German Economic Policy and the Euro 1999-2010 by Richard Conquest (pdf file)
From Page 12
The realities of the situation cannot be freely admitted by the political elite because to attribute any of the blame for Europe’s malaise to the Euro would at once confirm the worst suspicions of the financial markets and precipitate a market-driven crisis that would quickly pass beyond the control of any government. Or, indeed pseudo government such as the Brussels establishment. As time goes on this situation will only become more acute and crises more violent and economically destructive. So,for the time being at least, denial by the elite is the most expedient stance – stating and insisting upon that which they know to be untrue.
Most worrying of all, perhaps, is the fact that the President of the European Central Bank, Jean Claude Trichet, speaks in very much the same terms as the political class. He does not pursue an impartial, objective assessment of economic conditions which would allow the formulation of an appropriate monetary policy response. This is after all the proper function of a central bank governor. But no,
From Page 13
…rather, he serves an overtly political purpose. It is not for him to say, for example, which countries should remain in the Eurozone and which should leave. He flatly denies the possibility of the latter option, a manifestly absurd and very political position. History dictates that the politicisation of money always ends in disaster and Trichet is working actively to remind us of the validity of this observation
From Page 15
How could it ever have been seriously argued that the fast-growing Spain, with its enormous trade and current account deficits, apparent well before the coming of the Euro, should share a common interest and exchange rate policy with a slow-growing and export dependent Germany, luxuriating in huge trade and current account surpluses? It was always a recipe for disaster but the political class, including Trichet, are in their comfortable state of denial and of course, in receipt of lavish rewards for their incompetence.1
Footnote 1 on Page 15
Can it be any surprise to learn that Trichet is the latest recipient of the ‘Vision for Europe’ award? Previous laureates have included Jacques Santer, Jean-Claude Juncker, Jean-Luc Dehaene and Helmut Kohl, a depressing and dreary collection of functionaries in the ‘leadership’ of Europe. This award is granted ‘in recognition of outstanding achievements in taking Europe into the future’; self-evidently an exercise in fatuity.The first recipient of this self-congratulatory award was Jacques Santer, former EU President, forced from his extravagant sinecure by Paul Van Buitenen’s devastating accusations of corruption and fraud.
From Page 26
As will be seen below, Germany’s trade is overly concentrated upon the EU from which it derives substantial trade and current account surpluses. In other words, Europe’s largest and strongest economy contributes very directly to the external deficits of her ‘partners’ and these deficits result directly to the growth of external debt. Debt has proved ruinous to Greece and Ireland and it is not ‘contagion’ that will make this much worse, it is the result of ‘common’ interest and exchange rate policies that have been pursued since the creation of the functioning Euro on 1st January 2002.
Put simply, the likes of Greece, Italy, Ireland, Spain and Portugal must borrow, incur external debt, in order to finance the trade and current account surpluses of Germany. Are we to believe that this is a credible or sustainable model of economic development?
From Page 35
This grim situation has prompted intermittent debate in Italy’s political and economic circles about the desirability or not of that country remaining within the Eurozone – whatever fatuous noises Trichet might make on this issue. The problem then is that this debate is now a matter of concern to German economists and politicians.
From Page 55
Unfortunately there can be no such happy ending to the nightmare of the Euro. Although its disintegration would be economically beneficial in the long term, its demise will be extremely destructive in the near to medium term. The example of the UK simply illustrates that there is life after Euro-folly. However, in the same way that we could not expect that the government would deliver Britain from the absurdities of the ERM, so Europe cannot expect that the likes of Herman Van Rompuy, Manuel Barosso, Jean Claude Trichet and the other grandees and potentates of Europe will deliver the Eurozone from the destructive absurdities of the Euro.