Opening Pandora´s Box

That´s what the US Treasury did when it wrote in its report:

Within the euro area, countries with large and persistent surpluses need to take action to boost domestic demand growth and shrink their surpluses. Germany has maintained a large current account surplus throughout the euro area financial crisis, and in 2012, Germany’s nominal current account surplus was larger than that of China. Germany’s anemic pace of domestic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment. The net result has been a deflationary bias for the euro area, as well as for the world economy.

A flood of blog posts and articles followed, most of them ‘bashing’ Germany (who´s only defense was to say “it produces high quality products the world desires”!).

The leaders and politicians of the Eurozone´s periphery, feeling the US is behind them, have ‘come out of the closet’!

The plot is thickening fast in Italy. Romano Prodi – Mr Euro himself – is calling for a Latin Front to rise up against Germany and force through a reflation policy before the whole experiment of monetary union spins out of control.

“France, Italy, and Spain should together pound their fists on the table, but they are not doing so because they delude themselves that they can go it alone,” he told Quotidiano Nazionale

Should Germany persist in imposing its contractionary ruin on Europe – “should the euro break apart, with one exchange rate in the North and one in the South”, as he puts it – Germany itself will reap as it has sown. “Their exchange rate will double and they will not sell a single Mercedes in Europe. German industrialists know this but all they manage to secure are slight changes, not enough to end the crisis.”

2 thoughts on “Opening Pandora´s Box

  1. It’s foolish to “blame” the Germans for doing what’s working for them. There is no Bismarck deviously plotting a Prussian hegemony. The Latin countries have only themselves to blame either for their lack of confidence in their ability to rule themselves or their worship of the German economic and social model.

    That said, it wasn’t so long ago that the German “model” was considered a failure and they were the “sick man of Europe”! Things can change again, and hopefully will.

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