photo: zerohedge
All is not well in Europe. But then, everyone knew that. What many do not know yet, or maybe do and do not want to admit, is that the adoption of the Euro might have been a grave mistake, in light of what is happening recently.
The fact that Spain, Greece, Italy and now Cyprus are in deep debt and getting more precarious each day speaks volumes about how the Euro, which was supposed to be panacea for all involved, has not improved the situation for many, and in as many cases, has made things decidedly worse.
Apart from the loss of true frontiers, which is a constant source of lamentations from more developed countries in the union, the adoption of the Euro has caused a balooning of the debt from, among other reasons, the fact that the weaker currencies devalued in some cases more than 50% after the adoption of the Euro, whereas salaries and other internal features stayed the same.
Enter Germany, the winner in this beleaguered lottery. Germany has done well not because of the adoption of the Euro itself, but because of better governing, saving and spending habits of its population, and a roaring manufacturing sector that is actually one of the few in in the world that has gained a strong foothold in China.
But all this is of little help to countries like Cyprus, or Greece...or anyone.
What is emerging from Germany's leadership is that they are trying to re-shape the Euro countries according to their book, but this might not be in the best interest of the country in debt.
In Cyprus' case, the EU had ordered that depositors shoulder the burden of the bank failure in a misguided attempt at curbing Cyprus' cottage industry, which has been off-shore banking. But the measure would have punished everyone, even small investors and citizens who had saved through hard work. And that is patently wrong. The decision made the world shudder. Is everyone at risk in the future? In some countries, government spokesmen spoke of the measure as a trifle, giving the impression to many, that it could very well happen to their own. And it could.
All this has engendered a backlash against Merkel and Germany that is almost as strong as its post war reception. Signs of Merkel in effigy have been drawn with ominous moustaches. And it has shown a side of Germany that no one truly wanted to see again: a willingness to be selfish and to look down at their neighbors. They are, in the words of ex Chancellor Shmidt, acting as if they were 'the center of Europe'.
What people see in Germany's dour approach to their less fortunate neighbours, is an attitude of 'you're idiots and we know better'. Some in Germany, during the Cyprus crisis, decried the Cypriots as idiots for not eagerly adopting the first measure proposed, which would have seen a levy exercised on all depositors.
What people are seeing in Germany's approach to the resolution of debt, is that they are exercising a political and economic power by shackling european countries with debt they may never be able to fully repay. If Greece is an example, all countries could see austerity regimes in which everyone would have to be taxed to the hilt, only to see the taxes not go to public services, not go to the shoring up of the country's internal finances, but solely to repay the interest on the bailout amount, which is what is currently happening in Greece.
The other problem is that Germany and Germans in general believe that the debt some countries are in is entirely that country's fault.
But what Germans are not aware of, with all their griping about having to give money to their neighbors, is that Germany is actually profiting from the interest they are receiving from all the baliout money they have approved, to the tune of 10 billion Euro last year alone. So the poorer people in Greece who are paying their taxes, are in fact paying their richer neighbours in Germany.
The general consensus from economists is that this is not a sustainable system. At one point nations will realize that they cannot shoulder the burden of a bailout and the first cracks will appear on the once solid Euro zone.
Source : (partial) spiegelonline 3.26.13
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