Germany isn’t earning particularly good press at the moment. Nobel laureates like Paul Krugman and Joseph Stiglitz, as well as opinion leaders such as Ambrose Evans-Pritchard of the Daily Telegraph and Martin Wolf of the Financial Times are loudly calling for policy changes in Europe.
They argue that Germany, in particular, should finally stop demanding more and more austerity and, instead, live up to its role and assume the costs of the euro rescue.
But what is behind this attack on Germany’s position? It almost seems that those who criticize Germany’s position believe the country to be weakened, economically and politically. This would be the inevitable consequence of the high transfer payments so beloved of these critics, who believe redistributing money could solve the euro’s problems.
The current strength of the German economy is identified as the main source of the problems in Europe’s crisis-ridden countries. But what critics deliberately overlook is that Germany’s recovery is primarily due to exports outside the euro zone.
Little attention is paid to the much more interesting issue: As Europe’s financial center, what is the United Kingdom’s position on the euro? Although London bankers know that the euro cannot function in its current form, they also fear the end of the common currency, which would entail substantial disruptions in financial markets.
Considerable losses of assets are very likely. The end of the euro, or a substantially smaller euro zone, also signifies the end of the integrated capital market. It would result in financial transactions becoming much more expensive once again.