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Europa braucht den Euro nicht by Thilo…

Europa braucht den Euro nicht

by Thilo Sarrazin

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"Am deutschen Wesen soll die Welt genesen:" (if only the world were more German) seems to be Thilo Sarrazin's core message. His first bestseller justly lamented the failed integration of Germany's Turkish community whose practice of overwhelmingly marrying spouses raised in Turkey's underdeveloped parts constantly retards the process of assimiliation. Germany faces the same problem as Ataturk: How to draw or push people into the modern world.

This time, it was the Germans who were pushed into a modern world they didn't want. They had to sacrifice the Deutschmark for the Euro. The Deutschmark's success story out of the ashes of WWII to become the world's lodestar of stability and value preservation parallels Sarrazin's own life who worked partly as a political adviser, partly as a professional bureaucrat in the world of government finance. Affiliated with SPD out of his proletarian family background, his rather conservative views made him an odd fellow there. He quickly learned to exploit this, becoming the SPD's point man for uncomfortable truths and saving programs. Sarrazin has the perfect background of both public finance and central banking to discuss the current Euro crisis.

Sarrazin spends a large part of the book presenting the story of the Deutschmark and the Euro. Despite having been personally involved, he unfortunately doesn't discuss the German monetary reunification. The misaligned 1:1 switch pushed Eastern Germany into an unnecessary long period of uncompetitiveness and painful adjustment not unlike Spain's present situation. The difference lies in the fact that the PIIG's problems were triggered by a lack of restraints in a world of cheap credit.

The architects of the Maastricht treaty failed to foresee two aspects. Firstly, justly lamented by Sarrazin, the unwillingness of Europe's politicians to follow both the spirit and the letter of Maastricht. Sarrazin is too soft on his fellow party member Gerhard Schröder who jettisoned all restrictions (eagerly assisted by Sarrazin's favorite villains, the French). The Euro problem, however, was not caused by public finance (the Greek serial cheaters excepted). It was and is private debt of banks or near-banks that exploded. Accustomed for long periods of time to expensive interest rates, the availability of cheap loans triggered an orgy of real estate booms. The bankers and private investors, having captured the political system, are now unfortunately succeeding in having the general public pay for their follies. In a European context, this means Germany and the north pay for the follies in the south.

Sarrazin correctly identifies that the policies of the European Central Bank are no longer under German control while much of the risk still accrues to Germany. Europe's politicians started the Euro project without having hammered out a consensus of future monetary policy. Sarrazin sees this as a dastardly French plan taking over German monetary policy assisted by its southern minions. Good macroeconomic policy requires a duet of fiscal and monetary policy. At the moment, the mostly conservative governments in Europe block good fiscal policy while the ECB directs its firepower in assisting banks (and their failed investments) instead of the real economy.

In contrast to the book's title, Sarrazin hasn't completely given up the Euro yet. He just doesn't think it realisitc that the European south's fragile political systems will be able to adopt good government practices soon. Instead of accepting a European mezzogiorno of permanent and continuous wasted transfers, Sarrazin asks to look for other options such as a fiscal union or an exit. In contrast to his first book, Sarrazin's conclusion is tame and open-ended. The future will show whether Europe's politicians manage to choose a sensible solution among the wealth of current options. ( )
1 vote jcbrunner | Jun 23, 2012 |
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