Originally Posted by T88
Can you provide an example of such a utopian state? Germany, the only economically sustainable nation in Europe, major German firms like Siemens all have trade union leaders as supervisory board members
If the Euro goes down Germany is in a world of incredible pain, far more than Greece or Italy.
The reason for this is that German "efficiency" is largely the result of a severely deflated currency. The Euro represents a package of national currencies, the Greek Drachma, the German Mark, the French Franc etc. But because it is a single currency the natural market forces of currency fluctuation depending on the issuing nation's fiscal policies is severley restricted, the currency must reflect the Euro zone as a whole. Thus the weaker economies such as Greece have long had an effectively
inflated currency as the Drachma would normally have fallen in line with their inefficiencies whilst the stonger economies, and Germany is certainly the strongest, have benefitted from a currency that is effectively
weaker than that which they would have if their national currency, the Mark, was floated. In short, the Euro represents an average, those above the average get the benefits of an artificially devalued currency at the expense of those below the average who have to live with the consequences (ability to borrow short term thus creating a debt trap as well as reduced competitiveness making it hard to pay off that debt) of an artificially inflated currency.
If the Euro is abandoned suddenly Germany will be faced with a rapid and massive appreciation in the value of their currency, I would suggest in the order of 30%. All of a sudden those powerhouses of German manufacturing might and the general population will find out that those fantastic working conditions are no longer affordable because they simply cannot sell enough cars or electronic goods at the prices needed to sustain the businesses.
As it is BMW and Mercedes are outsourcing manufacturing to China and S Africa, if the German currency is allowed to float independently of Europe it will skyrocket and make outsouring production even more compelling with the result of increased unemployment at home.
This is the ONLY reason Germany is propping up the Euro, they simply cannot afford not to because a failed Euro will actually harm them far more than anyone else in the Euro zone. And as long as they can force the pain of austerity onto other countries they can keep the Euro going hoping to wait it out until a recovery occurs. In short, German support for the Euro is a given, all the poor countries should be demanding massive concessions from Germany because the poor are already screwed, they should accept that and tell the Germans that the bluff is being called. If Germany wants to collapse then they can choose not to support economic stimulus measures across Europe, their non support will make bugger all difference to the poor nations as they're already broke, but the Germans have a standard of living to lose.
Make them sweat and put everything on the line. The Euro has been an exercise in German dominance by other means, what they failed to realise was that dominance would always incur a long term collapse of weaker nations as they could not afford to pay their way out of the inevitable crunch which would have occurred at some point regardless of the current GFC trigger. Had subprime and all those events not occurred then sooner or later, probably about now in fact compared to approx 2009, the excessive borrowings of poor nations with a strong currency (i.e. the Euro members) would have come home to roost and the clear focus would have been on that situation with disbandment of the Euro as the only solution.
As it now stands the Euro might continue due to the mess in the USA taking a focus off Europe's structural issues. It will still collapse (unless all of Europe suddenly becomes very Germanic in attitude and efficiency and everything else) in the longer term and the pain will be all the greater.
The piper must now be paid, and the only people who have anything left to pay him are the Germans. They miscalcualted badly and assumed they were the piper to be paid by everyone else, the problem now is that they have all the money they can get, there is no more income for anyone else to keep paying them so now the German piper must pay the ultimate piper, the Eurozone, the very creation that they championed so that they could become what they thought was the ultimate piper, otherwise they themselves will suffer massively as the real ultimate piper fails and takes them and their investemnts down with it.