A real eurozone worry

By attempting to address the long-term problem before the immediate one, Germany has chosen a curiously back-to-front approach to the crisis. Ah, say the markets, but that\’s how the Germans like it. They want the cart before the horse. Once the cart is in place, then they can start talking about the horse.

That\’s the assumption, but what if Ms Merkel means what she says? What if she actually believes that budget discipline and structural reform alone are enough to solve the eurozone\’s problems? Crazy though this might seem, that\’s the implication of the rhetoric.

Yes, what if she (and they) really do believe this?

What then?

17 thoughts on “A real eurozone worry”

  1. Many fail to grasp the German psyche. The British worshipped real estate so much so that the UK is in the toilet since the housing bubble crash.

    Germany? No real estate bubble, fairly flat prices for 30 years.

    Yeah yeah, I know that doesn’t give much insight but at least a hint.

  2. @Super Sam,

    Well, at least the Brits were silly enough to invest in their own housing bubble, meaning that although the economy is in the toilet an awful lot of people are still sitting atop the pile of bricks they invested in. The Germans invested in American real estate, stuff they’d never even seen and in all likelihood never even got built.

  3. “sitting atop the pile of bricks they invested in” .. overpriced bricks.

    Sure the German banks bought too much USA RMBS (who else didn’t?) but then who rated them AAA and palmed them off to stupid suckers?

    Fannie & Freddie should be #Jeremy Clarson’d

  4. Lets be honest, austerity in other countries might be the soultion as far as the Germans are concerned. Whether its the solution for those other countries is a different matter all together.

  5. Agree with Serf, I must have missed the bit where it said everybody’s economy should be run for the benefit of the Germans

  6. Dunno why Germany doesn’t just cut loose the PIIGS. I think Merkel is putting the shittiest cards on the table so that cutting loose the PIIGS will seem a lesser evil. She has to get the pro eurounion lefties on her side and it’s worked so far (approval rating up to 63% from low 40’s).

    So far she has played a good hand – look at the USA moving in fast with swap lines lol.

  7. Bismerckel is, I suppose, jigging around to find the best advantage for Mrs M. Or, given the repeated hints of hesitation, perhaps I should say strathspeying around. Let’s hope she’s not reeling around.

  8. Just to say, Merkel is an extremely intelligent & educated woman compared to the silver spooned PPE Cameroid.

    Disclaimer: I am am 1/2 German

  9. There is another problem: they are not going to get their cart before everybody that is waiting to travel in it has died from old age. They need a new treaty which will put the fiscal transfers and fiscal oversight in place which the Euro always needed. This is going to take at least a year, and then the treaty has to get ratified. Ireland has to have a referendum due to their constitution. When asked whether they want to become vassels to the EU forever or whether they want to give the political elite a good kicking and maybe get a better deal they could well vote ‘No’. This treaty will also require changes to German basic law and so that could require a referendum there. They will be asked whether they want to subsidise the rest of the EU forever or not, and could well also vote ‘No’. If the Greeks or Italians get a vote they could vote ‘No’ as a way of protesting against the austerity imposed by their unelected rulers. There is a general anti-elite mood at the moment which could lead to a no vote anywhere that is given the chance, and all it takes is one ‘No’ to make them have to start again. With the third largest economy in the Eurozone is on the edge of a debt induced death spiral they simply do not have enough time for all of this.

  10. The rulers have no intention of going the treaty route.

    They are going to magic up some way of fiscal union without anyone unpleasant being allowed to vote on it. Can’t risk that.

    Don’t know how they are going to do it, but it will probably be on the back of a frenzied media PR storm about how “if-we-don’t-do-it-we-will-all-be-eating-turnips-in-the-street-by-next-xmas”.

    They intend to railroad it through, somehow.

  11. I agree with Stuck-Record above. The Euro-fanatics ‘solution’ will undoubtedly be illegal, by the strict reading of whatever laws apply, but it will be railroaded through, and they will defy anyone to try and stop them. And of course no European Court would uphold the law if it meant the destruction of the Euro and potentially the EU as it is constituted today. So the whole thing will stagger onwards for a while longer, unless the markets call the Eurocrats bluff sooner rather than later.

  12. “sitting atop the pile of bricks they invested in” .. overpriced bricks

    For sure. But a pile of bricks is a pile of bricks, overpriced or not. For most people, provided they can cover the mortgage or don’t have to sell, this isn’t a problem. Paying over the odds for your own house is one thing, paying over the odds for somebody else’s is something else.

  13. Isn’t Murky’s position the equivalent of telling a fat person not to eat so many pies or a drug addict to slow down on their cocaine use?

  14. If Merkel really believes that fiscal austerity alone will fix the Eurozone problem then she’s economically illiterate and her advisers should be Clarkson’d. ECB bond-buying followed by Euro bonds is the best option for GERMANY, because the collapse of its main export market would be disastrous for its economy. How on earth Merky thinks that Germany can remain prosperous while the rest of the Eurozone goes to hell is beyond me.

  15. Incidentally aren’t the Krugmans of this world telling us to provide more pies for the fatties, even if they are filled with used Chinese newspapers and rat gristle, or drug addicts with more cocaine even if it’s watered down with brick dust and benefiber?

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