The Alternative for Germany

 

 Yesterday I met the Leader of the new anti Euro German party, Professor Bernd Lucke. We had discussions in a small group, followed by a public lecture which he gave at Westminster.

He told us that as a German economics professor he went along with the consensus in the 1990s and argued that the Euro was a good idea. They thought the discipline of the Euro would force other EU nations in the currency to control their budgets and to become more competitive, so they could live side by side with Germany at a fixed exchange rate settled and enforced by the  Euro. He took comfort from the No Bail Out clause, which he thought offered a guarantee that member states in the Euro would have to accpet the fiscal and trade discipline, as they would be unable to resort to excess borrowing.

In 2010 Greece succeeded in establishing the principle that a struggling Euro member could indeed borrow more money from the EU and the IMF. Greece also went on to demonstrate that a Euro member could  renege on parts of its debts.  This changed Bernd Lucke into an opponent of the current Euro scheme. He apologised for misreading it in the 1990s, when some of us were warning what a disaster it could be for countries that had not brought their economies and budgets into line with Germany as required by convergence programmes.

He now thinks the troubled southern members of the Euro area should leave the currency union and devalue, to try to sort themselves out. Thereafter he thinks it may be necessary for Germany to leave the remaining currency union, as he thinks it is also a strain on France and the other members.

 He said that most people in Germany still support both the Euro and wider EU integration. Support for the EU is stronger than support for the Euro, and more Germans are now starting to worry about the social and economic strains the Euro scheme is imposing on some members. In particular many Germans agreee with Professor Lucke that there should be no more  bail outs.

His party currently has just 3% of the vote. If it is to make it to 5% to get representation in Parliament under their PR system, he is going to need to get acrosss vividly and frequently the points that the Euro scheme is miscarrying, and that Germany will be expected to pay more of the bills. German audiences should understand this, as after all they paid huge bills to try to get their own ostmark-DM currency union to work in the 1990s. In that case the area joining was much smaller, and they shared a common language and culture. The same cannot be said of Greece, Spain and Portugal. Professor Lucke is a fan of the approach adopted with Cyprus, making depositors and  bondholders pay more of the losses. This has in effect created two different currencies, the standard Euro and the Cyprus Euro. The Cyprus Euro is not freeely convertible if you hold too much of it in the wrong banks, and may be devalued by the authorities when you try to draw it out of the bank.

 

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67 Comments

  1. Peter van Leeuwen
    Posted June 14, 2013 at 5:34 am | Permalink

    It will be easier for AFD (Alternative für Deutschland) to win seats in Germany than for UKIP (over 20 years!) to get MPs in Britain. If only you had a system like Germany with its PR and a court in Karlsruhe to protect its constitution.

    • Brian Tomkinson
      Posted June 14, 2013 at 7:26 am | Permalink

      Peter,
      You would welcome the AFD being elected would you? Do you agree that the euro is a disaster for many countries and that Professor Lucke is talking good sense?

      • nicol sinclair
        Posted June 14, 2013 at 12:42 pm | Permalink

        @Brian: Yes, I agree that Professor Lucke is talking sense.

        Furthermore, I believe that he has had a (very late) Eureka Moment…

        • zorro
          Posted June 14, 2013 at 2:46 pm | Permalink

          Not keen on his seeming endorsement of the Cyprus model……

          zorro

      • Peter van Leeuwen
        Posted June 14, 2013 at 12:53 pm | Permalink

        @Brian Tomkinson: Actually I would like a serious party like AFD to win some seats (not a majority please) because it would allow for a good serious debate on such issues. No offense meant, but because of their ulterior motives, no such debate is usually possible with the British. I saw a little from Professor Lucke on TV and he is talking sense, but that doesn’t imply that I would have to agree with him. Many other German or Dutch economists don’t agree with him either.

    • Denis Cooper
      Posted June 14, 2013 at 7:51 am | Permalink

      The court in Karlsruhe has done a very poor job of protecting the constitution, and whatever it says the reality is that it has allowed itself to be reduced to the position of an inferior court subordinate to the EU’s ECJ, at least as far as the judges on the latter are concerned. We wait to whether the German court is prepared to trigger a showdown with the ECJ over the legality of ECB bond purchases; my guess is that once again it will find a form of words to duck the issue.

      • Peter van Leeuwen
        Posted June 14, 2013 at 12:54 pm | Permalink

        @Denis Cooper: The idea of a court is not to always give the verdicts that you happen to favor Denis. I don’t believe for a moment that it considers itself subordinate to the EU’s ECJ or vice versa, these two courts have different areas to cover. Although I’m no lawyer, I don’t think that the “Grundgesetz” forbids the pooling of sovereignty as such and therefore doesn’t necessarily block European integration, although there are some complex issues to be dealt with. The court in Karlsruhe might even one day give a verdict that this “Grundgesetz” needs amending before certain steps can be taken. This may be different from the more narrow UKIP idea of sovereignty and patriotism, but it deserves respect as a mechanism to provide safeguards in a changing environment.

        • Denis Cooper
          Posted June 14, 2013 at 6:15 pm | Permalink

          “I don’t believe for a moment that it considers itself subordinate to the EU’s ECJ or vice versa, these two courts have different areas to cover.”

          According to its judges it is the ECJ that determines whether which areas, if any, are left for the German, or any other national, court, to cover; that is what the government and parliament of Germany have agreed, and what the German court allowed to happen; so in reality what sort of constitutional protection has that court provided?

          I don’t expect to see it come to a deadlock between the ECJ and the German court, because the latter will work hard to avoid that; but if it did come to a showdown, I would put my money on the German court blinking first.

          • Peter van Leeuwen
            Posted June 15, 2013 at 8:32 am | Permalink

            @Denis: please accept that you view these matters through British spectacles.
            While I’ll respect that, German spectacles are different. The Federal Constitutional Court (BVerfG) has never refered a case to the ECJ or sought its opinion. Naturally, the ECJ has no say over the German constitution. The BverfG has a say over EU treaties prior to their ratification in Germany. But it cannot stand in the way of German democracy (it is there to protect it), and when German and other democracies decide to limit their sovereign rights in certain fields by pooling sovereignty (See the “Van Gend en Loos” case brought before the ECJ in 1963), then EU law supercedes national law, because that is what these countries want. In the worst case, the BverfG may then require that the constitution is amended before treaty ratification. Through British spectacles the ECJ is sometimes viewed as the “enemy”, an activist foreign court. That is not the prevailing view on the continent. The ECJ is “our” court in which we participate.

          • Denis Cooper
            Posted June 15, 2013 at 5:35 pm | Permalink

            “Naturally, the ECJ has no say over the German constitution.”

            Naturally, the ECJ thinks that it could have a say over the constitutions of the member states, if necessary; and in an exchange in the Commons when the Foreign Secretary was specifically asked whether the primacy of EU law extended to the constitutional law of a member state his reply was “Of course”; and which court gives the final interpretation of the EU treaties and laws?

          • Denis Cooper
            Posted June 16, 2013 at 5:44 am | Permalink

            http://eur-lex.europa.eu/en/editorial/abc_c05_r1.htm#h1

            “The Court has since consistently upheld this finding and has, in fact, developed it further in one respect. Whereas the Costa judgment was concerned only with the question of the primacy of Union law over ordinary national laws, the Court confirmed the principle of primacy also with regard to the relationship between Union law and national constitutional law.”

      • uanime5
        Posted June 14, 2013 at 2:31 pm | Permalink

        What’s wrong with Germany’s Constitutional Court being subordinate to the ECJ? You failed to provide any reasons why it’s bad for Germany.

        • Roger Farmer
          Posted June 14, 2013 at 2:46 pm | Permalink

          Germany’s constitutional court is there to protect the interests of germen citizens. The ECJ belongs to the euro fantasy land you appear to live in, and all too frequently sides with the grand corporate plan that ignores the interests of the people it might think it serves. Read 1984.

          • uanime5
            Posted June 15, 2013 at 1:00 pm | Permalink

            I noticed in your rant you failed to provide any evidence why the ECJ is a bad thing.

        • Denis Cooper
          Posted June 14, 2013 at 6:37 pm | Permalink

          No reason at all, if the German people no longer wanted Germany to be an independent sovereign state but instead wanted it to become no more than a member state of a pan-European federation. In that case, the natural state of affairs is that federal supreme court is the highest court in the federation and all other courts are inferior to it.

          Article 23 in the German constitution is the one to look at, as that accepted that the EU would be constructed on federal principles; as the German court allowed that to be put in the constitution, without insisting that the German people must first be consulted directly on whether that was what they wanted, it fell down on its job and it, and the Germans, must now live with the consequences.

          One of which could be that if the ECJ found that ECB bond buying was legal under EU law then if necessary it could order Germany to change its constitution so that it became legal under German law.

    • Shade
      Posted June 14, 2013 at 8:58 am | Permalink

      A slight aside to Peter’s point. UKIP will indeed find it difficult to win seats in a GE but will almost certainly succeed in denying some seats to Cameron’s team. Lord Ashcroft seems to think that the public are not interested in excessive debate about Europe and we often hear from the Tory Europhile leadership that a Eurosceptic stance will lose votes. It would be interesting to know how many prospective Tory voters would not vote for the party if it was seriously campaigning to get UK out of the EU, compare with how many would vote for it if it was. My guess is that there would be very few in the first category but a huge number in the second. I, and a large number of people I know who would normally be expected to vote Tory, have not been able to vote Tory since Major rammed Mastricht down our throats and, in my view, it was he who “split” the party.

      • rose
        Posted June 14, 2013 at 2:36 pm | Permalink

        No, it was Heath who split the party.
        Look back at the commentary at the time – see the Spectator archive for a start, on The Great Debate, July 1971.

    • Robert Taggart
      Posted June 14, 2013 at 1:55 pm | Permalink

      Not to mention the PVV – Pv – any connection ?!

      • Peter van Leeuwen
        Posted June 14, 2013 at 5:18 pm | Permalink

        @RT: how clever! Because of PR, PVV is representing 10% of Dutch people in parliament, which you may have seen on the RT TV channel or , if you’re not connected, have read in wikipedia.

        • Robert Taggart
          Posted June 15, 2013 at 1:58 pm | Permalink

          RT – ditto.

    • Mark B
      Posted June 15, 2013 at 12:14 pm | Permalink

      I 100% agree with you on your points regarding the electoral system and a constitution and constitutional court.

      Ironic thing is, I believe it was the British that helped set up the system today after the WWII. Could be wrong though.

  2. lifelogic
    Posted June 14, 2013 at 5:51 am | Permalink

    Indeed how can anyone sensible, given the situation, think much differently.

    • alan
      Posted June 14, 2013 at 7:11 am | Permalink

      Oh, I don’t know: I think there are quite a few points in the article where one could question whether it is “sensible”.

      For example, the implication that Greek banks that had run out of money had an alternative to either borrowing or defaulting. In the world of financial engineering there may be some alternative but right at this moment I can’t think of it, and I suspect that if an alternative is produced it will be equivalent to either borrowing or defaulting – for example leaving the euro is actually defaulting (which is why many Greek people don’t want it). It’s Greek banks that failed, not the euro (unlike in the UK where the banks were rescued at the cost of devaluing sterling, a default on paying our savings and wages).

      Then there’s the implication that “Greek euros” have less convertibility than other euros. Euros are, as I understand it, claims against the European Central Bank, not against the Cypriot or any other government. They are fully convertible, indeed there is no difference between them, as every “sensible” person knows. What is true is that a Cypriot bank that does not have enough euros and cannot borrow may not be able to pay, but then most “sensible” people would expect that. It’s got nothing to do with the convertibility of one euro to another.

      Reply If you put more than 100,000 Euros into the wrong Cypriot Bank you could not spend your money when you wishdd or withdraw it. When you were subsequently allowed to withdraw some they cut the amount you owned.In other words large sums in many a Cypriot Bank account were not freely usable and did not have the same value as normal Euros.

      • nicol sinclair
        Posted June 14, 2013 at 12:44 pm | Permalink

        @Alan: “…which is why many Greek people don’t want it…” Where is the evidence for that statement?

        • Alan
          Posted June 15, 2013 at 6:55 am | Permalink

          I think they voted for parties that were in favour of retaining the euro.

          • Denis Cooper
            Posted June 15, 2013 at 8:00 am | Permalink

            It was made clear to the Greeks that leaving the euro would mean also leaving the EU, and that immediately swung Greek opinion back towards staying in the euro.

      • forthurst
        Posted June 14, 2013 at 12:53 pm | Permalink

        “It’s Greek banks that failed, not the euro”

        Are you are suggesting that the Economy of Greece was not damaged and is contuining to be damaged by a one-size-fits-all interest rate and exchange rate? Is the rate of youth unemployment at over 60%, and the catastrophic shrinking of the economy caused by the failures of the banks? Its hard to see how it is possible to have healthy banks in a sickening economy.

        • Alan
          Posted June 15, 2013 at 7:23 am | Permalink

          You ask interesting questions.

          There isn’t, and in my opinion should never have been, one interest rate for all borrowers within the euro zone: that was in my opinion an error made by the bankers and one of the reasons the banks lost so much money. Now I don’t think Greece can borrow at the same interest rate as other countries in the Eurozone. That’s a good thing in my opinion, even though it makes life difficult for the moment: only investments that have a high probability of making money will get loans.

          Yes, in the short term the Greek economy is harmed by not being able to devalue: but if they left the euro they would face the same dilemma that we do, if we keep on devaluing then others might lose faith in our currency and we might suffer more harm than good. Mr Osborne comes to one conclusion, Mr Balls to a slightly different one: I don’t know who is right. Also if people in Greece were forced to convert their savings to a new currency their savings would be worth less, and they probably don’t want that even if it did help others, and those in work would in effect be paid less for the same work.

          Yes, I think the high rate of unemployment in Greece and the shrinking of the economy is brought about by the failure of the banks.

          I think it is possible to have healthy banks in a sick economy (and they should help it to recover), but experience seems to me to be showing that it is not possible to have a healthy (capitalist) economy with sick banks. Hence the need to “recapitalise” the banks – which I think means printing money and giving it to the bankers.

      • uanime5
        Posted June 14, 2013 at 2:37 pm | Permalink

        Actually John if you deposit more than 100,000 Euros into the “wrong Cypriot Bank” and this bank legally deducts a percentage of your deposit then it doesn’t mean that these euros have less value than other euros. It means this bank has more charges than other banks (specifically a bank’s bad investment fee).

        reply Nonsense – it means common EU banking regulation and the ECB as lender of last resort do create 2 different Euros.

        • uanime5
          Posted June 15, 2013 at 1:06 pm | Permalink

          I thought under EU banking regulations it was the state that had to guarantee bank deposits. So in this case it was the refusal of the government of Cyprus to guarantee the full amount money deposited in the banks that lead to bank accounts being reduced, rather than a new euro being created.

    • Jerry
      Posted June 14, 2013 at 7:24 am | Permalink

      @Lifelogic: Indeed, but as there are only two possible solutions to the Euro crisis, one is for full Federalisation of the EU [1] or for the break=up of the EZ back into national currencies, as the first is all but politically impossible and the second would destroy the eurocrates “Grand Plan” completely I suspect that common sense will have to wait whilst the meddling around the edges continues – perhaps when Spain or Italy ask for a bail-out sanity will return.

      [1] those not within the EZ would have to decide if to join the EZ or convert to a looser EFTA type membership

  3. Andyvan
    Posted June 14, 2013 at 6:23 am | Permalink

    I suspect that the German voter would not be such a fan of the Cyprus model if they had their money stolen by a corrupt and incompetent government. Much as British people would not be all that pleased if they actually realised how much is stolen from them by inflation and artificially low interest rates. All EU governments have engaged in every sort of theft and lie to keep the money flowing into their pockets and bribe enough people to keep themselves in power. Now the bills come due and when the Germans understand that they are the bank of last resort for all the criminal politicians across Europe they may not be very happy.

  4. alan jutson
    Posted June 14, 2013 at 6:23 am | Permalink

    Seems to me Mr Lucke has not yet understood the reality of the present position, and still grasps at the thought that a federal europe run on German lines is still possible.

    The fact of the matter is, all Governmemts seem to want to spend more than they earn in tax receipts, so whilst this attitude persists Germany and others who want to live within their means, will continue to pay more for the failure of others.

    I wonder if the German people are fully aware of the scale of the problem yet.

    • Denis Cooper
      Posted June 14, 2013 at 6:42 pm | Permalink

      Maybe he wants pan-European federalism, but he also wants Germany to be able to claim exempt itself from the consequences whenever it so desires.

  5. margaret brandreth-j
    Posted June 14, 2013 at 6:37 am | Permalink

    I tend to look at things form the particular to the general and then reverse the process. The principles I apply are not scientifically exact by any means yet there are similarities between small events and larger events which demonstrate the human condition .
    For instance I look at the business’s I innocently had shares in, the loans taken out which I had no knowledge of and the debts I had to pay for others whilst others lived exciting lives when I was counting every single penny to exist. People will live on the honesty and fairness of others , countries will be lazier and not contribute as much effort as others and rely on the nanny aspect of existence and others will struggle to pay for unconsidered extravagance of many, if you let them. It is difficult not to let them as they will by nature cream the efforts of another and say it belongs to them. Countries will jingoistically also behave similarly.
    The sense of belonging and identification to a group enables people to pull for the group as for example England, Scotland, Spain etc, but when the difference between sects and nations is too great, the competition between them, due to dissimilarity, is destructive, as the power factor and winning for those who are similar becomes greater than the whole.
    So it is with the EU. There are those who boast, as they have an easy ride on the back of others , there are those who compete strongly , healthily and win and there are others who bend to criminality to get what they want. All in all it is the human condition that sways events, not those bits of coins representing economics.

  6. Nick
    Posted June 14, 2013 at 7:08 am | Permalink

    Renege on debts.

    Who would have thought that.

    Just like MPs.

    We will pay you from 65 (60). Unilateral default.

    We will pay you an income linked to RPI. Oh no we won’t. We’re going to default and pay you CPI

    ….

    Still no sign of the debts being reported.

    Two years ago, the estimate was 5,010 bn pounds rising at 734 bn a year.

    The state is taking your money with no intention of honoring its side of the contract.

    Reply Future pensions have always rested on future votes in Parliament. People paid in thirty years ago on the assumption of much shorter average life than they are now enjoying, so they are getting more back than planned. That is why government is changing the retirement age. The UK debts are not increasing at anything like the rate you say.

    • nicol sinclair
      Posted June 14, 2013 at 12:54 pm | Permalink

      Reply to reply: “People paid in thirty years ago on the assumption of much shorter average life than they are now enjoying, so they are getting more back than planned.”

      Oh no, we didn’t Mr R. We (including me) paid in because we expected a reasonable life in retirement REGARDLESS OF AGE.

      Meanwhile , much of our ‘hard earned’ is being spent on the feckless who refuse to work for a living. I am still having to work for a living at 70+ in order to pay the bills.

      For the feckless, get off your bottoms and contribute to our economy like I’m having to do well beyond retirement age.

      • Bob
        Posted June 15, 2013 at 10:54 am | Permalink

        @nicol sinclair

        “much of our ‘hard earned’ is being spent on the feckless”

        Don’t forget that the UK DfID budget was increased by £4 billion p.a.
        Our govt has to find the money from somewhere to cover the increase.

      • uanime5
        Posted June 15, 2013 at 1:08 pm | Permalink

        The problem many people face is that employers would prefer to hire someone with 50 years of work experience than 0 years. So the “feckless” cannot get jobs because they cannot compete with other, more experienced workers.

  7. Nick
    Posted June 14, 2013 at 7:10 am | Permalink

    Freedom of movement of Goods, services, people and capital.

    Unless you are Cypriot. No freedom to move capital.

    Unless you are selling to the French. No freedom of movement of goods and services. Culteral Exceptions…

    The only good point. It’s legal to prevent the free movement of people. The government can stop migration.

  8. Mike Stallard
    Posted June 14, 2013 at 7:21 am | Permalink

    What he is saying flies in the face of what the Commissioner Barroso is saying quite openly in public speeches. He readily admits that there is a crisis, although in his opinion, it is now quietening down. On the other hand he is totally against nationalism and also populism. He is convinced that the answer to Europe is “More Europe.”
    I nearly cut and pasted some of his State of the Union Address this year. Then I thought better of it.
    The question to me is simple: how ruthless is M. Barroso and his Commission going to be when faced with a real threat of independence from any one country? (Including our own).

    • nicol sinclair
      Posted June 14, 2013 at 12:57 pm | Permalink

      @Mike Stallard: Hear hear. You got it in one.

  9. Brian Tomkinson
    Posted June 14, 2013 at 7:32 am | Permalink

    If I understood him correctly on yesterday’s Daily Politics, Professor Lucke’s main problem in getting his message across in Germany is lack of financial backing compared with the other parties who receive state funding. Tax payers paying for party propaganda is something we must resist here in the UK.

  10. Denis Cooper
    Posted June 14, 2013 at 7:45 am | Permalink

    “He now thinks the troubled southern members of the Euro area should leave the currency union”

    Sensible man; just a pity that those leading the three main political parties in the UK are all adamant that the present eurozone must be preserved intact so that it can later expand and eventually engulf us as well.

    • nicol sinclair
      Posted June 14, 2013 at 12:58 pm | Permalink

      @ Denis: Yessssssssssssssssssssssssssssss!

  11. Roger farmer
    Posted June 14, 2013 at 8:04 am | Permalink

    All credit to Bernd Lucke for admitting his error.
    The idea of a more cooperative Europe after the disasters of two World wars was a laudable one, and it was correct to start to grout the national gaps with free trade between nations. On the basis that you do not normally go to war with your favoured trading partners it had a lot of merit.
    There is an aspect of man that proves detrimental to the good of the whole. It manifests itself in all levels of group activity be it the golf club, business, health service ,civil service or government. Put a desk, figuratively in the corner of an office place a man in it with a title, and he all to often accrues more desks and people to fill them until he has a significant department. This thinking took root in the emerging Europe to the extent that there is now an ever growing cancer in the bodies of Europeans. We have Parliaments, Commissions, Law Courts and a proliferation of quangoesque organisations dictating how 300 million people should live their lives in the most grotesque of detail. Politicians then tried to force the issue with the introduction of the Euro. Everyone would have to play by the rules in Euroland, but surprise surprise they did not. All it is achieving is a gross distortion of the lives of most of those 300 million people all because the man with one desk in an empty office wanted more.

  12. Peter Stroud
    Posted June 14, 2013 at 8:13 am | Permalink

    I have assumed that there has been a team of bright economists in Brussels working out contingency plans, for the orderly break up of Euroland. At least since the beginning of the current crisis.

    • nicol sinclair
      Posted June 14, 2013 at 1:06 pm | Permalink

      @Peter: No way, Jose!

  13. forthurst
    Posted June 14, 2013 at 10:26 am | Permalink

    Economists are often poor prognosticators, since they believe their scientific theories, which on the whole, are neither scientific nor theories, simply hypotheses or speculations, will enable them to predict the future. In truth, economic reality is heavily influenced by human nature, something that Keynes understood, which often negates not only the endeavours of economists but also inhibits their capacities subsequently to admit to error, so well done to Prof Lucke.

  14. Robert Taggart
    Posted June 14, 2013 at 10:40 am | Permalink

    Who would have thought it – never mind wanted it – a belligerent nationalistic Germany – could be the answer to Eurosceptic prayers !

    • nicol sinclair
      Posted June 14, 2013 at 1:08 pm | Permalink

      @Robert: They tried that twice before if I recall correctly. If one includes the Franco-Prussian War – that’s thrice…

  15. Martin
    Posted June 14, 2013 at 10:55 am | Permalink

    Does Professor Lucke think that the ex DDR Lander should go back to Ostmark?

    Did Professor Lucke think that Gordon Brown’s devaluation of Sterling against the Euro was a great success? (Other than the anti-EU media not even reporting it!)

  16. Acorn
    Posted June 14, 2013 at 11:42 am | Permalink

    You don’t say so JR, but this was a Bruges Group event; the photos are on “flickr”. The group most likely to jump in with UKIP next election. Possible election pact Eurosceptics (any colour) and UKIP? Now I could get excited about that.

    Chapter one of MMT tells you exactly why the current Euro structure could never work without a single Treasury controlling Fiscal policy and a single Central Bank controlling monetary policy in a sovereign fiat currency economy. The US found that out pretty quick a century back. And, that ain’t going to happen anytime soon.

    In fact, it would probably be easier to do away with 17 Euro “nations” and run them as one country made up of the 63 regions that the EU currently divides them into. )etc ed)

  17. Dan H.
    Posted June 14, 2013 at 2:26 pm | Permalink

    You know, I’m starting to get the idea here that the entire Euro and EU debacle isn’t about economics, or politics at all. No, the whole problem is national culture, and it may even be partly genetic in basis (and if it is, we’re screwed if we try to force the EU to carry on existing).

    Best place to start is the end of World War 2. At this point, Germany has had about as thorough a pasting as any country can receive and still exist, and most of the rest of Europe has similarly had a pretty good hiding. Now, watch what happens: Germany resurges, even to the extent that West Germany can take on and mostly renew an economic basket case like East Germany. Britain in the same period limps along significantly less well, but still comes out fairly well. France does OK, Holland, Belgium (despite incredible cultural division) also run fairly smoothly, but look: ALL of these countries that are doing OK are doing so under fairly different political regimes.

    Italy, Greece and the rest of Club Med limp along poorly after World War 2, and never really seem to get anywhere much. Similar political systems, similar labour forces, poor results.

    This seems to be a hell of a lot more about culture than it is about politics or economics. What do you all think?

    • Denis Cooper
      Posted June 15, 2013 at 7:51 am | Permalink

      I think that eventually the Germans could train up the Greeks to be much more like Germans, but even if that was desirable it would take a long time. And it may not even be desirable, bearing in mind that no culture is static, and within living memory German culture was not something to be copied in many respects, and who knows how it will evolve in the future?

  18. rose
    Posted June 14, 2013 at 2:31 pm | Permalink

    Some plain common sense from the Franco German Axis at last. I saw him on Newsnight and hoped he would make an impact but he appeared too polite and reasonable to survive in today’s politics. Rather like you.

  19. uanime5
    Posted June 14, 2013 at 2:42 pm | Permalink

    Given that Germany currently benefits from the Southern European states devaluing the euro because it makes Germany’s exports cheaper there’s no chance of Germany calling for these Southern European states to leave the euro and even less chance of Germany leaving the euro.

    Also your comments about the Cyprus Euro are incorrect as both Cyprus and the rest of the eurozone use the same euro. A more valid comparison would be Euro banks and Cyprus banks as the latter won’t guarantee any savings above €100,000 euros.

  20. Normandee
    Posted June 14, 2013 at 2:52 pm | Permalink

    Interesting report on your meeting with the German Independance Party, how was your equivalent meeting with Nigel Farage? and when did it, or when will it take place?

    • Normandee
      Posted June 14, 2013 at 5:10 pm | Permalink

      So am I right in saying you will talk to the leader of a German independance organisation but not the British one?
      What if Miliband did this ? what if he was encouraging a foreign party and ignoring the British one? You would have something to say about that, and I think the word you would use is, hypocrite.

      Reply MPs of all parties regularly meet with a range of parties and leaders from abroad. I would expect Mr Miliband to meet with leaders of parties from around the world. We need to know what they are doing and what they believe. It does not mean we agree with them. I do not agree with AFD’s support for a largely unreformed EU leaving aside the Euro.

      • Normandee
        Posted June 15, 2013 at 12:24 pm | Permalink

        “So am I right in saying you will talk to the leader of a German independance organisation but not the British one?”
        Silly me leaving you Miliband as a get out.
        So how do you feel about the UK leaving a largely unreformed EU ?

        Reply I have made clear I would vote for Out if that were the choice, the current EU or out.

        • Normandee
          Posted June 15, 2013 at 11:45 pm | Permalink

          “So am I right in saying you will talk to the leader of a German independance organisation but not the British one?”

          • Normandee
            Posted June 16, 2013 at 8:33 am | Permalink

            You really have no shame have you ?
            Being a politician, and a tory one at that, comes before anything else. I am now of the fixed belief that for all the rhetoric you would rather stay in an unreformed EU than completely cut yourself off from the “party”, and you are not alone. This is the position of most of the so called rebels, you genuinely want out of the European Union but not at the cost of the party. Well it’s not going to go like that is it ? You will lose the next election because follow my leader will cause a split in the tory vote, but thats ok because the party will still be intact. Party first, country second, people third until that changes and country and people have a greater say than narrow party interests we will go no where.

  21. carol42
    Posted June 15, 2013 at 12:22 am | Permalink

    Does anyone know what is happening in Cyprus? it has all gone very quiet. I have a friend who had the misfortune of selling his holiday home there just a week before it all went wrong. His cash, just under 100,000 Euros, is stuck in his solicitor’s client account and so far he has been unable to get much information. All he has been told is that he will not be liable for any surcharge and that the solicitor has to go before some panel to show that the money in his client’s accounts does not belong to them and get permission to release it. I find it incredible this is happening in a member country.

  22. Lindsay McDougall
    Posted June 15, 2013 at 12:50 am | Permalink

    But this isn’t an alternative just for Germany. We in the United Kingdom are perfectly entitled to have our own foreign policy, to say that a 17 member State Euro zone is a bad idea and to call for its break up. There is no reason why Professor Lucke should be a lone voice in the wilderness.

    • Denis Cooper
      Posted June 15, 2013 at 7:20 am | Permalink

      Of course the anomaly is that under Major the Tory government did indeed say repeatedly that it was a very bad idea to have a “one size fits all” single currency; but nonetheless Major not only allowed it to be created but also relinquished any veto over which EU countries would be permitted to join it after the first wave, and he allowed it to become the norm that all new EU member states would have to pledge themselves to join it as a condition for joining the EU, and he allowed all these things to happen without even insisting that there must at least be a way for a country to leave it, and in fact he never ruled out the possibility of the UK joining it at some point in the future.

  23. Mark B
    Posted June 15, 2013 at 12:11 pm | Permalink

    Mr. Redwood MP. You are correct in pointing out that their were warnings about the Euro and what it would mean (I believe the first to highlight this was Dr. Alan Waters ?). The Euro as is all things EU are politically driven with one clear single objective.

    The agreements regarding non-fiscal transfers were a sup to get Germany on board and to further integrate the countries of the EEC/EU. Germany knew at some point that they would be liable for other nations debts if that was not put in the treaties. The seeds of today’s crises were thus sown.

    Today we have a Germany, led by the Bundesbank which is trying to resist further fiscal integration and is coming up against a determined ECB and EU, plus national governments.

    It is as clear today, as it was way back when the Euro idea was first floated, that in order for a currency union to work successfully, like Sterling and the US Dollar, you need to be able to transfer funds across ‘regions’. To do this legally, one must have the political, legal and institutional framework of a sovereign country, and have the aforementioned ‘centrally managed.’

    There are various outcomes for those countries in the Eurozone and in turn to those outside it, not just EU one’s at that. The Eurozone, in order to survive must, at some point, unify ! This means a Federal Europe, probably not too dissimilar to the UK.

    The fact that many countries cannot keep up with the might of Germany is also not new. Remember the Exchange Rate Mechanism (ERM) and the the disaster that was for the UK and the John Major Government. It turned out to be a blessing in disguise, as it taught us that, which now know today. Funny that.

    The German AfD party is not anti-EU or even Eurosceptic. It is pro-Germany and wants to return to the Deutschmark. They can see the writing on the wall. They can see that they in time will be dragged down by the inefficiencies, waste and endemic corruption of the club-med countries. They are going to be bled dry and there is no stopping it.

    There are of course a multitude of other scenarios but that would take pages and much of your time.

    So I’ll end here.

    • Denis Cooper
      Posted June 16, 2013 at 5:53 am | Permalink

      However the German government and parliament is on the opposite side of the argument to the Bundesbank.

      http://www.dw.de/germanys-constitutional-court-criticizes-ecb/a-16877427

      “Conservative MP Gunther Krichbaum, meanwhile, counters, “We, in this case the Bundestag and the government, believe the ECB acted within its mandate.” If that had not been the case, maintains Krichbaum, chairman of the parliamentary committee on EU affairs, the government would have brought its own suit before the European Court of Justice. “The ECB has shown in the past that it acts out its mandate with great responsibility,” Krichbaum told DW.”

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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