A new German party movement is calling for the restoration of certain European currencies, in countries such as Greece or Italy that have a high debt ratio.
The idea, which would be in fact a slow motion effort to push those countries out of the Euro zone, has been hatched by some nationalists who contend that these lesser economically sound countries are by their very habit of not getting their debt under control, dragging down the value of the Euro in general, and therefore, the value of Germany's Euro.
How quickly we forget. It was little more than a decade ago that European economists ripe with ideas of some revolutionary concept, dragged countries big and small into the vortex of the Euro.
What did happen then, although no one bothered to mention it, even after many were crying foul over the adoption of the single currency, was that in most European countries who were less fortunate, the currency in effect devalued by as much as 50%. That was because, while the price of goods never went down, the lower salaried people in those countries which had a lower standard of living and less stable economies, were suddenly forced to pay double what they had previously spent on both necessary and unnecessary goods.
But that being said, and seemingly almost everyone seemed to have either not noticed, or let it pass, the devaluation of the European currencies is at the base of many of those countries' ruinous descent into bigger debt.
True it might be that most of those countries were not in good shape before their entry, but then what was the point of having a fixed debt ratio as a requisite for Euro membership, if the EU central bank and other financial authorities never bothered to verify what the real debt ration was?
Now, even though Germany is becoming richer on interest payments on those very bailout payments every German begrudges, some of them insist that the only way to have a measure of control over those unruly countries and a better way to gauge the true value of those countries' currencies is to establish a 'dual currency system'.
Of course the people who want this dual monetary system do have a precise agenda, and they are even so bold as to spell it out clearly. They want the laggards out, sooner or later, so why not start them on their road by easing them back into their old currency?
What this would do, especially at a time of crisis as it is now, would be to further diminish the buying power of those citizens whose currency would no longer be a communal affair. It would in fact devalue their currency even more than it has already under the Euro conversion. Not to mention the flight of capital, when people in the less fortunate countries realize that their money is going to be converted into something close to worthless.
Of course the proponents always pull out the trump card. The imports of the countries who would be devalued would suddenly be cheaper, which of course would improve exports, which of course would stimulate the economy.
There's only one slight problem. As long as the countries who are better off remain in the Euro zone, and manufacture the majority of products the laggard countries buy, the devaluation will cause further poverty and depression for those citizens who will find themselves suddenly holding a near worthless paper. Not to mention the fact, that the Euro debt will remain, but taxes to pay it will lose their value, making repayment much more difficult.
The other thing the proponents also fan about in front of the observers is the doomsday scenario of the laggard countries having to leave the Euro zone by default, which would cause bank failures, layoffs and a general malaise spread across all of the Euro currency countries.
In short, they don't want to share the pain. The laggards will eventually fail in their mind, so let's cut the rope before they drag us in. But they forget who dragged the laggards in to begin with, and how with their idea of a common currency they have created failures in countries that could otherwise be able to weather the storm on their own. Not to mention that the 'dual currency' solution would do nothing more than precipitate the disaster they say they are trying to daftly avoid.
Op-Ed
Partial Source : Spiegel Online 4.22.13
No comments:
Post a Comment