If we want to understand why Germany clings to the euro so hard we need to also understand the benefits that Germany has received from the currency. The Bertelsmann Foundation, which Wikipedia describes as follows: https://en.wikipedia.org/wiki/Bertelsmann_Foundation
Its report concludes:
“Without the euro, that is, if Germany had a separate currency, the annual increase in real gross domestic product (GDP) would be about 0.5 percentage points lower. If one adds up the advantages of eurozone membership between 2013 and 2025 in terms of greater growth, the benefits as far as Germany is concerned amount to almost € 1.2 trillion.” (Germany_benefit_from_Euro.pdf)
Of course the paper does not go into comparing Germany’s benefits with the benefits of other countries which have the euro. Nor into who loses from the European Empire having adopted the euro. I would suggest we look at two main groups: The largely poorer Mediterranean member states, all of which from Portugal to Greece have the euro as its currency. In the sheer size of population this is a big group, including Spain, France and Italy with some 167 million population between them.
The other group is more diverse but is related to the EU subsidies paid to agriculture to keep food prices artificially low. Like all empires, the European Empire has a number of third world colonies of member states. The deal for these third world colonies was more for the benefit of the European Empire exporters, as the Financial Times pointed out in 2007: “How Europe’s trade talks with poor former colonies became mired in mistrust”.
For a discussion of how these matters are understood from an ordoliberal perspective see Heinz-Dieter Smeets and Anita Schmid “European sovereign debt crisis, lender of last resort and banking union” in Ordo – Volume 65 – 2014, pp. 47-75: the abstract is added below:
“Starting from the roots of the sovereign debt crisis, this article first explains the function of the Lender of Last Resort (LOLR) and, afterwards, shows how supranational institutions, such as the ESM and the ESFS, on the one hand, as well as the ECB on the other hand, acted as a LOLR vis-à-vis European banks and member states during the current crises. However, interventions by a LOLR do, again, evoke problems which consequences and solutions are discussed next: so, the resulting collective responsibility causes crisis-induced costs to be borne by the general public in the form of higher taxes or increasing inflation. Moreover, economic agents are faced with misguiding incentives that favour the emergence of new crises in the future. Therefore, the recent establishment of a European Banking Union takes the centre of the new arrangements that were introduced to solve the problem of responsibility and to break the vicious circle between banking and sovereign debt crises. However, in order to prevent a further systemic crisis, additional measures are proposed to even enhance the stability of the European banking system. Important suggestions are to introduce adequate capital cushions as well as to revise the preferential treatment given by prudential bank regulations to sovereign exposures. Moreover, it is necessary to establish a sovereign insolvency regime in order to credibly exclude a (further) bail-out.”
It is clear even from this one abstract that ordoliberal goals have been compelled to adjust to the dominant neoliberal ideology. When I first came to Sweden from Minnesota in 1972, Swedish banks adapted to slumps by switching from balanced budget funding to deficit financing to counteract unemployment. They no longer do that. Neoliberalism completely dominates economic thinking, and “big is beautiful”, so no bank – or for that matter Company – is too big to fail. We live in the era of large companies that are baled out by governments when the boom turns to slump, while the poor, whose taxes are used to salvage the big banks, lose out.
Quantitative easing has failed to solve the problem, big banks and big companies become addicted to the process without it having the desired effect.
Bloomberg explain clearly what is happening in http://www.bloombergview.com/quicktake/europes-qe-quandary:
“It’s the new conventional wisdom: When all else fails to make economies grow, create new money and buy government bonds. That’s the formula dubbed quantitative easing, or QE. Most economists think it helped keep the U.S. and the other countries that used it – Japan and the U.K. – from tumbling into a catastrophic depression. Could it work in Europe, too? It’s difficult for the 19-nation euro area to do the same thing, partly because of different interpretations of European Union rules, and partly because of concern it could undermine efforts to push governments to do more to revive their economies. But now that the European Central Bank has exhausted most other options, it’s pressing ahead with full-blown QE.”
Is Bloomberg wrong about it preventing the US, Japan and the UK “from tumbling into a catastrophic depression”? We will soon see, as the signs are growing that QE is indeed failing, as we head into the worst recession since the subprime mortgage crisis which was the worst recession since the 1929 Wall Street Crash. The subprime mortgage crisis happened a mere seven years ago. This one is likely to be worse – much worse – and we still have not recovered from the last one.
And in all this with the CBE printing money in unprecedented quantities – Bloomberg estimates a QE investment of 1.1 trillion euros.
See also this post in EU: Ramshackle Empire.