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The truth is, even at the outset of the euro, 55% of Germans were against the adoption of the single currency.
Why shouldn’t they have been?
The deutschmark had worked very well for Germany, and most saw no reason to ditch it in favor of “an experiment.”
The fact is, Germany knew that it would be dangerous to link their fate to Greece—and other weak economies—but agreed to do so anyway...
The Euro Cost
And it’s true; Germany has benefitted from the euro—as well as the devaluation of the euro.
German firms are doing very well since a devalued euro boosts Germany’s exports.
But all Europeans must know—especially the Germans—that the euro is not salvageable as it currently exists.
The economies are too different, and the debts to high, for Germany to rescue.
The political instability in Greece—and now Italy, too—is something that Germany wants to avoid.
And it can…
By simply refusing pay for anymore of the welfare of Greece, or Italy, or Portugal.
Germans have figured out that Germany’s financial resources are not enough to save the euro…
But, also that the debt that is destroying the euro, can destroy the German economy, too.
And, as noted in prior editions of The Gorrie Details, what the Germans must be seriously considering is “how to leave the euro behind?”
Who can blame them?
But, what effect will a German defection from the euro have on the rest of euroland?
An Existential Crisis
At minimum, we should expect to see much more of what we are seeing right now.
Political instability, growing civil unrest, and contracting economies throughout euroland…all of which beget more of each.
The euro crisis is not just a currency or debt issue…
It is an existential crisis for Europe.
Here’s what I mean…
Since World War II, Western Europe has been at least a security ward of the United States…
A protected territory…
That is, much of Western Europe has been infantilized—unable, unwilling, or in the case of Germany, disallowed, to have a defense strong enough to defend themselves…
European countries ceased being true, fully realized, fully functioning independent countries over 60 years ago…
There are historical and geo-political reasons for this, but one of the side-affects is that European societies have been able to create lavish welfare states…
And fostered and perpetuated among many nations the idea that short work weeks, six weeks paid vacations, cradle-to-grave welfare benefits and long term economic stagnation and high unemployment were somehow not conflicting realities…
The introduction of the euro only perpetuated this illusion—and made it worse.
That is why European leaders like Sarkozy of France have suggested an “economic government” in Europe…
Which would have to include a centralized fiscal policy from Brussels…
Leading to the end of sovereignty for every country in euroland.
Something that we talked about in The Gorrie Details several months ago…
Because a single currency can only work with political and economic union—neither of which exist in euroland today.
Doing It Backwards
A centralized fiscal policy would mean that a country like Greece would be just a pawn to be dictated to---much like it is today with its austerity programs, but without the layer of sovereignty that it still has…
To a supranational government, run principally by Germany and France.
The idea that Greece, Italy and other smaller euroland nations would agree to this is slim.
In fact, political degeneration in Europe is worsening as resentment grows on all sides.
This is predictable…because Europe went about the single currency process backwards…
A single currency ought to be the last piece of the puzzle after economic and political integration has been accomplished.
Why did they do things backwards?
Because, as it became apparent that the political and economic union of Europe was not being ratified in various treaties…
Euroland leaders accomplished what they could do, no what they should have done.
So today, political union looks further away than ever, as deep suspicions, blame, and great economic hardship and unrest begin to engulf euroland.
No Easy Choices
There is also one other dilemma for Germany, should it decide to leave the euro and return to the Deutschmark…
How strong would the new deutschmark—let’s call it that—be compared to the euro?
Most likely, it would be very strong—making German exports very expensive.
With exports falling, the German economy may well contract…
And, with much of euroland in political and civil unrest—not to mention economic decline-- how many new immigrants would flood to Germany to take advantage of it welfare system?
This is not only a possibility, but with Europe’s liberal immigration policy, it is almost a certainty.
Leaving the euro may in fact cause a deeper recession Germany, as well as cause a deep social crises and the very civil unrest that Germany is hoping to avoid if it remains in the euro and bails out Greece, Italy, and whomever else.
For Greece, the die is pretty much cast.
Their economy, political outlook, and social decline are all already in a downward spiral.
But Germany has some tough decisions to face.
Stay in the euro…or leave.
All things being equal, ditching the euro at least appears to be the lesser of two evils for Germany…
But may speed up the descent of Greece, Italy, Portugal, and the rest of euroland, into a state of utter anarchy.
And those really are…The Gorrie Details.