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Should Germany Be Forced Out of the European Union? | 40 comments (40 topical, editorial, 0 hidden)
Re: Should Germany Be Forced Out of the ? (none / 1)
There is, however the question that I would ask is why the decision to start dismantling things would end at the euro. European integration is a project carried forward by momentum, e.g. Monnet's bicycle. Unless you keep moving forward, you fall off. Moreover, forcing Germany out of the euro does nothing to solve the underlying divergence between the core and periphery.  It simply provides a mechanism to close the gap which is not without cost.  Devaluation forces up the cost of imported goods.  This is equally true of inputs, fuel and other natural resources, as well as finished products.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Apr 9th, 2012 at 02:18:32 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 1)
Well, currently "industrial policy" inside the EU is largely against EU law. At least if the EU is dismantled, the periphery could try to rebuild their economies. Without that they are sunk.

So I guess I agree, the European Union is a dead man walking.

More interesting is the realisation that there's no reason to believe that Chinese and Indian economic growth will not start to bite into the low end of Core country manufacturing.

And without the captive market of the periphery, it's hard to see how they prosper. They'll be on the sharp end of trying to out-mercantile China, but with much reduced influence at the WTO.

I'm not normally a purveyor of doom, but I don't see how things get better without some realisation that what will be needed is a rebalancing of world trade and Europe can only be part of influencing that if they stand together...

by Metatone (metatone [a|t] gmail (dot) com) on Mon Apr 9th, 2012 at 03:16:05 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
Well, currently "industrial policy" inside the EU is largely against EU law. At least if the EU is dismantled, the periphery could try to rebuild their economies. Without that they are sunk.

I disagree. I think that you are thinking of industrial policy in terms of protectionism, or more innoccously, trade policy, which is most often thought of as a zero-sum game.

Another way of thinking of industrial policy is considering how to create the institutional conditions that allow firms to compete more effectively. The EU does this in spades, what else is the purpose of cohesion and structural funds?  Moreover, the point of a broadened market is to allow an increased division of labor. Specialization matters.

Prior to the arrival of the NICs on the scene in the 1970s, the content of trade, where the volume was highest between developed countries, lay in intra-industry exchange. Rather than exchanging carrots for cars, trade was in things like catalytic converters for chasses. I would say the question is how to build a better chassis or catalytic converter rather than how to market than how to protect a domestic market for them.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Mon Apr 9th, 2012 at 11:35:26 PM EST
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Re: Should Germany Be Forced Out of the ? (none / 0)
One requires the other. In order to develop the institutions and technology, you need a production infrastructure. If your current comparative advantage is vacation homes, hotels and tropical fruit, such production will not be possible unless protectionist measures are part of your industrial policy.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Apr 10th, 2012 at 04:17:33 AM EST
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Re: Should Germany Be Forced Out of the ? (4.00 / 3)
What you need is import substitution. The periphery's dependence on imported hydrocarbons is going to weigh on the economy like a stone. And manufacturing is not the biggest culprit here, but the dependence on road transport.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 04:21:06 AM EST
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Re: Should Germany Be Forced Out of the ? (4.00 / 5)
Yet another case of neo-lib malaise.

In Portugal, as a "cost saving" measure public transport is being dismantled. Trains, but also buses.

The collectivist thing of public transport... it not modern, it is not individual. Trains are seen as an "expensive" anachronism from the past. The future, you see, is cars, cars cars.

Despair

by cagatacos on Tue Apr 10th, 2012 at 06:52:03 AM EST
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Re: Should Germany Be Forced Out of the ? (4.00 / 5)
And putting luxury taxes on fancy cars is not allowed.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Tue Apr 10th, 2012 at 07:05:16 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
Of course not, that's against the single market.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 07:10:23 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (4.00 / 3)
  1. Show me a nation (not a region) who has grown their industrial base without either mineral wealth or protectionism - then we can discuss if the periphery can take up that route.

  2. Right now EU law prevents individual companies subsidising companies beyond a certain level of tax breaks.

As such, the chances of say Greece, developing an indigenous solar industry (which the desperately need and they have the climate for) are low...

When you have a low industrial base, the only meaningful way to grow it is either from some advantage (e.g. low labour costs, convenient transport links, etc.) or by subsidy measures that help some portion of the supply chain of companies get off the ground to the point where you have a cluster.

That's the unmentioned part of your "institutional conditions" which I know you're very well aware of. The auto industry is a classic example, which you've talked about before.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 10th, 2012 at 08:55:12 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (4.00 / 4)
We keep running circles around the elephant in the room, which is that the EU needs to fund accumulation of productive capital in the periphery in ways that imply net fiscal transfer from the core, or "surplus recycling", or "repatriation of surplus".

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 09:04:10 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 1)
Well, yes. That is what solidarity implies.

But in my first post I was trying to make the point (about Europe standing together) why solidarity is good for the core as well as the periphery.

Sadly, I don't think anyone from the core countries would believe it.

And that's why Europe is a dead man walking.

Finally though, I'd make the plea that we don't forget that at some level this current crisis is artificial. There are structural problems and they are what we've been talking about (fiscal transfer, solidarity, etc.) but the crisis of the moment is pretty simply the failure of the ECB to act as the lender of last resort. As such the markets are attacking countries one by one, simply because they can...

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 10th, 2012 at 12:01:21 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
Well, yes. That is what solidarity implies.

Instead, what's being proposed is that structural funds be used to pay down debt to the core countries. That's the extent of solidarity in Europe.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 12:25:12 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
Finally though, I'd make the plea that we don't forget that at some level this current crisis is artificial. There are structural problems and they are what we've been talking about (fiscal transfer, solidarity, etc.) but the crisis of the moment is pretty simply the failure of the ECB to act as the lender of last resort. As such the markets are attacking countries one by one, simply because they can...
If you wanted to attribute nefarious intent rather than just ideological blindness, the Shock Doctrine narrative would fit like a glove.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 12:27:55 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (4.00 / 3)
Ah, the old stupidity vs evil question.

Very hard to resolve that one - especially given the neuroscience of recent years about facts, changing opinions etc.

Although of course, one might question if there's a bias there as well, isn't it to the advantage of conservatives to suggest that it's hard to get people to progress? Doesn't that elevate their attitude to "state of nature"?

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 10th, 2012 at 04:18:27 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
It is amazing how difficult it can be for smart people to understand simple things that go against their interests or undermine their self image.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Apr 11th, 2012 at 12:26:25 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
We keep running circles around the elephant in the room, which is that the EU needs to fund accumulation of productive capital in the periphery in ways that imply net fiscal transfer from the core, or "surplus recycling", or "repatriation of surplus".

You can give a man a fishing pole, but unless you teach him how to fish..... ?

BTW, isn't what you are suggesting basically an enhanced version of structural and cohesion funds?

The problem that I see is that there is an underlying issue of ability to compete that is going to require either massive emigration from the periphery, or the development of a domestic ability to compete in those countries.  The dilemma is not entirely unlike what happened as the US market was integrated in the 20th century.  The South couldn't compete, so there was massive emigration to the North. Finally, the development of a strong federal government allowed the redistribution of wealth from the North to the South.

But that sort of redistribution required a strong federal government, which the EU does not currently have.........

Let's be honest, the development of that sort of capacity in Europe was basically mean the end of the sovereignty of the nation-state in Europe.

Do we really believe that the Czechs and other euroskeptics will allow that?  

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Tue Apr 10th, 2012 at 07:25:41 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
Well, let's destroy the economies of the Mediterranean, the Baltics, and whoever else...

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 07:28:37 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (4.00 / 2)
Monetary union means the loss of sovereignty, because the state is no longer definitionally solvent and can thus not engage in a number of tasks conventionally considered a requirement for sovereignty (such as domestic macroeconomic planning).

The only viable options are to dismantle the monetary union or create the federal institutions necessary to perform those tasks. If the latter is politically unpalatable, the former will happen - voluntarily or messily, but it will happen. Because there are quite good reasons for sovereigns to exist, and those reasons don't go away just because you legislate neoliberal fantasies that assume away all the reasons for sovereigns to exist.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Apr 10th, 2012 at 09:48:25 PM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 1)
Monetary union means the loss of sovereignty, because the state is no longer definitionally solvent and can thus not engage in a number of tasks conventionally considered a requirement for sovereignty (such as domestic macroeconomic planning).
As well as

  • deposit insurance for banks
  • granting limited liability to businesses
  • disaster relief
  • access to health care
  • access to education
  • access to legal redress
  • public safety
In other words, monetary union leads to failed states. Greece, for instance, wasn't one three years ago and may well be one a year from now.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Wed Apr 11th, 2012 at 02:03:05 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 1)
companiesstates subsidising companies

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 09:05:10 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 0)
Oops. Thanks.
by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 10th, 2012 at 11:53:11 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (4.00 / 2)
Well, currently "industrial policy" inside the EU is largely against EU law.

As long as it's not export "vendor finance" followed by government bailouts of the private providers of said finance.

The whole thing is a sick joke.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman

by Carrie (migeru at eurotrib dot com) on Tue Apr 10th, 2012 at 04:19:13 AM EST
[ Parent ]
Re: Should Germany Be Forced Out of the ? (none / 1)
There is, however the question that I would ask is why the decision to start dismantling things would end at the euro.

It won't. You'll see a rollback at least to Maastrict, if not to Rome. Possibly with the partial exception of Schengen, because people have gotten used to being able to travel hassle-free throughout Europe. But the Rome institutions have enough institutional depth and a long enough history that they will probably survive.

European integration is a project carried forward by momentum, e.g. Monnet's bicycle. Unless you keep moving forward, you fall off.

That was true a generation ago. It is not obvious that it remains true today.

Moreover, forcing Germany out of the euro does nothing to solve the underlying divergence between the core and periphery.

Nobody's billing it as a solution to the lack of industrial policy. It's a solution to the current account imbalances, not the industrial underdevelopment.

It simply provides a mechanism to close the gap which is not without cost.  Devaluation forces up the cost of imported goods.  This is equally true of inputs, fuel and other natural resources, as well as finished products.

Yes, they will have to pay full price for imports. That sucks, and you can argue that it's unfair. But getting a discount on your imports by maintaining an overvalued currency gives the countries who support your currency political leverage over you. And as it happens, in contemporary European politics, that's a bad trade.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Apr 9th, 2012 at 04:29:10 PM EST
[ Parent ]

Should Germany Be Forced Out of the European Union? | 40 comments (40 topical, 0 editorial, 0 hidden)
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