Self-righteous Germany must accept a euro-debt union or leave EMU
If Germany and its hard-money allies genuinely wish to save the euro – which is open to doubt – they should stop posturing, face up to the grim imperative of a Transferunion, and desist immediately from imposing their ruinous and reactionary policies of debt deflation on southern Europe and Ireland.
By Ambrose Evans-Pritchard
19 Dec 2010
One can sympathise with the German people. Their leaders in the 1990s told them “famine in Bavaria” was more likely than the preposterous suggestion that Germany might have to bail out countries as a result of EMU.
But events have moved on and, rather than striking tones of Calvinist righteousness, the Teutonic bloc might do well to acknowledge equal responsibility for the capital flows, trade imbalances, and cumulative errors that caused the EMU debacle, and therefore accept that the honourable course is to meet the struggling south halfway.
Readers may have a better menu, but here is my own rough sheet: a debt union, funded by Eurobonds; a calibrated jubilee on traditional IMF lines for Ireland, Greece, Portugal, and if necessary Spain, to occur in parallel with austerity cuts; and a monetary blitz by the European Central Bank to prevent the victims tipping into core deflation, even this stokes inflation of 4pc or 5pc in northern Europe.
It beggars belief that the ECB should continue to allow the contraction of the M3 money supply and credit to private firms. Since EU leaders have already shown their willingness to ram through treaty changes without full ratification under Article 48 of the Lisbon Treaty, they can likewise bring ECB ideologues to heel with a new mandate.
If the Teutonic bloc cannot accept such a political revolution, it should withdraw from monetary union before inflicting any more damage to the social fabric of southern Europe, or at least allow a 30pc appreciation within EMU by creating a Doppelmark.