… as seen by George Soros and reported by Krugman
here. Germany was in the doldrums when the euro was created. The euro
(and its “German” interest rates that were too low for the southern
inflationary economies), in turn generated a false sense of security for
investors in southern Europe. That led to vast inflows of capital, debts,
bubbles, and to large trade deficits in the south that directly benefited
German exporters and led to a German recovery.
Interestingly, “this story bears little resemblance to the morality play
of profligacy and its consequences that has dominated European discussion until
just about now. If there were villains, they were the architects of the euro,
who waved away warnings about the system’s flaws” Krugman writes.
My comment:
Germany, who profited most from these flaws, should refrain from
claiming that it is its “virtuous” economic policy that explains its current
performance relative to that of southern Europe. It is, indeed, a bit cynical
to advise the latter to imitate the “German model” when it was so obviously
asymmetrically biased.
Suppressing the intra-european currencies market was the original sin,
and no fairy tale of building now a federal fiscal union is going to remedy
this fundamentally unbalancing fixed-price device. The only solution is to
re-create, in the zone, exchange rates and foreign exchange markets reflecting
different national price levels and inflation rates, in order to allow southern
European countries to regain competitiveness by restoring realistic exchange
rates within Western Europe.
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