When Germany Leaves The Euro
In June I was in the South of France with a group of old university mates, one of whom is an economist and, over a pression or five in the incomparable Bar Charlot in Seillans, we asked him: ‘What’s the solution to the Eurozone debt crisis?’
“No one knows,” was his reply. Then he added, “But one day we may wake up to find Germany has gone back to the DMark.”
How would that help? Well the Euro is strong because of Germany’s industrial strength, while having a strong Euro is killing the economies of the industrially weaker Eurozone
If Germany pulls out of the Euro, the Euro will collapse in value so, effectively, giving the remaining Eurozone countries a big devaluation after which their economies will be more competitive.
Their debt will be reduced, their manufacturing bases will be revived, their banks will be a bit closer to solvency. Prosperity will return to Europe.
It will be a bit like when the UK came out of the ERM – the economic benefits were huge and immediate.
Then, last week, I saw the New York Times ran a piece along the same lines – that a German exit from the Euro could save the currency.
One thing stopping a German pull out from the Euro is the consequent rise in cost of German exports. On the other hand, if Germany went back to the DMark, it would be in control of its own currency again and could do stuff to manipulate its value.
The other thing stopping Germany pulling out of the Euro is the Eurodream – the dream of the Eurocracy that Europe should have a common currency.
Time for the Eurocracy to wake up.