal prudence, where any member state running budget deficits in excess of 3% of GDP would be subject to substantial fines. And who were the first ones to ditch this undertaking? You guessed it - Germany and France, the two largest members of the club which used their clout to avoid any further talk of the stiff penalties which they themselves originally insisted on.
And - say the Germans - why should we now, after having pinched and saved and made sacrifices to keep our wage levels competitive, have to pay for the indiscipline of others? Well, one answer which comes to mind is that Germany is conceivably the only European nation that has had any real benefit from the Euro.
Where do you think the German Mark exchange rate would have been these days, and what do you think it would have done to the competitive position of German exports, the main engine of the nation's prosperity?
Sure, a stable Euro and the possibility of borrowing cheaply unlimited amounts of money gave Greece, Spain, Portugal and Ireland a temporary high, until the financial markets woke up to the fact that - hey! - we may not get any of that money back. Now these and other Euro club members are stuck with the unenviable - not to say impossible - task of deflating their economies and living standards back to pre-Euro levels, and in the process hurting the German economy by their Euro-associates not being able to afford their products anymore. After all, Europe is by far Germany's main export market.
Germany, stop whining and start fixing. If or when the Euro falls apart, you will be the biggest loser.
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