How Germany could come to kill the euro?

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  • Onur
    Senior Member
    • Apr 2010
    • 2389

    How Germany could come to kill the euro?

    How Germany could come to kill the euro



    “Tell me how this ends,” was the question posed by General David Petraeus about the Iraq war. European leaders are asking the same question as they contemplate the crisis in the eurozone.

    Having failed to construct a firebreak in Greece, the Europeans are hoping that they can stop the euro crisis in Ireland. But, even as an Irish rescue package is put together, the bond markets are already looking with unhealthy interest at Portugal. After Portugal, Spain is assumed to be next. And, if a really big economy such as Spain needed to call the financial fire brigade, the whole future of the euro would be in serious peril.

    The question of “how this ends” is therefore obvious and urgent – but also fiendishly difficult to answer. It is like watching a three-dimensional game of chess – in which the financial, economic and political levels all interact with each other.

    My current best guess is that the single currency will indeed eventually break up – and that the euro’s executioner will be Germany, the most powerful country and economy inside the European Union.

    The headline on one of the most-read stories in the Financial Times last week was “Anger at Germany boils over” – reporting accusations by some Europeans that the latest twist in the euro crisis had been triggered by inflexible German policies.

    But Germans themselves have plenty of reasons to be cross about the way the single currency is developing. Their country has been through a painful decade of wage restraint and cuts in government services. Many voters are outraged that their tax-euros might be used to finance early retirement for Greeks, or Ireland’s super-low corporate tax.

    The German people were also promised that the euro would be as stable as the Deutschmark – and that there would be a “no bail-out clause” that would prevent the richer countries in Europe having to save the indigent. Both promises look perilously close to being violated. That, in turn, is triggering growing concern that Germany’s constitutional court could declare their government’s participation in European “bail-outs” illegal.

    The German government’s fear of its own constitutional court has already been a crucial driver of the crisis. This year, the Germans were accused of acting far too slowly to organise a rescue for Greece. But official sloth was driven by a fear that speedy action would be deemed to violate the European treaties.

    The immediate crisis in Ireland was triggered about a month ago when Angela Merkel suggested that, in future euro crises, private bondholders should bear more of the losses and that further European treaty changes were needed. This remark was also made under pressure from the courts.

    Germany’s actions have, in turn, created political and legal pressures in bail-out nations. In Greece, we have seen deadly riots in Athens and a senior government minister evoking the Nazi occupation of the 1940s. In Ireland, there is much lamentation about the threat to national sovereignty. on Monday, the government itself was wobbling.

    It is possible that the rise of nationalist and anti-capitalist parties such as Ireland’s Sinn Féin will cause recipient countries to stick two fingers up to the EU – and to see whether life might be better outside the single currency. Countries such as Greece and Portugal might be a lot more competitive if they could devalue their currencies. But quitting the euro might feel like a national humiliation for members of the southern periphery. There is also no mechanism for quitting the euro in an orderly fashion. Any obvious preparations to do so might trigger a bank run.

    So if the euro is to break up, the country that sues for divorce is likely to be a strong economy – with Germany as the likeliest litigant. The Germans would not take this step quickly or lightly. A commitment to European integration has been a leitmotif of German foreign policy for half a century.

    But if the Germans became convinced that their eurozone partners were simply impossible to deal with – and that therefore the whole single currency experiment could not work – they might decide to quit. There are two ways I could imagine this happening.

    The first is a successive wave of financial crises across the eurozone, affecting larger countries, which gradually sap German taxpayer confidence that the “loans” that the EU is extending to its weaker members will ever be repaid. The second is if, as seems quite likely, the treaty changes that the German government is demanding to satisfy its courts fail to be ratified by some of the other 26 EU members. At that point, the Germans might throw up their hands and say, in effect, “Well, we tried our best, but the other Europeans won’t do what is necessary to save themselves.” Germany might then feel released from its historic obligation to “build Europe”.

    I realise that, in setting out these scenarios, I am laying supposition upon supposition. It only takes one point in the chain of argument to be wrong and events could charge off in another direction. All I would point out is that the optimists who put together the euro – and still argue that the currency will surmount its current problems – also made a lot of suppositions. And theirs don’t seem to be working out too well.

    By Gideon Rachman - Financial Times

    Published: November 22 2010

    http://www.ft.com/cms/s/0/85b62490-f...44feab49a.html
    Last edited by Onur; 11-23-2010, 04:30 PM.
  • George S.
    Senior Member
    • Aug 2009
    • 10116

    #2
    Well the euro doesn't seem to be holding like it used to.Countries like greece are doing their best to destroy the fabric of the eu.that pretty soon there won't be a eu as it's becoming all too debt ridden.
    "Ido not want an uprising of people that would leave me at the first failure, I want revolution with citizens able to bear all the temptations to a prolonged struggle, what, because of the fierce political conditions, will be our guide or cattle to the slaughterhouse"
    GOTSE DELCEV

    Comment

    • Frank
      Banned
      • Mar 2010
      • 687

      #3
      A new dawn for Macedonians if the EU falls

      Comment

      • George S.
        Senior Member
        • Aug 2009
        • 10116

        #4
        well frank i won't be surprised if the germans pull the rug out there won't be a eu left.
        "Ido not want an uprising of people that would leave me at the first failure, I want revolution with citizens able to bear all the temptations to a prolonged struggle, what, because of the fierce political conditions, will be our guide or cattle to the slaughterhouse"
        GOTSE DELCEV

        Comment

        • makedonche
          Senior Member
          • Oct 2008
          • 3242

          #5
          So wtf is Macedonia trying so hard to get into this decaying organisation?
          On Delchev's sarcophagus you can read the following inscription: "We swear the future generations to bury these sacred bones in the capital of Independent Macedonia. August 1923 Illinden"

          Comment

          • Vangelovski
            Senior Member
            • Sep 2008
            • 8531

            #6
            Originally posted by makedonche View Post
            So wtf is Macedonia trying so hard to get into this decaying organisation?
            I don't think they read the papers over there.
            If my people who are called by my name will humble themselves and pray and seek my face and turn from their wicked ways, I will hear from heaven and will forgive their sins and restore their land. 2 Chronicles 7:14

            The Revolution was in the minds and hearts of the people; a change in their religious sentiments, of their duties and obligations...This radical change in the principles, opinions, sentiments, and affections of the people was the real American Revolution. John Adams

            Comment

            • Pelister
              Senior Member
              • Sep 2008
              • 2742

              #7
              Originally posted by makedonche View Post
              So wtf is Macedonia trying so hard to get into this decaying organisation?
              Good question. Who really knows.

              Comment

              • fyrOM
                Banned
                • Feb 2010
                • 2180

                #8
                Hers to hoping. Go Germans…stop being mugs and taken advantage of by lazy swindling thieves.

                Comment

                • Onur
                  Senior Member
                  • Apr 2010
                  • 2389

                  #9
                  Angela Merkel warned that Germany could abandon the euro

                  The German chancellor, Angela Merkel, has warned for the first time that her country could abandon the euro if she fails in her contested campaign to establish a new regime for the single currency, the Guardian has learned.

                  At an EU summit in Brussels at the end of October that was dominated by the euro crisis and wrangling over whether to bail out Ireland, Merkel became embroiled in a row with the Greek prime minister, George Papandreou, according to participants at the event's Thursday dinner.

                  Merkel's central aim, which she achieved, was to win agreement on re-opening the Lisbon treaty so a permanent system of bailout funding and investor losses could be established to deal with debt crises that have laid Greece and Ireland low and are threatening Portugal and Spain. The Germans also called for bailed-out countries to lose voting rights in EU councils.

                  At the Brussels dinner on 28 October attended by 27 EU heads of government or state, the presidents of the European commission and council, and the head of the European Central Bank, witnesses said Papandreou accused Merkel of tabling proposals that were "undemocratic".

                  "If this is the sort of club the euro is becoming, perhaps Germany should leave," Merkel replied, according to non-German government figures at the dinner. It was the first time in the 10 months since the euro was plunged into a fight for its survival that Germany, the EU's economic powerhouse and the lynchpin of the euro's viability, had suggested that quitting the currency is an option, however unlikely.

                  Merkel's spokesman Steffen Seibert would not comment on her remarks today. But the threat, he said, was "not plausible. The chancellor sees the euro as the central European project, wants to secure and defend it and the government is not at all thinking of leaving it," he said. "Germany is unconditionally and resolutely committed to the euro."

                  Despite overwhelming opposition to her calls for depriving eurozone countries of their EU votes if they need to be bailed out, Merkel stuck to her guns on the issue at the summit, while conceding that the proposal would not feature at another summit in Brussels in two weeks' time.

                  She argued that under the Lisbon treaty, which came into force a year ago, EU member states can have their voting rights suspended if deemed guilty of gross human rights violations. "If this is possible for human rights infringements, the same degree of seriousness needs to be awarded to the euro," Merkel told the summit, according to the witnesses. She shelved the demand for suspension of voting, however, but won the argument on more limited change of the treaty to enable a "permanent crisis mechanism" to be established for the currency from mid-2013. This was rechristened the European stability Mechanism at last Sunday's emergency meeting of EU finance ministers in Brussels which decided on an €85bn (£72bn) bailout for Ireland.

                  Insisting on the loss of votes would have outraged most other EU governments. The Lisbon treaty would have needed renegotiation, opening a pandora's box of possible referendums in Ireland, the Czech Republic, and Britain, and placing immense strain on the EU's survival.

                  EU finance ministers are to meet again early next week ahead of the summit on 16-17 December. The mood in Brussels is febrile and there have been rumours of another extraordinary summit or session of finance ministers this weekend.

                  Officials said today there were "no plans" for a weekend session. But it is virtually taken for granted that Portugal will need to be bailed out and the €750bn rescue fund agreed in May may need to be increased as insurance against a Spanish emergency. Two EU ambassadors told the Guardian Portugal would need to be rescued very soon, despite repeated public statements to the contrary.

                  The summit in two weeks' time, said a senior European diplomat, would be preoccupied with the treaty change needed for a permanent bailout mechanism to be established when the €750bn fund expires in mid-2013. "The real question is, is there enough in the fund? If not, how much more do we need?" the diplomat added.

                  "Portugal will need to be saved. The big issue is Spain," said another senior diplomat.

                  Since the euro crisis erupted this year with Greece heading for sovereign debt default until it was bailed out in May, Merkel has repeatedly insisted that the primacy of politics over the financial markets has to be restored. That has yet to happen as Europe's leaders flail around in a mood of worsening "panic and despair", according to diplomats and officials in Brussels.

                  The current phase in the crisis started when Merkel and the French president Nicolas Sarkozy met in mid-October and delivered an ultimatum to the other 25 EU leaders: the treaty would be reopened and a permanent rescue system created which would entail "haircuts" or losses for creditors and investors if eurozone countries need to be bailed out.

                  Although this is to take place only from 2013, the markets took fright at the scale of potential bond losses, pushed Ireland's borrowing costs ruinously high, and forced last week's bailout of the Irish.

                  Diplomats, analysts, and officials generally agree that Merkel is right to focus on "moral hazard", insisting that the markets and not only governments and taxpayers have to share the losses if a eurozone country implodes. But her timing could not have been worse, they add.

                  Friday 3 December 2010

                  German chancellor said to have made comments during an EU summit dinner in Brussels at the end of October

                  Comment

                  • Risto the Great
                    Senior Member
                    • Sep 2008
                    • 15658

                    #10
                    Very interesting. Inevitable threats if you ask me.
                    Risto the Great
                    MACEDONIA:ANHEDONIA
                    "Holding my breath for the revolution."

                    Hey, I wrote a bestseller. Check it out: www.ren-shen.com

                    Comment

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