Marshall Auerback on Germany’s divorce with the eurozone…
What happens if Germany decides it wants its money back? If aggressive fiscal policy isn’t the answer, things could get ugly.
Like marriage, membership in the euro zone is supposed to be a lifetime commitment, “for better or for worse”. But as we know, divorces do occur, even if the marriage was entered into with the best of intentions. And the recent turmoil in Europe has given rise to the idea that the euro itself might also be reversible and that one or more countries might revert to national currencies.
As far as the European Monetary Union goes, the prevailing thought has been that one of the weak periphery countries would be the first to call it a day. (In Ireland’s situation, one could make a good case for it on the grounds of persistent spousal abuse.) It may not, however, work out that way: all of a sudden, the biggest euro-skeptics are not the perfidious English, but the Germans themselves. Take a look at these headlines (kindly drawn to my attention by James Aitken of Aitken Advisors, LLP): “Germany and the euro: We don’t want no transfer union” on The Economist, “Jenkins: Where Are the Business Europhiles Now?” on WSJ.com, and even a book by Hans-Olaf Henkel, formerly of IBM (Germany) and hitherto one of Germany’s great euro-enthusiasts (English translation), “Return our Money“.
So let’s consider what happens if Germany decides to follow Herr Henkel’s advice. (link to article to find out)
