Not too surprising that the erudite Mr. John Redwood MP explains the fundamental problem with the eurozone much more elegantly than I can:
Ever since she conceded over setting up the Euro to France, Germany has been a semi detached member. Germany has willed the end, a common currency. She has refused the means, a political, monetary and banking union. Germany has wanted a relatively weak currency which helps her export and build up large surpluses. She has not wanted to share her wealth with the other members of the zone who are struggling financially.
In other words, what the late 'Nick' Ridley called "a German racket". But, as Mr. Redwood reminds us, whilst they have been mean with the money they have been generous with the sermons:
Germany has been adamant that she will not pay for any weak country’s balance of payments deficit. They need to export more and import less. She has refused to prop up weak banks in other countries, saying that they need to lend less and raise more share capital. She has refused to grant or lend money to weak states that spend too much and need to borrow. She has told them to cut spending and raise taxes.
But it takes two to tango, as it does in certain other sorts of, er, union, and so whilst Germany may huff 'n' puff they don't always get to lead the dance:
However, it has not gone all Germany’s way. If Germany had kept them all on these policies all the time the Euro would have broken up by now. Just as Germany requires more cuts and more austerity, so behind the scenes step by step the rest force Germany to accept more responsibility for the communal debts, and to offer more money to the laggard economies. Germany has lost a series of crucial battles for prudence. In 2011 when the currency was near collapse Germany accepted large lines of credit being granted by the ECB to commercial banks in the zone. In 2014 Germany was forced to accept quantitative easing to bid up the bond prices of other states in the union and create more Euro cash. Today Germany has to accept that the ECB will finance the Greek commercial banks, offering them as much cash as they need. These banks in turn can finance the Greek state.
I really don't know what it is about the Germans that makes them follow daft ideas headlong into disaster:
Germany needs to wake up to the shocking reality. All the time she stays in the Euro she will be forced one way or an other to pay more of its bills. She has but a minority share of the votes (18%) and decision making, in a zone now dominated by states who believe they should be able to spend more of Germany’s money for her. So it will be, unless Germany has decided to move from semi detached to outside the zone. If she stays in she will discover she is in a terrace with shared walls she needs to pay to repair.
Like the Schlieffen plan, I suppose, the idea of a German-dominated Europe with a currency that was bound to be weak thus ensuring a huge advantage for German exports must have seemed like a world-beater. And so it has been - up to now! But alas, Jetzt die Hühner nach Hause gekommen zum Schlafplatz! Eh? What? You haven't brushed up on your German? You haven't much time left, you know, so you really should get on with it. Anyway, it means 'now the chickens have come home to roost'. Or if your prefer a military analogy to link with the Schlieffen plan, then once again Germany is about to face its opponents on the Marne!
