“According to calculations by Goldman Sachs, France today is just as overpriced as Spain. Both countries must be around 20% cheaper to make their economies competitive and to achieve debt sustainability. But to be 20% cheaper, the real devaluation process won’t be easy.
This is why France must undergo a slump of a decade in which its inflation rate would be lagging by 2% behind the average of the remaining eurozone. In spite of all that, France has not come yet under a bailout program.”
So said Hans-Werner Sinn, a German economist and president of the Ifo Institute for Economic Research.
France, Italy, Spain, Portugal, Greece… in fact just about every non northern member of the Eurozone has lost its competitiveness over… the last ten years!
While Germany’s competitiveness has soared over this same period. Coincidence? German hard workers as against southern shirkers? They love that one, but…. no.
It is the Euro, stupid! To paraphrase Clinton. The Euro is the Elephant in the room no one wants to acknowledge. For various reasons. Germany since it has been not only a net beneficiary economically of this flawed currency, but because it has also acquired political clout and absolute hegemony in Europe.
By signing up to this extremely badly designed, totally premature common currency, the countries of the Eurozone found themselves back in the dark ages of the gold standard and all the woes that that entailed. Breaking out of the Gold Standard was what helped stagnating, recessionary economies break out of the trap. A trap the Eurozone countries now find themselves in.
The Gold Standard was just as sacred as the idea of the Euro is today. It was just as taboo if not more to suggest leaving the Gold Standard as it is today to mumble that maybe the Euro should be dismantled!
No! Never! No way! Heresy! All we have to do is ruin the economies of the south, of France, okay maybe even Belgium and the Netherlands later on and…? Well, there you are.
In the end the Gold Standard was abolished.
In the end the Euro as it is now will become a bad chapter of history.
But instead of shilly shallying and ignoring the root problem of Europe while ruining everything Europe ever stood for, spreading pain and destitution, might it not be more sensible for the powers that be to start working out a sensible way to acknowledge the elephant in the room and devise a way to get it out quietly?
How about that Olli Rehn, and HVR? Rather than chortling Thatcher’s greatest clanger of “There Is No Alternative” (which isn’t even original for you) and insisting that the ONLY way to solve Europe’s problems (and perpetuate their parasitical jobs) is by inflicting more and more pain through austerity which will only lead to complete and total collapse! And not only of the Economy.
And if you can’t think that far ahead because it is too strenuous for you all, you can always resign and hand over to more capable people. Who will no longer be restricted by taboos.