Germany's best case is for all countries to stay in the Euro and force them to pay for "their greed" by cutting government programs.
Germany’s strong exports are being bought by all European countries which some argue is the cause of the rest of Europe’s unemployment and fiscal problems. Us in the USA like to think it is because of bloated entitlement programs, which very well could be the major cause or a contributing factor, but it is at least plausible that the absolute real cause is Germany’s strong industrial position combined with their ability to export to the rest of Europe.
If Germany left the Euro, their currency would be so strong against the rest of Europe that it would vastly damage their competitive position in Europe leading to a massive transfer in wealth out of Germany.
> Germany’s strong exports are being bought by all European countries which some argue is the cause of the rest of Europe’s unemployment and fiscal problems. Us in the USA like to think it is because of bloated entitlement programs, which very well could be the major cause or a contributing factor, but it is at least plausible that the absolute real cause is Germany’s strong industrial position combined with their ability to export to the rest of Europe.
I seem to remember reading an article around 2007 or so (anyway, before the shit started hitting the fan) about how the German employees' real wages had been practically stagnant in the previous decade, and about how the employers' association had basically told the unions that "it's either you keep your wage demands in check or the jobs will move to Eastern Europe". It seems to have had worked, if only for the fact that the German consumers weren't as easy going with their money.
Quite so. Germany has been running an immensely profitable manufacturing-and-technology economy on the basis that demand for their goods comes from exporting to other countries, who buy on the credit they receive from German banks. Therein lies the rub: if Germany couldn't export, its domestic consumption would be totally unable to hold up its economy. They'd go into an overproduction crisis like the US and Japan.
I always point to Canada's experience in the last 12 years. As As the CAD went from 0.60 USD to 1.00 USD, everyone was freaking that it would destroy our economy. During the rise of the CAD, income went up and unemployment went down. :)
We had this all before. When we had the Deutsche Mark, the German industry was as successful in exports as it is now.
One of the main problems of that time was changing currency values. The problem was not that the Deutsche Mark was high or low valued, it was more like the change was a problem. That made it difficult for companies to export. Large exporters were insuring themselves against currency value changes.
Basically a high valued currency made it cheap to import goods, energy and materials. A low valued currency makes these imports expensive. For example Germany imports most of its primary energy sources like oil. Devalue the currency makes the oil, gas and coal imports more expensive.
That the German industry depends or profits on a low-value currency is a myth. The Deutsche Mark was never low-value - just the opposite. Still exports were similar like they are today. The German exports will adapt.
The nice thing of the Euro is that the largest market for Germany is right around it and much of it is traded in Euros. This makes trading on variable currency values obsolete. This is the big win for German companies: it makes trading much easier and much less costly.
This is why we'll not be seeing this happen. Instead, they'll probably all agree to print Euros and devalue their currency, thus continuing to subsidize Germany's exports.
First, an independent German central bank can more easily adjust the exchange rate to reasonable levels (to reality). It would be much better for German to have higher interest rates.
Second, a somewhat stronger currency would be the lesser evil for Germany than the alternative, which is being robbed blind which is what's happening at the moment.
I remember a lot of Germans were very upset about switching to Euro from the Mark, because for example if before a cup of coffee was 1 Mark, after that it would've become 1 Euro (~2 Marks at the time). I don't remember if they converted everyone's salaries 1:1 to Euro, too, though. If they did, I guess that worry didn't make much sense.
This is a ridiculous statement, there were lots of measures in place to ensure that exactly this did not happen, with huge fines for anyone who tried to overcharge once the changeover happened.
Agreed, 'though people here (Portugal) will still tell you that stuff is now much more expensive due to the Euro. They don't seem to grasp the concept of inflation.
No, they didn't. And that price upscaling was only for small things, mostly rounding up to the next largest round number. Annoying, but it didn't make _that_ much of a difference.
