Whatever Germany does, the euro as we know it is dead

[Sol Invictus]

By Jeff Randall
Published: 7:56PM BST 20 May 2010

"Money can't buy you friends, but it does get you a better class of enemy" –

-Spike Milligan

For Angela Merkel, leader of the eurozone's richest country, a queue is forming of high-quality adversaries.

As she tips German Geld und Gut into the furnace of a rescue package for the euro, while going it alone in a misguided ban on market "manipulators", the brass-neck Chancellor has infuriated domestic voters, angered her EU partners (in particular the French) and invited the so-called wolf pack of global traders to do its worst.

In one respect, Mrs Merkel is right: "The euro is in danger… if the euro fails, then Europe fails." What she has not yet admitted publicly is that the main cause of the single currency's peril appears beyond her control and therefore her impetuous response to its crisis of confidence is doomed to fail.

The euro has many flaws, but its weakest link is Greece, whose fundamental problem is that for years it spent too much, earned too little and plugged the gap by borrowing in order to enjoy a rich man's lifestyle. It flouted EU rules on the limits to budget deficits; its national accounts were a moussaka of minced statistics, topped with a cheesy sauce of jiggery-pokery.

By any legitimate measure, Greece was unworthy of eurozone membership. That it achieved card-carrying status was down to the sleight-of-hand skills of its Brussels fixers and the acquiescence of central bank bean-counters. Now we know the truth, jet-hosing it with yet more debt makes no sense. Another dose of funny money will delay but not extinguish the need for austerity.

This is why the euro, in its current form, is finished. The game is up for a monetary union that was meant to bolt together work-and-save citizens in northern Europe with the party animals of Club Med.

No amount of pit props from Berlin can save the euro Mk I from collapsing under the weight of its structural dysfunctionality. You cannot run indefinitely a single currency with one interest rate for 16 economies, when there are such huge fiscal disparities.

What was once deemed unthinkable is now, I believe, inevitable: withdrawal from the eurozone of one or more of its member countries. At the bottom end, Greece and Portugal are favourites to be forced out through weakness. At the top end, proposals are already being floated in the Frankfurt press for a new "hard currency" zone, led by Germany, Austria and the Benelux countries. Either way, rich and poor are heading in opposite directions.

When asked on Sky if, in five years' time, the euro will have the same make-up as it does today, Jeremy Stretch, a currency analyst at Rabobank, the Dutch financial services giant, told me: "I think it's pretty unlikely." The euro was a boom-time construct. In the biggest bust for 80 years, it is falling apart.

Telegraph loyalists with long memories will be shocked by none of this. In 1996, Sir Martin Jacomb, then chairman of the Prudential, set out with great prescience in two pieces for The Sunday Telegraph why a European single currency, without full political integration, would end in disaster. His prognosis of the ailments that might afflict the eurozone's sickliest constituents reads as if it was penned to sum up today's turmoil.

"A country which does not handle its public finances prudently will find its long-term borrowing costs adjusted accordingly," Sir Martin predicted.

"Although theory says that default is unlikely, nevertheless, a country that spends too much public money, and allows its wage costs to become uncompetitive, will experience rising unemployment and falling economic activity. The social costs may become impossible to bear."

http://www.telegraph.co.uk/finance/comment/jeffrandall/7746806/Whatever-Germany-does-the-euro-as-we-know-it-is-dead.html

[ikki]

16 economies being this hard, try 50... well.. we can see the result, all funded by massive borrowing.. 3 bilions a day...

Their kind of economy and wealth is about printing money, importing chinese stuff and selling that chinamade stuff to eachother, and with silly high prices calling themselves hardworking rich and prosperous.

[Eldritch]

I say bring it on. The sooner the whole house of cards collapses the better. It's not as if it can be avoided.

[Svanhild]

The game is up for a monetary union that was meant to bolt together work-and-save citizens in northern Europe with the party animals of Club Med.
That's the essence of the truth. The Club Med countries shouldn't belong to a monetary union of the more powerful Northern European countries. The economical and cultural differences are too large.

I hope the Euro fails and we see our strong D-Mark again.

[Cynodon]

I'd say it's likely to be the exact opposite. Greece's economical collapse would have been the Trojan horse of a European economic gvt.

[Fortis in Arduis]

I'd say it's likely to be the exact opposite. Greece's economical collapse would have been the Trojan horse of a European economic gvt.

Please tell me what I missed there. :rolleyes2:

[poiuytrewq0987]

I think with the inevitable demise of the Euro will force Rompuy's hand to exercise his powers as per the Lisbon Treaty. Whether this will be done remains to be seen.

[poiuytrewq0987]

That's the essence of the truth. The Club Med countries shouldn't belong to a monetary union of the more powerful Northern European countries. The economical and cultural differences are too large.

I hope the Euro fails and we see our strong D-Mark again.

The mark (http://www.bloomberg.com/invest/calculators/currency.html) was inferior to the US dollar and continues to be that way today. It was only with the currency unification of Europe that the Euro managed to overtake the US dollar. The collapse of the Euro would only strengthen the US dollar, and inevitably, America on the world stage.

[SwordoftheVistula]

The mark (http://www.bloomberg.com/invest/calculators/currency.html) was inferior to the US dollar and continues to be that way today. It was only with the currency unification of Europe that the Euro managed to overtake the US dollar. The collapse of the Euro would only strengthen the US dollar, and inevitably, America on the world stage.

Like the Japanese Yen and the Swiss Franc, the DM was never supposed to trade to the dollar at a 1-1 ratio, so it was still 'stronger' in that we had less purchasing power there than they did here.

As to the 'reserve currency' thing, people put their wealth in the currency they think will be the most stable. An independent DM would probably be seen as more stable without the 'club med' than with it, at this point.

[poiuytrewq0987]

Like the Japanese Yen and the Swiss Franc, the DM was never supposed to trade to the dollar at a 1-1 ratio, so it was still 'stronger' in that we had less purchasing power there than they did here.

As to the 'reserve currency' thing, people put their wealth in the currency they think will be the most stable. An independent DM would probably be seen as more stable without the 'club med' than with it, at this point.

I don't think so. The collapse of the Euro can cause damage to the successor currencies' credibility. From that point, the US dollar would be seen as the best investment over other currencies.

[Groenewolf]

Finally, the Euro is going down.


I think with the inevitable demise of the Euro will force Rompuy's hand to exercise his powers as per the Lisbon Treaty. Whether this will be done remains to be seen.

Maybe he will, maybe he won't. However it is possible that the Eurocrats will make some desperate measures to save this symbol of their "succes". We already have heard what kind of blackmail Sarko did towards Merkel. How know what more will come out of their sleaves.

Let's say we are luckly they do not have a real euro-military yet. Or NATO has to come to the rescue. But that remains to be seen, since a weaking Euro could be in de benefit of the USA. So if it comes down to military action they got that paramilitary riotpolice unit and maybe French troops at their disposal, but little more.

However this could be a very good time for EU-sceptic parties in those countries that are on the paying end where there are elections soon to make a strong push. If they want to seize the opportunity.

[Liffrea]

Originally Posted by Cynodon
I'd say it's likely to be the exact opposite. Greece's economical collapse would have been the Trojan horse of a European economic gvt.

It’s possible, certainly the power houses of the EU (Germany and France) have two options, let the Euro die or attempt to enforce what will be the culmination of the European state.

We know which they favour because Angela Merkel has spent the last few weeks attempting to bring the EU project to its intended conclusion, full EU statehood with “member states” becoming little more than provinces.

The wise turn the bad into an opportunity its Germany’s game now, just as Kohl said at the beginning of the Euro in 1999, Germany is the heart of the EU project, how bad do the German elite want it?

For my money I don’t expect to see the Euro die, I expect to see the EU become what was always intended.

[Svanhild]

The collapse of the Euro would only strengthen the US dollar, and inevitably, America on the world stage.
The US economy has serious problems as well. http://www.huffingtonpost.com/laurence-j-kotlikoff/is-the-us-in-worse-fiscal_b_559318.html

Our DM was never meant to follow the US-$ 1:1. It was the most valued strong and stable currency in Europe and more popular than the British pound.

[poiuytrewq0987]

The US economy has serious problems as well. http://www.huffingtonpost.com/laurence-j-kotlikoff/is-the-us-in-worse-fiscal_b_559318.html

Our DM was never meant to follow the US-$ 1:1. It was the most valued strong and stable currency in Europe and more popular than the British pound.

The US produce enormous wealth whereas Greece don't. The US's GDP is $14 trillion compared to Greece's tiny economy of $300 billion. The larger your economy is, the more flexible you can be with debt size. Greece don't realistically produce enough wealth for it to be flexible with debt... just as you wouldn't trust a friend who is barely scraping by with enormous amounts of money because it would be pretty difficult for your friend to pay back what he owes. It's not the case with the US, yes, it has a huge debt but the amount of wealth it produces is more than enough to finance that debt. It is the only reason why the US has been allowed to take on large amounts of debt and others be okay with it. Yes, the amount of debt the US hold is certainly a concern but it's not the impending doom as some may make it out to be.

[The Lawspeaker]

The US produce enormous wealth whereas Greece don't.
They used too- the factories moved to China and other countries with low wages. I personally can't remember the last time I saw something marked as "Made in the USA".

[poiuytrewq0987]

They used too- the factories moved to China and other countries with low wages. I personally can't remember the last time I saw something marked as "Made in the USA".

The US may don't make cheap junk anymore, regardless the US is still manufacturing (http://en.wikipedia.org/wiki/Economy_of_the_US#Manufacturing)a lot of goods.

[Cato]

Time to go back to the greenback for all you Euros!

http://images.encyclopediadramatica.com/images/4/47/Madoffbill.jpg

[ikki]

The US may don't make cheap junk anymore, regardless the US is still manufacturing (http://en.wikipedia.org/wiki/Economy_of_the_US#Manufacturing)a lot of goods.

Such as?

Subsidised cars noone wants to buy?
Ships? Nope..
Steel? Some, but considered 3rd rate quality..
Paper, lumber, cement? Also not of any significant amounts.

[poiuytrewq0987]

Such as?

Your post is definitely facepalm-worthy.



Subsidised cars noone wants to buy?
GM Posts First Quarterly Profit Since 2007 (http://www.foxnews.com/leisure/2010/05/17/gm-posts-quarterly-profit/)

Gee, I wonder how was that possible if no one bought their cars?


Ships? Nope..

Commercial ships being built (http://shipbuildinghistory.com/today/statistics/shipprograms.htm)

Military ships being built (http://shipbuildinghistory.com/today/statistics/navyprograms.htm)

While it's true that not a lot of ships are built today in the US but it is a thing that has always been dominated by East Asian countries. The US mostly build military ships for the US Navy nowadays but that's not necessarily a bad thing.



Steel? Some, but considered 3rd rate quality..
And China must make the highest quality steel, right? :laugh:


Paper, lumber, cement? Also not of any significant amounts.Really? What part did you miss? The US (http://en.wikipedia.org/wiki/Economy_of_the_United_States#Manufacturing) alone still is the largest manufacturer of goods in the entire world.

It's pointless to deny the facts, the US manufacturing base may have shrank significantly but even with the shrink, it is still the largest.

[Wulfhere]

If the euro collapses this will benefit the pound - which, given that it's by far the oldest currency still in existence, has also proved to be the most stable. In all that time, over 1200 years, the pound has never collapsed and had to be revalued - as the German Mark did in the 1920s, for example.

[Treffie]

The US may don't make cheap junk anymore, regardless the US is still manufacturing (http://en.wikipedia.org/wiki/Economy_of_the_US#Manufacturing)a lot of goods.

In Europe, American cars are frowned upon because they're seen as inferior.

[Eldritch]

In Europe, American cars are frowned upon because they're seen as inferior.

Perhaps not as much inferior as overpriced/hyped and fuel inefficient?

[mustangeroo]

In Europe, American cars are frowned upon because they're seen as inferior.

Inferior to what? Volkswagen and BMW maybe. But it seems that Ford is just as popular in Europe as Volkswagon. I have seen tons of Fords all over the UK and France. Especially the Ford Fiesta, Focus, Ka, and Mondeo. Skodas, Renaults, Peugots, Fiat, and the such seem inferior to equitable Ford models. I see lots of Vauxhalls. They are built by GM. I've also seen Opels on the road. Thats also built by GM. Saab was owned by GM until fairly recently. Don't see as many of those on the road as I thought I would. Volvo is owned by Ford at the moment. I've seen Mazda on the road. That was controlled by Ford until fairly recently. Seems American cars are alive and well in Europe.

I see surprisingly less Japanese and Korean cars on the roads of the UK than I saw in the States. Definitely see more BMWs and Audis on the road here than in the USA. Crazy thing is that Europeans seem to love the hatchback. You could never get the average American to buy a BMW hatchback, but you see them all the time here.

[Cato]

I drive a Toyota, so I've got no comment on American vs. European cars. :D

[Falkata]

Such as?

Subsidised cars noone wants to buy?
Ships? Nope..
Steel? Some, but considered 3rd rate quality..
Paper, lumber, cement? Also not of any significant amounts.



http://www.microsoft.com/en/us/default.aspx
http://www.coca-cola.com/index.jsp
http://www.boeing.com/
http://www.jnj.com/connect/
http://www.exxon.com/USA-English/gFM/home_Contact_Us/homepage.asp
http://www.pg.com/en_US/index.shtml

[Ulf]

Whatever Germany does? I think some land reclamation is in order.

FOR THE PRESERVATION OF OUR REICH!

[Ulf]

In Europe, American cars are frowned upon because they're seen as inferior.

The Ford Focus is the UK’s most popular car for the tenth consecutive year with more than 100,000 sold in 2008.

In total, 101,593 Focuses were sold in the UK with the Vauxhall Corsa the second biggest seller – shifting 99,574.

Third place in the list went to the Ford Fiesta with the Vauxhall Astra and VW Golf making up the top five

Source (http://www.autotrader.co.uk/EDITORIAL/CARS/news/NEWCARS/49771.html)

[Falkata]

It´s true that, except Ford (and just a few models, usually cheap ones), the rest of american cars are not popular in Europe. I see tons of BMW, Mercedes, Peugeot, Citroen, Volkswagen, SEAT, Audi... and even asians like Honda or Skoda but in a lesser ammount

[Eldritch]

... and even asians like Honda or Skoda but in a lesser ammount

But Škoda (http://en.wikipedia.org/wiki/%C5%A0koda_Auto) aren't Asian. ;)

http://upload.wikimedia.org/wikipedia/en/thumb/7/76/%C5%A0koda_logo.svg/145px-%C5%A0koda_logo.svg.png

[OneWolf]

Actually the American Dollar being worth less than the Euro has been good
for business in the U.S..Think about it,goods manufactured in America are
way cheaper right now than goods made in Europe.
And whoever said that nobody wants are second rate cars needs to rethink
that suggestion.It seems that Europeans are buying are Automobiles at a
record pace because the Dollar is worth less than the Euro.

[Falkata]

But Škoda (http://en.wikipedia.org/wiki/%C5%A0koda_Auto) aren't Asian. ;)

http://upload.wikimedia.org/wikipedia/en/thumb/7/76/%C5%A0koda_logo.svg/145px-%C5%A0koda_logo.svg.png

My bad, I had no idea lol I´ve always put them in the group of cheap asian cars with Daewoo, SsangYong...
But well, what i wanted to say is that you hardly see american cars around here, except shitty Fords. There´s no place for musclecars and pickups in Europe :p

[Ulf]

My bad, I had no idea lol I´ve always put them in the group of cheap asian cars with Daewoo, SsangYong...
But well, what i wanted to say is that you hardly see american cars around here, except shitty Fords. There´s no place for musclecars and pickups in Europe :p

We'll be glad to keep making them sub-par if you'll continue to keep buying them. :thumbs up $$



:rolleyes:

[Falkata]

We'll be glad to keep making them sub-par if you'll continue to keep buying them. :thumbs up $$



:rolleyes:

thanks, but i´ve never bought one. Anyway when i´ve said "shitty" i meant cheap/low standard cars like the Fiesta or Ka models. Expensive Ford models (or expensive american cars in general) have no market in Europe, since people prefer to buy BMW,Mercedes, Jaguar, Audi,Porsche, Masseratti,Aston Martin, Ferrari...
Why so offended anyway? Are you a Ford engineer? Maybe an important shareholder? I dont understand why people take it so seriously when somebody criticise a company of their country. Business-nationalism? :confused:

[poiuytrewq0987]

I think it's pretty ridiculous to say that American cars are inferior than European cars. There's no discernible difference in quality between both continents' vehicles. What quality difference is minimal, and it is solely an image problem than a quality problem.

[SwordoftheVistula]

Depends on what you're talking about. The best cars in the world come from Europe, and nowhere else has anything that can compare: Ferrari, Porsche, Lamborghini. BMW & Land Rover are good as well. The average European however does not drive one of these, and the average quality of vehicle on the road there is well below the average quality of vehicle on the road here (if they even own a car).

[poiuytrewq0987]

Depends on what you're talking about. The best cars in the world come from Europe, and nowhere else has anything that can compare: Ferrari, Porsche, Lamborghini. BMW & Land Rover are good as well. The average European however does not drive one of these, and the average quality of vehicle on the road there is well below the average quality of vehicle on the road here (if they even own a car).

Quite precisely.

[Falkata]

Depends on what you're talking about. The best cars in the world come from Europe, and nowhere else has anything that can compare: Ferrari, Porsche, Lamborghini. BMW & Land Rover are good as well. The average European however does not drive one of these, and the average quality of vehicle on the road there is well below the average quality of vehicle on the road here (if they even own a car).

Well, it depends. BMW, Audi and Mercedes are pretty common, there are many different models. Audi A3 or BMW Serie 1 (my sister has one and she´s 20) are popular between the young people.

[Svanhild]

I think it's pretty ridiculous to say that American cars are inferior than European cars. There's no discernible difference in quality between both continents' vehicles.
There is and most Europeans value European cars much more than American cars. If you exclude Ford, there's hardly any American car developer present on European streets. Buick? Nothing. Cadillac? Nothing. Chevrolet? Almost nothing. GMC? Nothing. Dodge? Nothing. Lincoln? Nothing. Mercury? Nothing. GEM? Nothing. Ram? Nothing. IC? Nothing. Kenworth? Nothing.

Opel is a traditional german car developer bought by GM but almost entirely independent in development of cars.

Europe is dominated by European and Japanese cars. US cars have a bad reputation and the other main difference is the issue of automatic cars. North Americans drive cars with an automatic gear. Most Europeans drive manual.

Most common cars in Europe are BMW, VW, Audi, Mercedes, Toyota, Mazda, Fiat, Skoda, Ford, Citroen, Peugeot, Seat and Mitsubishi. :wink

[poiuytrewq0987]

There is and most Europeans value European cars much more than American cars. If you exclude Ford, there's hardly any American car developer present on European streets. Buick? Nothing. Cadillac? Nothing. Chevrolet? Almost nothing. GMC? Nothing. Dodge? Nothing. Lincoln? Nothing. Mercury? Nothing. GEM? Nothing. Ram? Nothing. IC? Nothing. Kenworth? Nothing.

I disagree. Most American manufacturers are not successful in Europe because most Europeans aren't interested in large vehicles. However the smaller American cars such as the Fiesta (http://en.wikipedia.org/wiki/Ford_Fiesta#Popularity) has been resoundingly successful because it appealed to the European market.


Opel is a traditional german car developer bought by GM but almost entirely independent in development of cars. Dunno. Regardless, the Americans profit from Opel, so... :coffee:


Europe is dominated by European and Japanese cars. US cars have a bad reputation and the other main difference is the issue of automatic cars. North Americans drive cars with an automatic gear. Most Europeans drive manual.Yes, the image is a problem conjured by imaginary problems. A lot of Europeans do drive manual because they find it too hard to drive automatic (or can't afford to pay extra for an automatic transmission). :p


Most common cars in Europe are BMW, VW, Audi, Mercedes, Toyota, Mazda, Fiat, Skoda, Ford, Citroen, Peugeot, Seat and Mitsubishi. :winkEuropean cars common in Europe, big surprise there!

[Falkata]

Yes, the image is a problem conjured by imaginary problems. A lot of Europeans do drive manual because they find it too hard to drive automatic (or can't afford to pay extra for an automatic transmission). :p


Hard? :confused: It´s more like the opposite. My father has an automatic (european) and i could drive it even being drunk as hell. Just break and accelerate, like a videogame.
And in general, euro cars have a more developed technology (a cheap Citroen has tons of extras, like the stop-start system) this is, smaller engines who offer the same HP than enormous american ones, which means less consume, noise... As an example, a Ford Mustang 2010, has a 4.0 V6 engine with 210HP. An Audi A3 2.0 or a TT 2.0 have 200HP with 2000cc less than the american one.
It´s called efficiency

[SwordoftheVistula]

The Vauxhall (GM) models are based on American ones.

The medium-high end vehicles from here aren't popular in Europe because of high fuel taxes, meaning Europeans have to drive small cars. The Ford F-Series and the GM Silverado & its various clones (F-series is most popular car here, Silverado also is near top), also vehicles like the Escalade and Lincoln Navigator are basically nonexistent in Europe for this reason

[Svanhild]

The medium-high end vehicles from here aren't popular in Europe because of high fuel taxes, meaning Europeans have to drive small cars.
Not necessarily small cars but fuel-saving cars. American middle- and high-class cars need more fuel than European cars. German roads are full of medium- and high end vehicles: BMW 5er, 6er or 7er. Audi A4 up to A8. Mercedes, et cetera. :wink

[SwordoftheVistula]

BMW is good, but Audi is nothing special, and Mercedes has slipped a lot in the past decade or so. At any rate, I didn't see all that many of those on the road in Europe, not that much more than here, most of the vehicles being junky little Citroens, Opels, Fiats, Peugots, Fords, and Vauxhalls.

[Monolith]

As much as I would like to see Euro crash and burn, I'm afraid it isn't going anywhere any time soon. It's too important for the EU imperialists, being one of the columns of their project. It's also instrumental for powerful Europe-based companies because they can operate without transfer costs between various European markets. The Euro might depreciate tough, which will probably lead to the increase of exports from the Eurozone countries, considering it's cheaper for foreigners to buy European goods if they can suddenly get more European currency for one unit of their own.

The mark (http://www.bloomberg.com/invest/calculators/currency.html) was inferior to the US dollar and continues to be that way today. It was only with the currency unification of Europe that the Euro managed to overtake the US dollar. The collapse of the Euro would only strengthen the US dollar, and inevitably, America on the world stage.
Actually, like someone already pointed out, it's often beneficial for a country's currency to be less valuable, in comparison to other nations' currencies. Take pre-Euro Italy, for example. Their Lira was often intentionally depreciated in order to make their economy more competitive.

They used too- the factories moved to China and other countries with low wages. I personally can't remember the last time I saw something marked as "Made in the USA".
Neither can I. If I remember correctly, the USA moved most of their heavy industry abroad (roughly 30% of their GDP at the time). However, the increase of their tertiary sector was disproportionally larger.

[Truth Seeker]

My friend with an import car said his repair costs were expensive because it wasnt american and not common. His new car is american.

[SwordoftheVistula]

Depends on what type. The Japanese cars are pretty common