This question is for those of you much more knowledgable than me, but the last time I was home, I heard more than one German merchant telling me he hated the Euro and wished it had never been initiated.
So with what is going on in Europe economically at the moment, do you think that the different nations should go back to their own form of currency, or is it too late for that?
Thanks
Quasi
You just asked two different questions in the same OP. One was whether Germany would be better off? The answer is probably. The UK didn’t go for the Euro so other stable and disciplined countries like Germany are left supporting the Greeks and Italians who you never want to be mixed in with financially even if they are practically family. They are attractive people but you don’t stay that way spending long, hard days at work for years on end.
The other question hints at asking whether the Euro should have ever been adopted by anyone. That is a much harder question. It is good if you are the slacker of the bunch and not so good if you aren’t but a unified currency has some strategic and practical advantages above and beyond that.
Our economy is very export-oriented, and without the Euro the value of our currency would have skyrocketed, similar to what the Swiss Franc is now doing. The relatively good shape our economy is now in is in no small part thanks to the Euro.
Greece has a problem with the Euro because they can’t devalue their currency. Of course having to bail them out is a problem, but that developed because the economic policy was left to the member states of the Eurozone - in a way the unification didn’t go far enough.
I still think the Euro was a good idea. Aside of all economics, closer ties between European states are a worthy goal in and of itself.
The whole Euro project is based on upside-down logic. In Upside-Down land, having a strong currency is a bad thing, rather than a reward for having a successful economy, one that enriches all of the country’s citizens.
Germany (or the northern Euro-using countries of which Germany is the largest member) presumably fell for this crazy logic because they saw that supressing the value of their currency, which is what the Euro essentially does, means that their exporters would do well, by artificially increasing demand for their products in the rest of the Eurozone. That imports would cost correspondingly more seems to have been ignored.
In effect, northern Eurozone taxpayers give money to the rest of the Eurozone so that they can buy stuff made by northern Eurozone companies. This mostly benefits shareholders in northern companies (as long as they are not themselves paying too much of the tax that funds this circular scheme), and to a lesser extent consumers in the southern Eurozone. For ordinary people in the northern Eurozone, it is a net loss. They get to console themselves with woolly notions of European unity.
there are both pros and cons to such a situation. An major “pro” is that this helped Germany to maintain its productive industrial sector much better than various other countries, such as the de-industrialized England and America. Germans may have had somewhat lower living standard than they could have had, but a rich, stable and productive economy with an indigenous machine tools industry (just in case) is a very good thing to have.
How about we tie Central and South America, along with North AAmerica (maybe the Caribbean “offshore holdings” and “tax burrows”) to a common currency… name it the Ami. What would you think? Back it up with peruvian Gold!
Most Germans I know were not thrilled with the conversion to Euros, and once it took effect, felt that it was an excuse to raise prices; things that used to cost 1 DM suddenly cost 1 Euro (practically double the DM price value initially).
Many elderly Germans still call the Euro “Mark” out of habit.
I took my username from the good old German DMark, so needless to say, I would be happy to see it come back, but I won’t be holding my breath for that to happen.
There is certainly an issue in the Euro-zone stemming from the inequality of economic fundamentals of the old and new entrants. The conventional answer is that the new marginal entrants such as Greece ought to be tossed out, but I have read a good-sounding article a few months ago that touted the opposite - that the strong currencies such as Germany ought to leave and go back to their own, and not let the weak currencies drag them down. I’m not economically literate enough to comment either way, but there it is for you.
I don’t know where you got this opinion from, but it’s wrong.
Leaving aside your personal skewing of the issue, Germany has had a strong export industry before the introduction of the Euro, and this whole industry has benefited from one currency.
That merchants and/or people on the street complain about the Euro doesn’t mean they want the Mark back. It means they want the strong economy under the Mark back. Switching now to a currency different from the rest of the Market won’t accomplish that, however.
Compounding the problem for the “man on the street” is the perception that with the Euro, prices doubled. That is, roughly 2 DM = 1 Euro, but prices stayed the same, so really everything doubled.
This perception is both wrong and right. Wrong as in that the actual inflation, measured with an standardized shopping cart of goods every month by the statistics bureau, is about 2%, so prices have not doubled.
Right in that the standard shopping cart contains not only food and non-food items like toilet paper, but also 1/36th of a washing machine and similar, because every 36 months on average, people need to buy a new one.
What really happened was that prices for some very common things, like food and restaurants, did double shortly after the Euro, but other prices rose only moderately. This means that in the standard cart, it evens out; but in people’s perception, where you buy food every day, but washing machines rarely, prices are too high.
The other fundamental problem of the Euro was seen by critics long before it’s introduction, but because the politicians put it as “yes for Europe/ no to Europe” issue (calling everybody who didn’t want to join it a backwards idiot) no third option was brought forth.
This fundamental problem is: on the one hand, it’s a political tool for unity; on the other hand it’s a real currency which fluctuates. But because of it’s political reasons, it can’t be opted out, and the exchange rates to the old currencies are fixed.
And further, individual countries - like Greece - still have financial sovereignty; so when one country breaks the guidelines for stability, the EU imposes a sanction on them. Which is really stupid: they are deeper into debt than allowed, so they have to pay an additional fine!
Calls for the EU or EZB to take over a country’s budget once it fails the criteria have not been met enthusiastically - and looking at the libertarian, American, economic strategy the bankers suggest/ describe for Greece, one can understand why citizens and politicians don’t want their state to be dismantled into a libertarian plutocracy ignoring other options (like higher taxes for the rich and more tax investigators, or fighting corruption).
So the situation is complicated and messed up, but going back wouldn’t really solve it, either. Back when the Mark was strong, this was negative for the export industry and good for other parts of the industry, so it’s not a cure-all.