1. Dave Holden says

    You can present as much economic theory and “logic” as you like but what all these economists fail to realise is that if you don’t have the politics on your side you’ll go nowhere fast.

    I would suggest Kohl was a chancellor of a different Germany to the one that Merkel is to today.

    1. Edward Harrison says

      Indeed, Dave. I suspect that the Germans would have rejected the euro had it been voted upon.

      One big difference is embodied in Merkel herself. She’s from the east and it has taken Germany a long twenty years to get the level of economic harmonisation in Germany that people feel comfortable with. The Ossi Wessi divide is still palpable but less so that 20 years ago. Nonetheless, the cost has been significant in terms of German willingness to ‘fund’ the eurozone periphery.

      1. Dave Holden says

        That’s interesting I didn’t know she was from the east.

        I also suspect that one of the main differences between Merkel’s generation and Kohl’s is there being a lot less post war introspective guilt, something I suspect was a particular driving force in Kohl’s successes in European integration.

        It seems to me that today’s Germany is a more nationally robust place and selling a narrative that it’s current “success” is in some part (from their perspective) due to them benefitting from an artificially low euro is expecting a lot.

  2. David Lazarus says

    Germany has also benefited immensely from the euro in that because of the inherent weaknesses of the PIIGS it has kept the euro low and allowed them to maintain exports. The fact that a lack capital of capital controls has meant that excess funds can flow out of Germany and inflate bubbles everywhere else has also helped, it also stopped them from addressing the imbalances within the German economy.

  3. roger erickson says

    Jedku nails it, in a comment on a cross-posting.

    It’s the usual scaling problem. Trying to scale tactics, instead of strategy & net operations simply doesn’t scale. :) At our current population level everyone should learn the following by 3rd grade: “Tune the damn system, NOT just the components.”

    jedku comment [comments mine]

    “I am surprised by how many commentators here feel that the smaller countries are at fault. It has long been discussed on the continent that the EU has been a devil’s deal.
    French and German companies would expand their markets into the periphery states and crush local national industries in markets for everything from cookies to automobiles both by dint of their greater capital and newer factories AND by the fact that they write EU regulations (safety, environment, labor, etc) to benefit large companies and penalize backward factories in the former eastern block and the mediterranean. In exchange, smaller countries would receive huge investments, subsidies and the euro in which to issue their bonds, in other words “free money.” I traveled in southern italy, hungary, greece and everywhere was signage advertising that the EU was paying for this or that improvement, development, etc. What the periphery got for EU entry was a bubble created by the free money.

    Germany and France were truly predatory and did not think things through for the long-term. [Amen. Can he get a witness?]

    They got their expanded markets, but now they carry the costs of the trade imbalance too.

    Morally, I think all parties are culpable only of following their short-term interest [bingo], which is not uncommon in free-markets.

    My point is that this relationship has been known and discussed for a decade on the continent.”

    [rge: Knowing & discussing is not the same as exploring & solving.]

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