Ganging up on the Germans
The common currency Euro is in a bit of a mess. Ever since the austerity measures were introduced, southern European nations in the European Union (EU) have had to swallow the bitter pill of 'austerity.' Social benefits took a hit and thousands lost their jobs. Unfortunately, such bleak measures have not worked out too well for countries like Greece, one of the countries that are hammering for debt cancellation. Germany, the strongest economy in the Union is now under collective fire for having pushed the “austerity agenda.”
It is interesting to note that according to some international media outlets that Germans apparently never wanted to be part of the Euro! Whether that is true or not we will probably not know unless put to a plebiscite. Despite the safeguards, checks and balances put on governing the Euro: “Fiscal and monetary transfers between nations were specifically banned, and rules were put in place that would supposedly ensure fiscal discipline. None of them has proved equal to the task, and none of them is ultimately compatible with a single currency that actually works.”
Like the United States, Europe too has resorted to printing its way out of recession, a move strongly opposed by Germany's Bundesbank. The number of countries that have been openly critical of German policy started with the Greeks and now joined by Mark Carney, Governor of the Bank of England, which has openly attacked the policy. Ironically, Britain is not part of the 'Euro' regime. Besides the Greeks, the Spaniards and Italians are not too happy with Bundesbank either. To top it all off, a win by the “We Can” in Spain to Syriza's victory in Greece isn't going to help the German blitzkrieg.
As pointed out in the Economist article 'Charlemagne: Greece and its discontents:' “The ascendancy of Syriza is spreading political fears in two related ways. The first, much fretted over in Berlin and Brussels, is that Greece's euro-zone partners may feel obliged to offer Mr. Tsipras goodies as a 'reward' for his victory, weakening the hand of reformers in other countries. Such concerns may indeed mean that Mr. Tsipras finds it harder than his predecessors to win concessions. The second is that his victory will embolden Podemos and similar parties elsewhere. Spain and Portugal hold elections later this year; Ireland no later than April 2016. Today polls suggest that the anti-austerity parties will do well in all three.” What we gather from the article is that voters across the union are disenchanted with mainstream parties to deliver them from the Euro crisis and are increasingly willing to vote for, what had hitherto been common understanding “fringe” parties. So where does that leave Germany? If things continue the way they have been, the Euro may well be doomed.
With so much haggling going on what works and what doesn't, it will be interesting to see how Germany plugs the hole in the Eurozone. As pointed out by The Telegraph in a recent article “From the start of the crisis it has been obvious to all dispassionate observers that it can only really end in two ways. Either the eurozone must move rapidly towards the sort of transfer union which Germany has spent the last 15 years resisting, or it must be reconstituted in more sustainable form that is the monetary separation of Germany and its satellites from the less competitive south, arguably including France. European elites have been in a state of denial about this choice, with their response to the crisis characterised by grudging incrementalism. There are too many egos, too many careers and too much vested interest bound up in it all to admit reality.”
Rather a gloomy picture. But there it is. With Greece and Spain going radical left with support from unlikely allies on the far right, it will be interesting to see whether Eurozone will survive in the long run. And anti-austerity policies being hugely unpopular in economies less advanced than Germany's, the ones who have been hardest hit by policies perceived to be formulated largely in Berlin will find no favour and the people of these countries will be looking for someone to blame.
The writer is Assistant Editor, The Daily Star.
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