Also, there's yet another level of German hypocrisy in its holier-than-thou protestations concerning the poor periphery's debt. All of Europe is highly indebted and while the European-side of the transatlantic crisis opened on the shores of the Mediterranean, it is now an pan-European crisis -- and that includes Germany, one of the first countries to breach the Maastrict debt ceilings. According to I.M.F. numbers, gross government debt in Germany will be nearly 83 percent of gross domestic product by 2012.
The Germans can't be let off scot-free for what happened. As the Portuguese European MP Ana Gomes recently put it to the Germans: "Our governments, banks, companies and citizens were encouraged to become dangerously indebted by your banks, businesses, your official representatives, and by all who made the euro extremely affordable, at low interest rates, and who encouraged us to procure submarines, cars, equipment and diverse technology we probably did not need. And to buy all of that in Germany, of course." She finished off with a polite but devastating uppercut: "Your budget surpluses, dear German friends, are in fact the mirror image of our deficits."
So rather than try to re-adapt European monetary policy to work a bit better for the traditionally weaker currency countries, the Germans are instead writing into stone the policies best for its economy. It worked for them, so why shouldn't it work for everyone else? As if economies based on tourism, agriculture, and fishing can hope to win by the same rules that enables the world's fourth-largest industrial economy to prosper. As George Soros noted: "Germany cannot be blamed for wanting a strong currency and a balanced budget but it can be blamed for imposing its predilection on other countries that have different needs."
One imbecile of a German politician even openly boasted in November, "Now all of Europe speaks German!" a comment that sent the English tabloids into hysterics, for once understandably. German bullying and blunders like this have fueled the eurosceptic fires in Great Britain that underlay Cameron's subbornness on financial regulation. (In Germany's defense, Merkel's stands don't exude the kind of aggressive nationalism that reeks of the Munich beerhall, as the British tabloids see it, but rather a politics of myopic self-interest for which the next regional election is the long-term perspective.) Anyhow, the Brits have now left the field entirely to the Germans and the French, removing themselves as a possible check to Franco-German hubris. Cameron could have made a principled stand; instead he came away looking the pettiest of them all.
Is there a strategy Merkel has in mind to help get those countries back on their feet again? Simply put: No, and it's not something most Germans care about either, so convinced are they that the lazy Greeks deserve their terrible fate. (For this Merkel, too, is responsible.) Europe-wide, Keynesian deficit spending is not only frowned upon, it is now being outlawed and subject to sanctions. No one's talking about investment in the deficit-strapped countries to relaunch growth and employment, or upping wages or other measures in the north that would reduce trade surpluses and give the south a fighting chance. Bloomberg commentator Matthew Lynn in his excellent book Bust: Greece, The Euro, and the Sovereign Debt Crisis puts it nicely: "To the Germans, telling them to weaken their own competitiveness to help out the eurozone makes about as much sense as insisting that Brazil could play in the soccer World Cup only if they had nine men on the field."
The high-deficit countries are being buried in debt, forced to swallow recession-fueling austerity, and pushed down a path of grinding deflation that will take them decades dig themselves out of. How can their domestic industries or exports possibly bounce back when stuck in this trap? Without the levers of a national monetary policy, with which they could devalue a currency, their only option is to slash and slash wages again until Greece is competitive with Germany (and its own population is completely impoverished and rioting on the streets). As it is, the contraction of their economies will send prices and wages plummeting and joblessness skyrocketing. It will make the debt problems even more severe and there'll be less cash around to repay the balance.
So, what to do if it's impossible to imagine Europe's new crown prince budging on the policies best for it and its northern neighbors? One not-so-loopy idea is to create two currency zones -- a northern and a southern -- the euro for the well-heeled above the Brenner Pass and the "medi" for the western Mediterranean, Central Europe, and maybe Ireland, too. This would have the distinct advantage of preserving the many, indisputable advantages of a currency union, but simultaneously enabling their participants to set money policies and tweak them accordingly in ways more appropriate for their economies. Like the European soccer leagues, under-achievers in the first league could be demoted, while tigers in the lower league could move up.
Another idea along the same lines, but a step further, is "parallel currencies," namely the simultaneous existence of the euro and the whole gambit of national currencies. Both would be legal tender, the euro primarily used, as least at first, as a currency for multinational businesses, the capital markets, and tourists. Eventually, those nations with like-minded economies and policies could adopt the euro as their national money, if they wanted to. But as Lynn underscores "it would happen naturally when the market was ready, rather than being forced on economies that couldn't cope."