While the Bundesbank states that a return to national currencies would not make economies better off, the German Vice Chancellor Philipp Rösler has stated earlier this week that the horror of a Greek exit has worn off I felt that he was trying to play tough cop when there was no criminal around. Otherwise, he was just really ignoring the economic reality of the EU (that is the polite way to say that he was being stupid silly).
What he seems to be forgetting here are the interconnections between the EU nations. If Greece fails and returns to drachma, then the next ones to fail will be Cyprus and Spain. And then Italy. Then maybe England if they decide not to print any more pounds. What then? Should Cyprus bring back the pound, Spain the peseta and Italy the lira just to save themselves if Germany will not is not afraid of them fleeing and will not aid them? Well then how about we just have a good north-euro? Great way to increase faith in the currency Philipp!
If Greece exits, the domino consequences will be catastrophic for the union. Euro is now the second most circulated currency in the world (after the almighty dollar of course!). 332 million people in the Eurozone use it daily and another 175 million worldwide have currencies pegged to it. Just imagine the consequences if the currency is destroyed. Great depression would seem like joyful period after such a case.
By the way Philipp I know you were only born in 1973 (errr you didn't want to say your age? Sorry!) but if you had studied German economic history you would have seen that immediately after WWI when the Allies demanded reparations paid by Germany to repay the damages and debt they had obtained during the war it was the German president of Reichsbank Hjalmar Schacht who had fought the idea most of them all. Indeed, even Maynard Keynes was against reparations as he believed that they would be a burden on the German economy which was just barely alive after the war. The allies did not want to adhere to the two economists, but the combination of a horrible inflationary period (during which Schacht was not in the Reichsbank) and the 1929 Depression made the Allies see that it would be economically irrational to pursue the policy of reparations. (which would last for more than 50 years) I do not know if Philipp can see the resemblance here which is quite obvious if you just substitute Germany with Greece and Allies with Germany. It is true that history repeats itself but I would hate for us to reach the brink of destruction just to realize that what we had been doing was wrong.
Although I am quite pro-German in several areas of the economy and society I cannot really understand this obsession with not helping the countries in need. What are they afraid of? Yesterday, Mario Draghi had an idea similar to what I had proposed here. This made me go to bed happy but today I learned that the Bundesbank has objected to such a plan. One wonders what their reasons might be! ''This seems like a good idea for the European economy so lets just say no!" While ECB seems all powerful, they will just not let it use this power. It is not acting as a real Central Bank the way the Federal Reserve acts in the US. I repeat once again: buy government bonds, expand credit in the Eurozone and let inflation rise for a year. Then go back to listening to stubborn German politics if you desire. Just do this now before it is too late.
P.S. I do not understand why we need to have IMF experts checking up economies in the Eurozone. (Well OK I do if the ECB does not want to act like a Central Bank) Don't we have enough technocrats here? Or are 4-5 troikans the only people in the world who can understand public finances?
P.S. I do not understand why we need to have IMF experts checking up economies in the Eurozone. (Well OK I do if the ECB does not want to act like a Central Bank) Don't we have enough technocrats here? Or are 4-5 troikans the only people in the world who can understand public finances?
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