Monday 9 January 2012

Why the Euro is not dead (yet)

As with so many things in life, your own experience gives shape to what you know and what you see, yet often only at the exclusion of other viewpoints. So it is with the British debate on the Euro. The currency that celebrates its decennial this January is thought to be doomed by most British observers. For them, the only question worth answering is when the final collapse will happen and whether or not it will drag the entire European project with it. 
You only have to take a flight to Berlin, as I did over the Christmas holidays, and pick up some German papers to understand how alien this view is to German opinion-makers. Believe it or not, German newspapers and journals thought they had genuine reason to celebrate the birth of the common European currency ten years ago. 
And, contrary to British public opinion, they might just have cause for celebration. Despite all nay-sayers, the Euro is for all intents and purposes actually doing very well. Especially so for German purposes one might add. In terms of stability, the Euro is more stable than the Deutschmark, with ten year inflationary rates of less than 2% (the rate for the Deutschmark was more than 5%). Even more importantly for the export orientated industry in Germany, it remains a comparatively weak currency which boost German growth to an extent not experienced since the 1970s. 
It is these undoubted advantages of the currency to the German economy that many British commentators fail to factor into their calculations of impending gloom. The Euro is not only a political project, it is also one that has produced unprecedented growth rates in Germany at a time of shrinking manufacturing output for the rest of Europe and struggling industries across the Western world in areas where Chinese producers offer more competitive conditions. 
Whether the critics of the Euro like it or not, it is most likely to survive as long as the German people take a rational view of the enormous benefits that the common currency has brought. And for those who harbour some nostalgia for the Deutschmark, help is afoot: there are still about 13 billion Deutschmark in circulation in Germany. If you like you can even pay at high street shops in Berlin with the old currency which is still legal tender. 

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