Look at the increasingly rationalized and automated world-class capabilities of the German economy, there should be no contest that it will continue to grow and grow at the expense of other European economies who have no way to defend themselves and no mechanism to achieve similar productivity and, vitally so, scale. All Eurozone economies are profoundly exposed but are not sufficiently integrated with Germany to benefit; the German economy simply does not sufficiently scale outside its own cultural and linguistic area to deliver benefits to the entire Eurozone.
Now that the Euro is down so much vs other currencies, the German economy will further heat up. But we’re not seeing similarly bright flares in other European economies. Even economies like the Dutch and Finnish ones that used to mirror Germany are not seeing much recovery and unlike Germany have been shedding many jobs, adding debt, seeing housing prices drop, etc. This de-facto devaluation vs the dollar/yen/yuan may help some but it is lopsidedly favouring the German economy. As companies like Volkswagen are sitting on ever greater mountains of cash they will be able to invest and improve their competitive advantage only further. But these investments don’t often enough take place outside Germany.
It seems to me a rather inescapable conclusion that the German economy has grown at the expense of other Eurozone economies. Those countries that could chart their own monetary policy such as Poland, the UK and Sweden are doing well. One would wonder how Italy would do if it had control over its own monetary policy, at the very least it would not be in denial.
I’m glad you now say that the Eurozone is the 2nd worst idea and that breaking it up would be the worst. We need to realize that it was a terrible idea, we’re still in denial over it. But the realization that a break up is even worse is equally important. We need to restore the transfers of wealth that previously were part of the ERM, the ability to devalue the currency at the time was that mechanism and did amount to a transfer of wealth because it changed the economic dynamics between economies. Such sharing of the wealth is necessary.
But there Gideon Rachman is right, that right now is politically poisonous. Still as long as the Germans don’t see the degree to which their marvelous economy is far too strong for the rest, the need for a more equitable sharing won’t be seen either.
Anyway, we do arrive here at the point where in the next few years increasingly jobs are being replaced by robots. This is already part of that movement as Germany is turning into one of the wealthy rationalized and roboticized production zones and has solidarity only within its own nation. If this is the future pattern, nationalism is about to make a return.