Why Germany supports the Euro/EU through thick and thin

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Sanctimonious
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Everyone keeps saying 'Germany does this, Germany does that' but that's because its in Germany's economic interest to do so.

If the Euro crumbles and Germany return to the Deutschmark then it'd appreciate which would be harmful to them economically. It is not in their interest to do so. The Euro works to their benefit whilst it works to the disadvantage of other EU countries.

Thank God we did not join the Euro. Stop acting as if Germany is the European good guy in all of this. If it wasn't in their economic interest, I can assure you Ms Merkel wouldn't give a ****.
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Rakas21
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Of course, analysts believe there'd be a 12% appreciation overnight.

Not only that but think of the political power/leverage that Germany has in terms of demanding that bailed nations do certain things. 'Don't want to agree with our stance on Russia, Iran or ISIS'.. think again if you want that next cheque.
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MagicNMedicine
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(Original post by Rakas21)
Not only that but think of the political power/leverage that Germany has in terms of demanding that bailed nations do certain things. 'Don't want to agree with our stance on Russia, Iran or ISIS'.. think again if you want that next cheque.
In fairness given that Germany has had to contribute disproportionately you can see why they make demands that bailed nations do certain things.

Their demands are usually along the lines of "keep your public finances in order rather than spending beyond your means and expecting further bail outs from us". I don't see what is wrong with saying this.

Germany are not the bad guys of Europe trying to dominate Europe, this is just a silly throwback to the war. If all European countries ran their economies with the discipline that Germany does then Europe would be better placed.

I prefer the German approach to the approach of the south European countries which is more one of protectionism, at least the Germans are generally quite open in terms of free markets and openness to trade which makes them a more natural ally of the UK.

Which is also why the new QMV rules are interesting in the context of European alliances and potential exit of the UK from the EU. Germany does not want the UK to leave the EU, it would be a bad thing for the Germans if we go as it means they will lose a key ally and it will tip the balance of power towards the protectionist countries that want Europe to be about subsidising favoured industries and heavy social legislation.

The positive way forward for Europe would mean the northern European countries plus the UK (supported by the Eastern European countries who are trying to get more and more open after their experiences under communism) leading the way to make Europe a more open and free market and knock down the protectionist aspects that were mainly brought in at the insistence of France.

I think the Germans will support David Cameron if he is trying to drive a reform agenda that makes Europe more open eg completing the single market, extending to services etc, what they won't support is if he starts trying to bring in his own protections and restrictions eg quotas on migration etc.
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Observatory
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Having lived among them for a little while, I think the overwhelming reason Germans support the European national unification movement is to distance themselves from their own history and particularly from the Nazi era. If they were to leave the EU they would need to adopt an independent policy befitting what would at least have the potential to be a great power. This would precipitate an attack of national neurosis that no one wants to even contemplate. The European national unification movement presents them with a cookie-cutter set of policies to pursue which are explicitly non-German and which, to the extent they mirror events in German history, conveniently skip the period 1871-1945.


(Original post by Rakas21)
Of course, analysts believe there'd be a 12% appreciation overnight.

Not only that but think of the political power/leverage that Germany has in terms of demanding that bailed nations do certain things. 'Don't want to agree with our stance on Russia, Iran or ISIS'.. think again if you want that next cheque.
It's a bit more complex than that, since those cheques are not being spent by Greece and the others, they're going straight into debt repayments to (among others) German banks. Essentially Germany is bailing out its banks at the creditor end rather than bailing out the banks directly. The main reason they are doing this is to keep Greece and others inside the Euro and the EU, and to avert the possibility of military coups or other political instability in those countries.


(Original post by MagicNMedicine)
Which is also why the new QMV rules are interesting in the context of European alliances and potential exit of the UK from the EU. Germany does not want the UK to leave the EU, it would be a bad thing for the Germans if we go as it means they will lose a key ally and it will tip the balance of power towards the protectionist countries that want Europe to be about subsidising favoured industries and heavy social legislation.

The positive way forward for Europe would mean the northern European countries plus the UK (supported by the Eastern European countries who are trying to get more and more open after their experiences under communism) leading the way to make Europe a more open and free market and knock down the protectionist aspects that were mainly brought in at the insistence of France.
I'm beginning to see the EU more and more as a sort of colonial empire for the south and east. By abolishing all the national governments, at least in part, it prevents instability in those regions that would probably otherwise be on-par with that in Latin America or South East Asia. What is less clear is whether this is something that the northern countries, particularly the UK, have any existential interest in, particularly as the colonials get votes too, and actually out-vote the supposedly dominant north.
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Rakas21
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(Original post by Observatory)
I'm beginning to see the EU more and more as a sort of colonial empire for the south and east. By abolishing all the national governments, at least in part, it prevents instability in those regions that would probably otherwise be on-par with that in Latin America or South East Asia. What is less clear is whether this is something that the northern countries, particularly the UK, have any existential interest in, particularly as the colonials get votes too, and actually out-vote the supposedly dominant north.
There's plenty of interest in expansion for Germany, new applicants are 'encouraged' to adopt economic reform conducive to investment from other European countries. This is largely one of the reasons Ukraine is important, it has 40+ million people and must be kept out of a Russian Customs Union.
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Observatory
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(Original post by Rakas21)
There's plenty of interest in expansion for Germany, new applicants are 'encouraged' to adopt economic reform conducive to investment from other European countries. This is largely one of the reasons Ukraine is important, it has 40+ million people and must be kept out of a Russian Customs Union.
I disagree that this is primarily an economic or German interest.

Ukraine is about as prosperous as Sri Lanka or Jordan. Almost all of this is internally-produced services (they have a lot of good doctors, etc. from the Soviet time, albeit working with little equipment). Trade with Ukraine is not important to the EU as a whole or to Germany.

The political significance of the customs union membership is that customs unions are a precursor to political integration. Ukraine doesn't add much to the EU but would add a lot to Russia, giving them at least the potential to re-emerge as a rival power to the whole of combined Europe.

In other words the EU's conquest of Ukraine is its first colonial war and while its victory is not total, it has done well and emerged as the clear winner.
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Rakas21
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(Original post by Observatory)
I disagree that this is primarily an economic or German interest.

Ukraine is about as prosperous as Sri Lanka or Jordan. Almost all of this is internally-produced services (they have a lot of good doctors, etc. from the Soviet time, albeit working with little equipment). Trade with Ukraine is not important to the EU as a whole or to Germany.

The political significance of the customs union membership is that customs unions are a precursor to political integration. Ukraine doesn't add much to the EU but would add a lot to Russia, giving them at least the potential to re-emerge as a rival power to the whole of combined Europe.

In other words the EU's conquest of Ukraine is its first colonial war and while its victory is not total, it has done well and emerged as the clear winner.
On the economic front i think it's a long game. Ukraine may be poor now but so was Poland which is now a steadily growing economy with a GDP of $500bn or so. Indeed if we view Poland as an example then 27% of their imports come from Germany alone, so Ukraine is quite a prize if it gets to a place where economic reforms allow its citizens to afford German goods (of course one could argue that alone it could become wealthier faster but in the world of international politics Ukraine is a bone for two dogs to fight over).

I do agree with the rest of your post though and the colonial analogy.
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Sanctimonious
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(Original post by MagicNMedicine)
Germany are not the bad guys of Europe trying to dominate Europe, this is just a silly throwback to the war. If all European countries ran their economies with the discipline that Germany does then Europe would be better placed.
I don't believe Germany are trying to dominate Europe either. I believe Germany being Germany i.e. an efficient hard working nation came to that position by accident. The other nations are simply not at their level and thus they have to continue to prop them up when they struggle. I do not believe Germany meant for this to happen. However, I do believe Ms Merkel has taken full advantage of the situation within the EU setup to make demands to make life increasingly difficult for other EU countries.

I prefer the German approach to the approach of the south European countries which is more one of protectionism, at least the Germans are generally quite open in terms of free markets and openness to trade which makes them a more natural ally of the UK.
I like the German approach but its almost impossible to blanket across Europe when so many countries have different economies and different policies etc. Culture and other social issues also play a part in this. Europe would function much more efficiently with sovereign states with their own currencies trading with one another in well thought out trade agreements. This would involve a lot of work but it'd be for the long term benefit and economic prosperity of all. To me, the EU was a quick fix attempt and not well thought out. It was a reaction to the wars in a time of emotion and the cracks of that emotive decision are clear to see. It was not a well thought out plan or a logical plan but purely based on trying to stop another war breaking out in Europe and further afield. It's time people woke up and realised its a failed project.
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MagicNMedicine
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(Original post by Observatory)
It's a bit more complex than that, since those cheques are not being spent by Greece and the others, they're going straight into debt repayments to (among others) German banks. Essentially Germany is bailing out its banks at the creditor end rather than bailing out the banks directly. The main reason they are doing this is to keep Greece and others inside the Euro and the EU, and to avert the possibility of military coups or other political instability in those countries.
Yes this is a good point that people often miss.

The German banking system didn't collapse and require bail outs like ours or the Irish did, the difference being ours and the Irish were heavily exposed to sub-prime mortgages and the financial products that were based on them, largely in the US housing market but also in our own. When those loans went bad we had to bail out.

The German banking system is heavily exposed to government debt from the southern European countries, so their collapse and bail out would happen if those governments defaulted. Germany has a huge vested interest in those southern European governments remaining solvent, which means a) providing them temporary finance to keep them ticking over, b) making sure those governments carry out the reforms necessary to get their budgets back in order and remain solvent and able to repay their debts. This is what Germany does - provides them loans but demands that they carry out reforms.

The (German dominated) fiscal compact for the Eurozone now has some strong rules in it:
- Structural deficit should never exceed 0.5% of GDP (or 1% for a country with a debt-GDP ratio significantly less than 60%)
- If your debt-GDP ratio is over 60% then every year you have to reduce it by 1/20th of the percentage points you are over 60%
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MatureStudent36
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(Original post by MagicNMedicine)
Yes this is a good point that people often miss.

The German banking system didn't collapse and require bail outs like ours or the Irish did, the difference being ours and the Irish were heavily exposed to sub-prime mortgages and the financial products that were based on them, largely in the US housing market but also in our own. When those loans went bad we had to bail out.

The German banking system is heavily exposed to government debt from the southern European countries, so their collapse and bail out would happen if those governments defaulted. Germany has a huge vested interest in those southern European governments remaining solvent, which means a) providing them temporary finance to keep them ticking over, b) making sure those governments carry out the reforms necessary to get their budgets back in order and remain solvent and able to repay their debts. This is what Germany does - provides them loans but demands that they carry out reforms.

The (German dominated) fiscal compact for the Eurozone now has some strong rules in it:
- Structural deficit should never exceed 0.5% of GDP (or 1% for a country with a debt-GDP ratio significantly less than 60%)
- If your debt-GDP ratio is over 60% then every year you have to reduce it by 1/20th of the percentage points you are over 60%
Sorry to be a pain, but the German banks required bailing out.

They were some of the largest bailouts.

http://mobile.nytimes.com/2013/08/10...anted=all&_r=0

In fact German banks had the second largest bail out of all European banks.

You are however spot on with the rest of your post.

Germany requires the € to be a success as if it fails its the German banking system and taxpayer that foots the bill.

A return to the DM will see Germany's currency mean that German experts are less competitive.
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Alfissti
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No such thing as a country that doesn't act in its best of interest.
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saayagain
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(Original post by Sanctimonious)
Everyone keeps saying 'Germany does this, Germany does that' but that's because its in Germany's economic interest to do so.

If the Euro crumbles and Germany return to the Deutschmark then it'd appreciate which would be harmful to them economically. It is not in their interest to do so. The Euro works to their benefit whilst it works to the disadvantage of other EU countries.

Thank God we did not join the Euro. Stop acting as if Germany is the European good guy in all of this. If it wasn't in their economic interest, I can assure you Ms Merkel wouldn't give a ****.
EU is an epic fail.
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SarcasticMel
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(Original post by Sanctimonious)
Everyone keeps saying 'Germany does this, Germany does that' but that's because its in Germany's economic interest to do so.

If the Euro crumbles and Germany return to the Deutschmark then it'd appreciate which would be harmful to them economically. It is not in their interest to do so. The Euro works to their benefit whilst it works to the disadvantage of other EU countries.

Thank God we did not join the Euro. Stop acting as if Germany is the European good guy in all of this. If it wasn't in their economic interest, I can assure you Ms Merkel wouldn't give a ****.
Actually having to pay for ****holes like Greece really negates the positive impact the Euro has...believe it or not, but some people actually want to work together...

Just be happy that Germany and the other central/northern European states like Netherlands and Denmark don't split off and say **** off to the rest of Europe. As much as they benefit, you really think they need the others as much as they are needed? Hah.
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Observatory
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(Original post by Sanctimonious)
I don't believe Germany are trying to dominate Europe either. I believe Germany being Germany i.e. an efficient hard working nation came to that position by accident. The other nations are simply not at their level and thus they have to continue to prop them up when they struggle. I do not believe Germany meant for this to happen. However, I do believe Ms Merkel has taken full advantage of the situation within the EU setup to make demands to make life increasingly difficult for other EU countries.
I think it's mostly that.

However, there is one other factor. Inflation seems to be useful at reducing unemployment due to recessions. This is because it allows wages to be cut by stealth. The Labour Party has been complaining about that in this country, but it's actually a good thing, since the alternative of unemployment hurts the poorest the most, reduces total GDP, and increases the welfare burden. In effect wages were too high before the recession, as we thought there was more money to go around than there really was, and we did need to reduce them. If they're not reduced, some people go without entirely. This is what has happened in Italy and Spain where low inflation and a severe recession has combined to produce enormous levels of unemployment.

If wages are not 'too high' then wage increases outstrip inflation, but inflation can distort the economy in other negative ways (e.g. it implicitly taxes savings) which is why people generally don't want higher inflation than necessary. In Germany, which wasn't as badly affected by the recession, not so much inflation is needed. On the contrary, inflation of a high enough level to deal with Spanish unemployment would distort German capital markets in a very negative way. Germany has undoubtedly used its influence on the ECB to force it to produce much less inflation than it otherwise would have done, severely hurting the southern countries, including France.

I am still wary to blame Germany for this, since the Euro does not permit the optimal solution: different rates of inflation in Germany and Spain. Someone had to get hurt, and Germany just did what was necessary to ensure it would not be them, within the framework of a system to which everyone had agreed. The blame belongs to the advocates of the Euro, many of whom are German but many of whom are also Spanish, Italy, Greek, and French, and some of whom are British (Clegg, Blair).
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