Germany could be the first to leave the Euro
When Angela Merkel paid a rare visit to 10 Downing Street last week she said that Britain outside the EU would be “alone in the world”. But few countries are as alone as Germany at the moment having alienated most of the members of that Euro-State which Mrs Merkel and her predecessors have constructed over the last 60 years. The abject economic and political failure is plain to see and now even the German economy is in dire straits.
There is a myth that Germany has benefited enormously from the Euro. This is true for German industry, German exports and for the increase in German power across Europe but for the domestic German economy the picture is rather different.
Germany’s growth rate since the Euro was launched in 1999 has been poor. At 1.4% pa it is less than the UK and even below Spain and Ireland. Consumer spending has grown since 1999 by only 10% compared to 30% in the UK and the USA, the reason being that over the last 13 years German workers’ average real incomes have fallen by 4% as the State forced down costs to compete at the lower rate adopted for the Deutschmark against the Euro. The results are what I saw when I visited relatively rich parts of Germany – Fulda, Mainz and the Rheinland – in 2011 – run down railway stations, vagrants and empty shops on the high street.
German exports have been a great “success” with a massive balance of payments surplus of 6% of GDP but unfortunately they have for a lot of that work nothing better than IOUs from the bankrupt Mediterranean Euro members and a total exposure of over 1 trillion Euros to those countries. This farce cannot continue – but it will because the “rescues” of Greece (ie driving into impossible debt, depression and social break up) are necessary not to save Geeks but to save the German and French States and their banks and the horrendous losses sustained by the German people must not be revealed until Mrs Merkel has won another election (in the autumn of 2013).
Germany’s success in productivity is ironically due NOT to GDP per head growing but to wages falling relative to production. So Germany is left with poor consumers at home and poor consumers abroad who can’t afford to pay their debts to Germany.
Compared to the bankrupt Euro members Germany has been successful but compared to what Germany was with the Deutschmark and compared to non Euro countries it has been a failure. The German political class was prepared to sacrifice economics for political control – but now the costs are too high. As I have long predicted Germany will leave the Euro just as Russia left the Soviet Union – because nowadays empire is too expensive! By autumn 2012 the waves of economic failure in the rest of the Euro-zone were not just lapping at Germany’s shore they were flooding the foundations of the German economy. In September German industrial production fell 1.8% and orders fell 3.3%. The rapid slide has begun. Germany should leave the Euro for three reasons: the entire concept is flawed, the German economy will collapse if it remains and the weaker countries should be left with a weaker Euro as a base for devaluing their debts and returning to their domestic currencies.
When Roger Bootle, The Daily Telegraph columnist and winner of a prize for solving the EU crisis, spoke at a meeting in Germany he found the Germans angry with the United Kingdom for avoiding the Euro disaster. He writes (1st October 2012): “There were three marked strands to their Anglophobia: the British were complicit in attempts to undermine the Euro through the activities of the City of London; they were avoiding a full contribution to the cost of European development; and we did not deserve to be taken seriously because “we did not produce anything any more”.
In other words those who did not sail on the Titanic were “undermining the shipping line”, those who make a market in finance are responsible for the foolishness of those who borrow and should pay for the bankruptcy of the borrowers’ foolish projects and the British economy is not in the same crisis only because we are weak! In fact the UK produces more manufactured goods as a % of GDP than France and we are at the centre of the largest group of linguistically, legally and commercially linked countries in the world – the economically growing British Commonwealth plus the USA.
During 2012 the value of UK exports to Brazil, Russia, India and China rose from 3.0% of exports to 8.1% while exports to the EU fell from 52% to 45.3% (and even this figure is severely distorted by EU practice). Between 1973 (when Britain joined the EU) and 2012 the Commonwealth (excluding the UK) share of world trade rose from 10% to 15% while the EU share of world trade (excluding the UK) fell from 27% to 17% with further falls expected as the Euro drives most of its members back to the dark ages.
Bootle seemed surprised that “Anglo Saxon” seemed a term of abuse among his German hosts. What a sheltered life Bootle (and other British economists and political commentators) live! In France and Germany during the fascist 1940s Anglo Saxon was always a term of contempt and things are little different today – because the continent’s alternative philosophy is little different today. It remains Euro-nationalist, corporatist, protectionist, imperialist, anti British and anti American.
Plus ca change plus c’est la meme chose!
