Newsday's Daniel Akst observes that Germany rises as Europe
declines.
Say what you will about the Germans, but they're nothing if
not persistent. They tried conquering Europe by armed force,
but the Panzer approach backfired badly. So this time they
plan to take over by means of the euro.
It might just work, at least for a while. But conquest by
currency is unlikely to prove any more enduring than conquest
by force of arms, if only because voters in poorer euro zone
countries will sooner or later rebel - if we even get that
far. There's still a good chance the euro will fall to pieces
before the Germans get to put their latest plans for
continental hegemony in place.
If you're not a currency trader or an economist, you may be
wondering what all the fuss is about, so here's the short
version.
So far, the single European currency - the euro, launched in
1999 - has been quite a boon to Germany, making its exports
cheaper for other euro countries to buy. At the same time,
adopting a single respectable currency lowered the cost of
borrowing for the euro zone's less industrious and
creditworthy nations, which previously shuffled through life
with their own flimsy drachmas and lira.
The availability of low-cost euro loans enabled Greece, Italy
and some others to do two things.
First, residents could uphold their great national tradition
of not paying taxes, since their governments could borrow to
cover deficit spending. And second, cheap euros could be used
to buy more German stuff.
Of course, their own exports, such as they are (feta cheese?
olive oil?) were made relatively more expensive because they
were no longer priced in trashy drachmas and the like. Not
surprisingly, Germany built up a big trade surplus.
This is not so very different from China and the United
States; each has its own currency, of course, but China won't
let its yuan rise enough to make American imports
irresistibly affordable. Such imbalances usually involve
debt; sure enough, America has plenty.
As for Europe, for years the IOUs of its debtor nations have
been piling up in banks all over the continent and beyond.
Lately, though, investors have lost confidence in these IOUs
and are demanding ever-higher interest rates to lend in
Europe.
This is starting to strangle the euro zone. When something
like this happens here [United States], we unleash Ben
Bernanke, whose Federal Reserve will flood the world with
dollars if necessary.
But the European Central Bank isn't allowed to do such
things.
And that's Germany's opening.
Germany could push for a massive central bank bail-out - at
this point, possibly the only thing that might work - but it
opposes any such effort. It also opposes any plan to put the
financial backing of the entire euro zone behind the debts of
member states. Instead it pushed out governments in Greece
and Italy in favour of leaders who would impose strict
austerity that, unfortunately, will make their debts even
more unpayable.
Then, recently, Germany pushed through a plan that will
supposedly impose stricter fiscal discipline on European
nations.
Britain, with nothing to offer but blood, sweat and
relatively unfettered financial services, stood alone in
opposition.
Let's be realistic. Europe needs more fiscal discipline, just
as we do. But Europe is probably already in recession, which
austerity will worsen. And its future cannot be secured by
reducing some member states to permanent economic vassalage.
Worse yet, the dubious plans announced still leave the euro
teetering on the brink of gotterdammerung [collapse,
literally "twilight of the gods"].
Then again, phrases like "European crisis" and "German
dominance" just seem to go together, don't they?
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