2010-12-16

Current state of Europe and the euro

There are lots of social mood indicators in the Guardian's excellent article, Year of bullying, bluff and bailouts leaves euro fighting for its life:
The mark was born behind barbed wire in total secrecy in this barracks in 1948 in what became known as the "conclave of Rothwesten". The currency met an early death at the age of 50 in 1998 (though notes and coins were in circulation until 2001). But as the German opinion polls show every week at the moment, 30%-40% are hoping for a resurrection.
The mark is freely exchangeable into euros in perpetuity, which has resulted in a significant, albeit small relative to money supply, hoard of marks in private hands.
"There is no appetite anywhere for another Franco-German plan to save the euro," said an east European government minister.

Jean Asselborn, the foreign minister of Luxembourg, went further: "I can only warn Germany and France against a claim to power that shows a certain overbearingness and arrogance."

A prime minister of a small EU state was more damning still. "Merkel and Sarkozy think they are the most pro-European leaders ever. But there is no Franco-German leadership. It's all domestic politics," he told the Guardian.
It's all domestic politics because during periods of negative social mood the public focuses inward on domestic issues. Those unable to face those difficulties often turn to foreigners as scapegoats, rather than partners.
"It has always been very difficult to take decisions in the EU against German thinking. But that's not new," said the prime minister. "The new phenomenon is that the Germans are talking, but they're not listening. For the first time on a serious issue, I'm upset by the German behaviour."

Jean-Claude Trichet, president of the ECB, José Manuel Barroso, president of the EC, and Jean-Claude Juncker, chairman of the Eurogroup countries and prime minister of Luxembourg, have all separately attacked Merkel in recent months, calling her "naive" and "simple". In the WikiLeaks cables, the US ambassador in Berlin characterised the chancellor as "risk-averse and seldom creative".

In a paper in July, Jean Pisani-Ferry, director of the Bruegel thinktank in Brussels, noted: "In Angela Merkel, the EU has a de facto leader, but one who was not prepared for leadership."
Normally, comments like this would make Merkel popular at home, except that social mood is too negative. Her party has also failed to deliver on the tax cut promises that were made to its coalition parter, the FDP, causing voters abandon them. The ruling government is looking weaker politically and the result is that Merkel doesn't want to cave to the EU now.
The Slovaks, however, who only joined the euro club last year, appear already to be kicking themselves. "We were guided by promises of a stable currency and solid rules,' the parliament speaker in Bratislava, Richard Sulík, complained this week. "We need to stop believing blindly in the governors of the eurozone and start preparing plan B, a return to the Slovak crown."

The Slovaks feel betrayed by what has happened to their money, like the many Germans who are bristling with indignation in part because they were never keen on the currency in the first place.

Last week Helmut Schmidt, the former chancellor and German elder statesman, said Merkel did not understand modern economics. He also attacked the central bank in Frankfurt, the Bundesbank. "In their innermost heart they are reactionaries. They are against European integration." His successor, Helmut Kohl, admitted he had to force the euro on his country. "I knew I could never win a vote in Germany. We would have lost a referendum on introducing the euro. That's absolutely clear," he told the author of a new book on the currency.
Democracy almost always gets in the way of European integration.
Another new book, meanwhile, is heading up the Christmas bestseller lists in Germany. Save Our Money, an anti-euro broadside by Hans-Olaf Henkel, the former boss of the German equivalent of the CBI, argues for splitting the currency north and south, strong and weak.

Unthinkable, failure is not an option, they insist in EU capitals. "It would be like an asteroid hitting the planet," said the east European minister.
I'll take those odds.

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