The German surplus


             Let us talk today about the German surplus. There it stands, enormous, giving Germany a great sense of achievement and power. No wonder so many Germans want to keep the Euro. They associate it with high levels of exports throughout  the EU, and rising cash balances as they seek payment for their goods.

              In 2010 Germany exported 179 billion Euros more than it imported. 60% of its exports were to the rest of the EU.

             It leads Germans to say to other Euro members, you can be like us. Work as hard as we do, set realistic wages, and you too can have a surplus like ours.

              The German surplus is matched by the southern states’ combined deficits. Portugal, Greece, Spain, and Italy had a combined deficit about as large as Germany’s combined surplus. They like Germany do a lot of trade within the EU.    They recognise that Germany has become more competitive than them. They want a way to pay for the goods they buy from Germany. They seek loans or grants from the surplus country to pay the bills. Germany is not keen to send them grants, and is trying to restrict the borrowing. The southern states are forced in to austerity measures, to curb their appetite for German products.

             In a normal single currency area, backed by a single country, these surpluses and deficits are financed much more easily. If one region of the UK has high unemployment, tax revenues from London and the south-east are collected and sent to pay the benefit bills. If one  or more region falls behind, the central government sends it more state  cash for local government, for education and health. If one or more region  grows slowly, there are regional policies  to locate more public sector jobs and to attract more private industry to the troubled area.  These do not always work, but the combined impact of the very large sums of money transferred makes it politically tolerable.

            If the politicians meeting later this week to “save the Euro” are to have any more success than in the many previous meetings with the same aim, they need to understand this simple characteristic of successful single currencies. Where you have parts of the union that are much more productive and successful than other parts, there needs to be very large transfers to finance the imbalances.


  1. lifelogic
    December 7, 2011

    Well the Germans need to make up their minds as to how they wish to proceed. Cast jelly Cameron has clearly already decided to give in fully and to deny the public the promised say in return for some worthless assurances. Similar to the ones given on CAP to Blair when he gave away the rebate.

    The man must go if he cannot do any better than that. He is unelectable at the next election anyway as he has zero credibility left.

    1. lifelogic
      December 7, 2011

      Radio 4 is today going on about pay day loans, which have interest rates of several hundred percent. Daytime TV is also regularly advertising loans at about 300% APR (in between the adverts for over priced life cover and endless no win no fee legal actions and similar).

      I cannot see that loans above say 20% APR serve any purpose, whatsoever, beyond inflicting misery on the vulnerable. Why are they permitted? Surely if people have to pay above 20% APR they are better of without the loan. They are probably also better off without Major’s national lottery too yet another tax inflicted on the poor and vulnerable.

      There is also the problem where people take a loan at one reasonable rate then this is increased to absurd levels due to minor defaults or later changes in conditions when the are unable to repay for some reason.

      The government should announce an intention to cap on all interest at about 20% shortly to apply to all loan in existence. Thus killing a pointless misery causing industry. Just as Huhne killed of the absurd Photo-Voltaic one – that that he had idiotically kick started in the first place.

      1. scottspeig
        December 7, 2011

        I’m not convinced against the high short term loans – Maybe if it is set as a payment rather than percentage and as long as the penalty isn’t extortionate, I cannot see why a lender of £100 cannot ask for £110 back in a week’s time – even though the APR of such becomes ridiculously high.

        Maybe if it is a £10 fee and then a penalty of £90 to be paid over 1 yr, (so the penalty means you pay double want you borrowed) or some sort where there is no interest to pay, but there are fees to pay??

      2. norman
        December 7, 2011

        I’m not trying to defend predatory loan sharks but these are short term loans (a couple of weeks typically, until the next pay day) and for very small sums so the APR appears ridiculous, sometimes in the thousands of percent.

        Take someone who is applying for a £200 loan (perhaps to stop the electric being cut off) to be paid back in two weeks time. The time it takes the loan company to process the application, etc. it wouldn’t be unreasonable to charge £20 for this service but if you calculate the APR on paying back £220 in two weeks on a £200 loan it would be in the hundreds of percent.

        1. lifelogic
          December 7, 2011

          Yes but they are not all short term and many become long term if not paid back. Some are 12 months at about 300% APR. They need an electric card meter and budgeting help not a high interest loan for a week.

      3. Andrew Duffin
        December 7, 2011

        Most credit cards have rates above 20%; do you want to close that industry down as well?

        Why not leave people to make whatever assessment they want of their needs (if they’re a borrower) and the risks they face (if they’re the lender).

        It really is none of your business.

        1. lifelogic
          December 7, 2011

          The people are pretty desperate for the money rather like an addict or alcoholic they would clearly, more often than not, be far better off without the loan at all.

          Often the loan is not paid back and so rapidly runs away and cannot be paid and becomes a source of misery for the whole family. Perhaps the 20% limit should be 25% or even 30% or a time cut off when it goes down to a low level – but a cut off there surely should be and penalty default charges should be restricted. In the case of porn brokers they have security for the debt anyway.

          One of the loans advertised on TV at about 300% APR mentions repayments over a year and a car. So borrow say £2000 and perhaps pay back £5000+ or similar over one year of 12 payments!

          Surely it is better to walk or get a lift. If the government really thinks these sorts of people have too much money this is surely not the best way to allow companies to take it off them.

        2. lifelogic
          December 7, 2011

          Even Warren Buffet struggles to make more than 30% PA very often so it is very unlikely these borrower will improve their lot with loans at 300%+.

          Rather more likely they will buy lottery tickets, gamble it, drink it or waste it in some other way and thus have bigger problems next week. They are surely better off if it is not available to them.

          1. zorro
            December 7, 2011

            A lot of the time this is nothing more than usury and is frankly unacceptable. I am all for freedom of choice, but these people are profiting off people in need or at a low ebb. It leaves rather a bad taste, a bit like those doubtful investments made on behalf of people nearing the end of their life which was recently in the news.


          2. Bob
            December 7, 2011

            The PIGIS may soon be needing some extra cash to tide them over to the next bailout.

        3. Bazman
          December 7, 2011

          Very rarely agree with life logic, but in this case he is right they are a finance parasite on the poor and the vulnerable who often have money problems anyway.
          This is what makes it my business.

        4. davidb
          December 7, 2011

          Usuary is a sin. Christians should not indulge in it. People could join credit unions or save up if they have trouble obtaining credit. But generally I concur with Mr Duffin. Less nanny.

          I have found that people do not grasp APR or interest in percentages. There seem to be many people who look at whether they can afford the payments and don’t pay much attention to the number of payments involved or what a bad deal they are entering. Even better educated people seem to struggle with this.

    2. Disaffected
      December 7, 2011

      Spot on as usual lifelogic. The electorate will remember:
      Budget of borrow and spend continues, EU contribution and powers hugely increased worse than under Labour, Immigration worse than under Labour, Defence worse than Labour, Crime and Disorder worse than under Labour, Welfare costs rise higher than under Labour, Public spending worse than under Labour, higher energy costs through green unproven science worse than under Labour, equality rubbish worse than under Labour- Cameron and Clegg think it is right to change our Christian religion by having gay marriages in Church. Clegg is an atheist why would he care? Except when it comes to his children’s education of course. Labour were the most hated government in recent memory and Cameron is performing worse than them. I hope Cameron remembers that the plebiscite have memories as well.

      About time some true Tory MPs stood up against Cameron and oust him before it is too late. Lib Dems have nothing to lose over Europe as they are going to be destroyed at the next election.

      1. lifelogic
        December 7, 2011

        Surely, even the dimmest of Libdems, must realise that the EU/EURO is undemocratic, anti growth, anti jobs, financial disaster now? And they promised an EU referendum (and no tuition fees) did they not?

        1. uanime5
          December 7, 2011

          The EU is more democratic than our own government (PR vs FPTP) and seemed to be growing and producing jobs without a problem until the banks destroyed the economy.

          1. lifelogic
            December 7, 2011

            You cannot have an EU democracy as there is no European Demos or European populous not even a common language nor an understanding of where the common issues or interests lie in the different countries of Europe with their various histories and life styles. If you did get an appalling murderous money thieving EU government there may well be no common ground in how to replace them across Europe. What powers do MEP actually have anyway it is a pure talking shop only.

          2. Bob
            December 7, 2011

            Who democratically elected the EU commission? Mr Van Rompuy? and the Baroness Ashton (she’s paid £230,000 p.a. but doesn’t pay any tax in the UK)?

            The EU parliament is there only to give the impression of democracy, giving everyone a vote in EU elections is meant to placate the public and provide some lucrative positions to buy off our politicians. The MEPs just rubber stamp anything that the commission place on their legislative conveyor belt.

        2. Disaffected
          December 7, 2011

          No Lib Dems want a pan European state look at some of their voting records in parliament this year. They want the EU to have control over the Uk’s finances, Clark pretty much said the same thing in his interview.

          Come on Lifelogic, what they promise before an election and what they deliver are two different things. This is not about economics, jobs etc it is about fanatical political ideology. Look at what Clegg said about the culture of Britian against Germany before the election (Wikipedia). He criticises the UK culture every chance he gets. Look at why Straw wanted mass immigration. Look at Warsi today wanting to claim what was in their manifesto, when it suits they do not want to be held to their manifesto because they are in coalition. sadly, WEeak Dave will hand the UK over to germany on Friday.

          1. lifelogic
            December 8, 2011

            “WEeak Dave will hand the UK over to Germany on Friday.”

            It certainly looks that way I have no confidence in him whatsoever.

      2. outsider
        December 7, 2011

        It has been pretty obvious from the start that the Financial Transactions Tax was straw man put up as an obvious threat to the UK that could be graciously dropped as a tremendous concession in exchange for the UK agreeing to whatever else the European Commission and Merkel/Sarkozy want to push through.

        1. lifelogic
          December 7, 2011


  2. Mike Stallard
    December 7, 2011

    David Miliband made a really cogent comment yesterday. It was to point out that once the 17 Eurozone members unite, then the other states of Europe will be excluded from all decision making. That, he said, is the danger.

    Mr Cameron has not explained this in a serious enough way. He appears to accept that if the Euro goes under, then the whole world will be thrown into a Brownian recession. He accepts the Euro idea of “populism” and denies the referendum which he has promised – twice. In the photos of the leaders, he is always at the back, never at the “heart of Europe”.

    We British have a very long and honourable history of sorting the continent out when it gets into difficulties. We also have a fatal knack of never “interfering” until it is far too late.

    Stop kidding around, Mr Cameron – lead for heaven’s sake. What has Eton taught you if not leadership?

    1. Disaffected
      December 7, 2011

      Cameron’s rhetoric today is to appease his critics. He has no intention of blocking anything, Clegg will not let him. Merkel and Sarkpsy have already told him. He is preparing his weasel words for the press on friday/Saturday why it is in the national interest to be subservient to Germany’s rule.

      When I hear MPs wanting more and more Europe I wonder what their motive is? It strikes me that first generation immigrant MPs always want more immigration, want to change the UK culture, want to make us more inclusive of Europe, want to open the borders so people can work and live in any EU country and hence become a pan European state. I think people like this should go back to the EU country they come from and live their EU dream there.

    2. lifelogic
      December 7, 2011

      What has Eton taught Cameron if not leadership?

      To say one thing do another PR and argue rather well that black is white.
      To make cast iron promises to gain a position then break them without any qualms.

      To use distractions widely, such as the Royal Succession rules, or the EU lock ruse legislation to distract from the real substantive issues.

      To think that passing equality laws will make people equal. For example laws to say insurance and pensions for men and woman should be at the same rate (as they clearly live the same time, drive exactly the same way and are identical in every respect – though they do need to be discriminated in favour of in parliament and on wages – the poor little “calm down” dears). Also that 105 years old’s are just as effective workers as 30 year old’s if the law says they are.

      To think that money grows on trees and should be thrown at hopeless black holes in the EU.

      To think that the interest of the UK voters should rarely be considered it is after all “never the right time” and after all Sacozy is so very nice and did lend me the fabulous Fort de Bregancon when my father was ill.

      1. lifelogic
        December 7, 2011

        Listening to him on Question Time he clearly expects a treaty of the 27 which he will agree to for a few worthless beans (and destroying much of the remaining democracy and thus liberty in Europe in the process). He clearly also plans to do this without any reference to the voters.

        If he does this, given his earlier assurances, he must then be evicted he would be worthless as PM – almost anything would be preferable.

        1. Disaffected
          December 7, 2011

          Lifelogic, the assurances Cameron is alleging to secure from the EU have already been agreed by France and Germany. As Jeremy Warner rightly points out in the DT, Cameron is all hot air. 6 weeks ago he appeased his back benchers by saying he would repatriate powers back to the UK in exchange for treaty change, German Finance Minister said he would not, and he was right. Clark said: “No, No.” He also said it would be good if there were proper financial regulation by the EU in an interview today. Miliband just asked him what powers he is going to repatriate and he looked completely lost.

          Germany are going to change the EU treaty, the UK will be given nothing and the UK will come closer under German rule- fact. Cameron will spin, use sophistry, deceive or lie that there has not been any transfer of sovereignty or powers. But by definition there has to be significant change to the EU otherwise there would not need to be a treaty change that Germany will secure. They are doing this to safeguard their country and to conform to their country’s ambitions. Cameron in contrast is using every weasel/deceptive word to avoid or confirm that a change is happening in the EU. It is difficult to reconcile that Clark says it will be good for proper EU financial regulation and Cameron telling us that no powers are being transferred.

          The question now is: why does the UK need so many layers of government? EU, Westminster, regional assemblies, local government, parish councils and a whole load of quangos to supervise. The unelected dictatorship of the EU is running the show cut out the middle men who cost us all a fortune. Look at the Irish puppet government- announcing the country’s budget that was decided by Germany’s politicians!!

          European Liberal Party, which Clegg and Oilly Rehn are a members, want a pan European state. Cameron knew this before he went into Coalition with them. Cameron chose his pro-Euorpean ministers, Cameron chose his pro-Eiropean advisers ie Heseltine, Major and Clark. I would like to think there are some Tory politicians who have a little bit of grey matter between their ears and oust Cameron ASAP. The Tories have effectively two years before the run up to the next election- look where they are on policy issues to the electorate. Lisbon Treaty gets a further strangle hold on the Uk in 2014. Time is not on the Tories side they have already wasted 2 years of lost opportunity.

      2. uanime5
        December 7, 2011

        Given the recent bouts of qualitative easing it’s no surprise that people think the banks have limitless money.

        1. zorro
          December 7, 2011

          There is very little quality about the easing but plenty of quantity….


  3. Edward Barrow
    December 7, 2011

    This is only half the story.
    What happens if you have multiple (floating) currencies, and the same productivity differentials? The less-productive southern states devalue, so German goods get more expensive for them, and Germany retrenches. Southern currencies inflate, as they always tended to do pre-Euro. You don’t have debt crises, you have currency crises. The root problem is the same – the productivity differential. The idea of the fixed currency was to provide a stable cross-border pricing regime so that price mechanisms would change the productivity differential. Multiple currencies are no more part of the solution than the single currency was – the solution is resource (labour, land) market flexibility so that lower southern costs attract production and boost southern productivity. For all its problems, fixating on the Euro as the issue ignores the basic underlying problem, the productivity differential.

    1. Robert K
      December 7, 2011

      The idea of the fixed currency may well have been to provide a stable cross-border pricing regime so that price mechanisms would change the productivity differential. The problem is that it can’t and hasn’t.
      Personally, I don’t care if there is a productivity differential between north and southern Europe. If the south wants to be more productive it’s up to them, or more specifically it’s up to the enterprises that seek to locate there.

    2. lola
      December 7, 2011

      Quite. And what helps to sort that is more sound currencies, not less. It would also help a lot if there was some way democratic politicians were unable to borrow against future tax streams to buy more votes today.

      1. Mike Stallard
        December 7, 2011

        Hey – wait a minute – what about the democratic deficit?
        Countries are made up of people who are governing themselves in Europe (until recently anyway).
        Greeks and Spanish people are not German (thank heavens). They have their own virtues and their own defects just like everyone except the English who have, as we all know, no defects at all.
        The money reflects this. There were 10,000 ptas to £20 in the 1990s. So?
        What is happening at the moment is that our pound is sinking so fast in value that I will not be able to afford a gluwein when I go to Switzerland next week.
        It really doesn’t matter if all the countries are governing themselves how their currencies compare with each other..

  4. NickW
    December 7, 2011

    Transfer payments won’t be politically acceptable unless there is a uniform retirement age throughout the Eurozone.

    Greece and Italy will have to come to understand very quickly that they will have to accept the one to get the other. However, given the Italian fuss about a very small change to retirement age already suggested for the distant future, recipient electorates are not going to accept the necessary changes.

    I seriously doubt if the German donors will accept the large payments they will have to make either.

  5. James Reade
    December 7, 2011

    There doesn’t need to be – economically. Politically, possibly – not even sure about that either though.

    Economically, there are other means to achieve the rebalancing other than an exchange rate depreciation (which would happen outside a currency union) or fiscal transfers (which might happen inside).

    Any method by which the marginal cost of production in the peripheral regions can be reduced will suffice. In other words, real wage decreases to improve competitiveness. But, of course, governments don’t get elected on real wage decreases.

    1. APL
      December 7, 2011

      James Reade: “But, of course, governments don’t get elected on real wage decreases.”

      Having conditioned their members to an expectation of ever rising salary, neither do Unions maintain what popularity they currently have on real wage decreases!

  6. ian wragg
    December 7, 2011

    So the other EU countries won’t be able to borrow money to finance purchase of German goods.
    No wonder Germany is so keen on the Euro. If it implodes, so will German exports,

    1. Mike Stallard
      December 7, 2011

      And we English?
      How are we affected?

  7. Nick
    December 7, 2011

    If one or more region falls behind, the central government sends it more state cash for local government, for education and health.

    And lets look at the outcome. Money is sent to Liverpool. The results broadly are the same as Greece. People don’t get off their arses and move to where the work is. They sit there like lotus eaters, drinking larger and watching sky.

    Billions have been pumped into these deprived areas, and the outcome is depressingly the same.

    The state is the problem, not the solution.

    1. Bob
      December 7, 2011

      Liverpool would be a thriving centre of commerce if it were not for our over regulation and high taxation which drove manufacturing abroad.

      Now we are left with huge numbers of uneducated and unskilled people who have become addicted to welfare. There is little hope for them, but they should make some effort to justify their keep.

      1. Mike Stallard
        December 7, 2011

        And add in the recent airport tax…..

      2. uanime5
        December 7, 2011

        Manufacture left because of cheap labour in India and China. Greater industrialisation, which used machines instead of people, also reduced the number of people needed in manufacture.

        1. Bob
          December 7, 2011

          Manufacture left because of cheap labour in India and China. Greater industrialisation, which used machines instead of people, also reduced the number of people needed in manufacture.

          If they use machines instead of people, then what has cheap labour got to do with it?

          Why can’t we use machines to manufacture?

          1. lifelogic
            December 9, 2011

            Machines still need operators, need constructing and maintenance and programming labour for these is an still important cost. Why locate them is a high labour cost, high tax, high regulation, area if you do not have to?

    2. APL
      December 7, 2011

      There was an interesting article on the BBC propaganda channel yesterday, about whole districts ‘up t’ north’ that were empty, showing streets and streets of boarded up houses.

      Now it was all because of the private landlords apparently – at least that was the BBC script. Personally, I am not sure how a private landlord can remain solvent if all his properties are empty and boarded up .. but the BBC didn’t go into that aspect of the problem.

      Then there was a KORKER of an interview on Radio 4 during the 1pm news today. All about how, as a result of the government abolishing the Regional development agencies there was some astronomical sum waiting in the EU to be dolled out to the poor burgers of Rotherham.

      Never once was it suggested that if we hadn’t given the money to the European Union we wouldn’t have to beg for it back …

      But there you go, that’s the BBC for you. In the pay of the European commission with their conditional soft loans.

      1. lifelogic
        December 7, 2011

        Good old BBC – Landlords always a favourite target for all sort of attack by the BBC always on the side of Tenants, more regulation or Squatters (stealers of property as they should more correctly be known). After all there are more tenants than landlords so they are always a popular BBC target.

        The other day I heard, on the news, something rather like – after the troubles with state sector pension comes news that private ones are not doing very much better”. To the BBC a private pension is, I can only assume, doing slightly better than one typically seven times the size in the state sector.

        1. zorro
          December 7, 2011

          ‘The median average salary-linked public sector pension that is currently being paid out to a pensioner, is worth £5,600 a year.

          That compares with £5,860 in the private sector, according to the National Association of Pension Funds (NAPF).
          Using a mean average, some £7,800 a year is being paid in a public sector pension compared with £7,467 for a private sector salary-linked pension.’

          Some 87% of public sector employees are currently paying into a salary-linked pension scheme, compared with 12% of private sector employees.

          ‘Many of the salary-linked pension schemes in the private sector have been shut by employers.

          Instead, 32% of the private sector workforce, including the self-employed, contribute to personal pensions and other schemes where there is no promise of a particular level of retirement income.’

          Lifelogic, I don’t dispute the points around the provision of pensions, but that comparison you use should be used in context. The problem is the lack of adequate private provision, which is because of low wage levels and high taxation of various means.


          1. lifelogic
            December 8, 2011

            My figures take the value of the average pension pot – it is about 7 times higher in the state sector.

            Many in the private sector have no pot at all. Most in the state sector only contribute a small proportion of the final value of the pot the rest being made up by the tax payers often taxpayers with no pension at all.

            The MP’s pension is about the best there is (other than perhaps EU ones) with contributions perhaps only 15% of final value received. In other word it is worth almost as much as their salary again. In many state sector jobs it is worth perhaps 30% of salary and they are already paid more than the private sector by about 10% even before the pension. So perhaps 40% over paid on the backs of the private sector tax payers.

            This renders the private sector uncompetitive and cost jobs and tax revenues and things just get worse still.

  8. Bob
    December 7, 2011

    I see that Ken Clarke has thrown in his two-penneth; he thinks that Cast Jelly Dave is being too tough!

    This from the man who would had us in the €uro in a heartbeat, and wants to release criminals back onto the streets before they’ve had time to sniff their first bowl of porridge!

    Past his “best by” date methinks.

    1. lifelogic
      December 7, 2011

      Whenever was Ken Clark’s best days? He clearly need to be retired now – perhaps just doing a few of those second rate Jazz programs (which should anyway clearly be on Radio 2 or Classic FM and not radios 3/4 – so I do not ever have to hear them in passing.

      It seem in UK politics being proven to be wrong like Major, Clark, the green prophets, the LIBDEMs, Healey, Heath, Kinock and the rest is the best route to a very long political career and a good pension. Being right puts you on the back benches at best.

      1. APL
        December 7, 2011

        lifelogic: “He clearly need to be retired now – ”

        You set up the petition on the No 10 web site, and you’ll get at least one additional signature.

        1. lifelogic
          December 7, 2011

          Thanks to Cameron he and everyone can now work up to 110+ even if it does bankrupt all their companies.

    2. forthurst
      December 7, 2011

      I think you will find that Ken Clarke is a Bilderberger; as such he has had the opportunity to associate with some of the shortest and most distinguished people on the planet, and being a bright chap will have been able to absorb their conceptualisation of the New World Order. I think this makes him, if anything, almost overqualified to sit round the Cabinet table with his fellow Bilberberger, Gideon Osborne.

  9. Barry Sheridan
    December 7, 2011

    The current path to save the Euro will commence a one way process in which German largesse, built up by their economic performance, will be milked to bail out those who cannot match her competitively. At the end of this flow the problems facing Europe will remain, an unrealistic, blinkered and ageing population still dominated by bureaucrats whose artful fantasies destroyed the soul of a vibrant collection of peoples. Absolutely brilliant!

    1. The Realist
      December 7, 2011

      Sadly, even the German cup does not run to the benefice required to sort this problem out. It still does not unwind the productivity differentials that have, and will exist for decades to come. Germany has over leveraged banks and the Government has a debt / GDP of circa 84% . Germany like many countrieas has its own problems with the East/Berlin in particular benefiting from massive wealth transfers. East Germany is a good example of how long it can take to drive up productivity and economic activity. It still has a long way to go even after 18 years of huge subsidies! The political and bureaucratic elite will have to face up to the fact that ‘the project’ is broke and cannot be fixed.

  10. Robert K
    December 7, 2011

    I’d like to pick up on your point about regional policies, which are one of the more destructive activities pursued by central government. Without regional subsidies and without constrictive planning policies, capital and labour would rapidly relocate to areas where it would be most effectively deployed. Wealth creation would increase and unemployment would diminish.
    Historically, capital and labour were needed in the industrial belt in the Midlands and NorthWest, where there were extensive deposits of raw materials. Cities such as Liverpool grew because of the burgeoning transatlantic trade. As the raw materials have become exhausted (although there is plenty of coal left) and trade patterns have changed, so the economic drivers for theses regions changed. Subsidy from central government simply traps these regions economically and deprives the more dynamic regions of capital.
    It is time for a fundamental re-think of regional policy within the UK – and heaven help Europe when the EU turns into a grand version of the Westminster regional redistribution machine.

    1. Dave B
      December 7, 2011

      There was an interesting US study that suggests state spending actually drives out private sector jobs. So it makes the problem worse.

      1. norman
        December 7, 2011

        I often make the case (only half tongue in cheek) when English people complain about the perceived extra money being spent on Scotland that it should be us Scots who complain due to the stifling effect the extra money (and government to go with it) has on our economy and liberty!

      2. lifelogic
        December 7, 2011

        Of course state spending drives out jobs. It is money taken from people and businesses who usually know how to use it. Then much of it wasted in collection and distribution, then wasted on daft ideas, buying votes, the green religion and countless other pointless things. Also attracting good people to do useless things and taking them from doing profitable sensible things.

    2. Bazman
      December 7, 2011

      The simple answer is that they are going to be subsidised by benefits or industry. Some towns are geographically isolated and due to changes in the world and the policies of previous governments find themselves left behind economically. You propose to run them further down, by cutting and income that does reach them from the central government. Private enterprise cannot reverse this decline and many jobs are just washing yachts for millionaires anyway. You are in effect trying to create work where there is none.

  11. Kenneth
    December 7, 2011

    But John, large transfers are already happening: people are transferring themselves in large numbers accross Europe.

    This breaks up families and excessive movement is not good for the originating community nor the recipient community.

    1. Robert Christopher
      December 7, 2011

      I remember reading reports that there were no plumbers in Poland: they were all over here!

      1. Bazman
        December 7, 2011

        If Marec and his mates are plumbers then so am I.

  12. oldtimer
    December 7, 2011

    You make the point perfectly that Merkel`s proposal serves the German interest perfectly. It will serve to protect a market without having to pay for its sustenance. For that she relies on the UK to be the sucker with its substantial net contribution to the EU (now close to £10 billion a year) and with an additional financial transaction tax on top if she can get away with it. No doubt other wheezes will be tabled over the next days to accrue more power to the EZ members and away from the UK, such as the revised 85% QMV.

    Denis Cooper`s enlightening post on the previous thread, about the prior need for Merkel to secure permission of all 27 EU member states to do what she wants, confirms the strength of the UK hand. Why did not Cameron/Clegg/Hague not point this out at the outset? We can but guess.

    1. Bryan
      December 7, 2011

      Do not forget the UK balance of trade deficit with the rest of the EU, currently c £40Bn p.a. and growing as new entrants into the EU are subsidised to ‘compete’ which really means capturing what is left of our manufacturing base.

      As Mr Redwood has posted in the past, this is a major strain on our economy and also why the EU needs us more than we need them. This surely is the right time to rattle our sabres!

      Mr Cameron’s article in the Times today is yet another piece from the ‘how to insult the reader without really trying’ project.

      In my humble Mr C is now the worst post WW2 PM since Mr Heath and at this rate even Mr Brown will start to look good. Never thought this would have been possible!

      1. albion
        December 8, 2011

        Your comments are laughable.
        Britain buys German goods because they are simply better than the British products they compete against. Increasingly for industrial goods, there is no British competition.
        Just get used to it – German manufacturing is much stronger thanks to a the high quality of its products and its constant innovation.
        Britain has been devaluing its Peso Pound for years without being able to counter the inexorable decline of its manufacturing industry.
        The UK should accept this hard fact and focus its efforts on services (things like producing reality TV programs and financial speculation).
        I know a lot of people in the UK (well London ….) who do very well from these ‘industries’.

    2. Andrew Duffin
      December 7, 2011

      She doesn’t need the permission of the 27.

      The 17 will make their own treaty amongst themselves without reference to the Lisbon constitution or any other rules. They’re still (legally – just) sovereign states and there is nothing to stop them doing that.

      Thus we will be on the outside (where we want to be), with no influence (we have none anyway) but paying in a fortune (as we do now). No change there, really.

      Of course Cameron and Hague know this perfectly well, but even if they did have a strong hand, they wouldn’t play it – they have no intention whatever of impeding the EU’s project or standing up for Britain’s interests. Watch what they do, don’t listen to what they say.

  13. backofanenvelope
    December 7, 2011

    You often mention the USA as an example of a country which successfully transfers wealth from poorer to richer regions. But does such a policy work even there? Reading US blogs suggests that California is bust and there is little enthusiasm outside the state to help. Instead, people are leaving for other states. The best hope for the EU is the gradual success of English as the language of choice. I notice that Merkel-Sarkozy speak English to each other. Language affects the way you think – there is hope there!

  14. English Pensioner
    December 7, 2011

    Surely it is mathematically impossible for all countries within the Eurozone to have a trade surplus unless it is with countries outside the zone.
    We should be putting real effort into selling our goods and services outside the EU and the government should be vigorously helping our companies to do so.

  15. Gary
    December 7, 2011

    There are always imbalances between countries, this is not just a feature of a currency union.

    Austerity and striving to become more industrially competitive by becoming more efficient and innovative is exactly what is required to bridge the imbalances.

    The problem in this fiat paper world is 1. Countries look for the easy and unsustainable way out of industrial uncompetitiveness by devaluing their currency by printing money.
    2. There is a favoured clique in the financial sector who never have austerity but have never ending bonus windfalls and who live permanently attached to the govt teat, and are the biggest welfare basket cases we have seen. Cameron talks today about protecting them at all costs. And it will certainly cost us.

    Germany nearly exports as much as China and exported more than China up to beginning of 2010. They have earned their position and if we don’t like it, maybe we should look at our own performance ? The same goes for the rest of the eu.

  16. Ralph Musgrave
    December 7, 2011

    The problem with John Redwood’s argument above is that “transfers” from efficient to less efficient countries are a form of subsidy, and countries entering the EU did not enter it on that basis. If German taxpayers are told they’ll have to subsidise the periphery, their understandable reaction could be “stuff this for a lark – we’re leaving the EU”.

    One possible solution is to force the periphery to devalue while staying inside the EZ. This could be done by enforcing a cut in wages of 30% in the periphery combined with a 30% or so cut in all prices in those countries. That would amount to the same as devaluing their currency. This solution would be EXTREMELY difficult and expensive to effect, but the all the alternative solutions are equally problematic.

    The beauty of devaluation is that it is relatively painless. The pound was devalued by 25% in 2008 and I’ll bet half the UK population didn’t know it happened.

    1. Gary
      December 7, 2011

      “devaluation is painless”

      Keynesian back to front non-logic.

      Devaluation loots the savers, it preserves the weak ineffective businesses. Instead of cleaning them out and forcing reform and gaining a competitive edge by innovation and efficiency, they carry on doing what made them fall behind in the first place, and use the temporary money debasement to get a quick hit. Like a junkie.

      Currency debasement solves nothing. Makes the problem worse in the long term

    2. albion
      December 8, 2011

      Has the latest 25% devaluation of the Peso Pound helped UK exporters?
      Well, the latest trade figures would suggest that the answer is a resounding NO.
      Sometime, I like to imagine what the UK would have become had no oil been found in the North Sea ……
      Anyone would care to comment.

  17. Winston Smith
    December 7, 2011

    Mr Redwood, can you explain to me why Cameron is using a Labour activist and ex-Labour councillor, climate change zealot to lead his policy team and now in charge of public sector reform? To make it worse he formerly developed policy for Tony Blair. It is gradually becoming clearer that Cameron is Blair reincarnated in presentation, beliefs and policy. Vote Conservative, get New Labour. Are you happy for this to continue?

  18. Matt
    December 7, 2011

    Yes, your article points to another issue, that the UK has a low infrastructure of world class engineering companies.

    The best brains go into the city, or the professions or the pure sciences.

    Much of the base that we have is defence orientated – nothing wrong with that – but there’s little else of magnitude.

    This from a nation that led the industrial revolution.

    In the Far East you see evidence of German exports everywhere – here in the UK we can’t even manufacture for our own market. Apprenticeships are all very well, but not sure that the trained kids will find work.

    Towns in the North and much of Wales were decimated when the Thatcher government closed much of the steelworks, shipyards and mines (not blaming that government, don’t think there was a viable alternative) they are now wastelands with high youth unemployment and drug use.

    Outside the EU maybe we could pursue a policy of nurturing industry

  19. If only...
    December 7, 2011

    Curiously it has been the fall in the Euro’s value against the Yankee dollar that has kept Germany’s exports to non-EU countries up. If Germany went back to the D-Mark then it would rapidly find it was pricing itself out of the market…

    1. Tim
      December 7, 2011

      That’s the whole point and why Germany embraced the Euro. it was and is to keep their currency low for export purposes. However with debts of 80% of GDP it CANNOT bail out the whole of the Euro area.

    2. albion
      December 9, 2011

      Like it did in the seventies, eigthies and the nineties when the DM kept appreciating against Sterling and the other European currencies ?
      Rather inconveniently for you, the German trade surplus with this countries kept increasing year on year.
      How do you explain that?
      I am staggered by the economic ignorance of some many posters on this site.
      First prize goes to Kevin Dabson for his rant on ‘mercantilist and protectionist’ Germany. Maybe he is enraged because he wishes he had bought a BMW!

  20. Martyn
    December 7, 2011

    John, does anyone really know what is going on or what the outcome might be? I stumbled across a ‘Voice of Russia’ online newspaper item of December 1st saying ‘Some suspect Germany of plotting against the European currency and preparing for a Black Monday when it allegedly plans to issue some special Euros for domestic use only and then leave the euro zone along with Finland and Holland’.
    And that ‘Dirk Meyer from the Helmut Schmidt University, Hamburg, who has designed and presented Merkel’s government with a plan on getting back to the Deutsche Mark has also predicted the Black Monday scenario which goes as follows- on a Monday all the banks in Germany will be closed and the next day, people will get new banknotes with a magnetic chip. The old euro will be taken out of circulation and two months later, Germany will quit the euro zone. Could this possibly be true?

    Reply: Sounds unlikely. Why haven’t they done it already if that is their wish?

  21. rose
    December 7, 2011

    And will the Germans also pay for subsidised housing for all of Europe, so that no-one will want to move to find a job in a more flourishing area?

  22. lola
    December 7, 2011

    Germany is ‘successful’ because it is mercantilist. Mercantilism always impoverishes first your customers and then yourself. Germany has been lending money to the rest of the Eurozone so that they could buy its goods. This never works as eventually those loans will go bad.

    1. APL
      December 7, 2011

      Lola: “Germany has been lending money to the rest of the Eurozone so that they could buy its goods. ”

      China/America any resemblance?

      1. Kevin Dabson
        December 8, 2011

        The German govt is subsidising it’s exports through it’s state owned banks.
        Why hasn’t BMW’s gone up in price since devaluation?

        Additionally, by being in the euro and pegging it’s currency down it is effectively “stealing jobs” from other parts of the euro/EU and world. Aka Krugman with China/US. It’s not the economic/industrial miracle people think it is.

        Germany is the main problem in the Euro. They are like the Japanese who allow only 4% car imports!. Anti competitive and predatory practices.

        You cannot have free trade with people like this no matter how good the idea is. We probably lose 7m jobs for the 3m we gain with the Single Market.

  23. forthurst
    December 7, 2011

    The premise of this article is entirely incorrect: the situation that exists now in Europe, unhealthy as it is, is entirely due to market distortion. Club Med and the Celtic Tiger were borrowing Euros, at rates offered by lenders that implied they were constituents of one strong economy in order to expand their own weak economies, unhealthily, with property bubbles and government bureaucracy bubbles. Germany has had its industrial output distorted in order to supply BMW 3 series made by immigrants to people who should have been buying Fiat Unos, secondhand, when it should have been focusing less on low technology consumer goods and more on its advanced engineering production of which it still is a world leader. To suggest that the current state of affairs should be maintained by replacing the now unavailable borrowing by wealth transfers from Germany is to promote the status quo.

    As far as the UK is concerned, wealth transfers are essentially about using Conservative voters’ money to bribe poorer regions to continue to vote Labour and to continue to attract the worlds’ surplus populations to join them.

    Market distortion is bad for Europe and bad for the UK. The North of England, like East Germany has suffered from the destructive effects of the nationalisation of its major industries after WWII and the added incubus of the activities of Communist Apparatchiks on further destroying its competitiveness, but the replacement of healthy industies by a permanent supplicancy is morally destructive and economically unsound. How to replace, if it is at all possible, industries that have been built up over generations and which have been destroyed by socialists and fellow travellers is not by giving up even before trying: the North of England was almost totally reliant on its grammar school educated elites to drive its economy historically; essentially, it wont start moving again till the middle classes have proper education there.

    1. uanime5
      December 7, 2011

      Actually the North of England needs some industries to provide jobs, not better education. The middle class can always move to the north of England if they need to.

  24. figurewizard
    December 7, 2011

    All the more reason why, if our negotiations for the repatriation of powers are to be tempered by this country participating in a rescue of the Euro, should precipitate an immediate referendum on our continuing membership.

  25. javelin
    December 7, 2011

    … and since 2007 it is the PIIGS who have run a current account deficit. This tells you it is not fiscal obesity that has caused this crisis – but the flow of money out of the economies. Particuarly the capital outflows and the resulting funding crisis.

    So the German currenct account surplus – is NOT the opposite of the over spend in the PIIGS. In fact the Germans have been over spending too (in 4 years GDP debt up from 50-80%). So the German story of fiscal over spend is NOT entirely true. Up until 2007 the average fiscal deficit could not have identified the problem in the PIIGS.

    So ths comes down to a reality being a different story than Merkel is peddling. It is one of money transfers away from the PIIGS. If Germany gets it way the PIIGS are left to be and they will get further and further in trouble!!!! The crisis has ONLY JUST STARTED !!!

  26. Ken Mourin
    December 7, 2011

    There precisely is the reason that Germany does not want Europe to collapse: 179 billion of trade excess. If European countries leave the Euro, germany loses her sheltered market. Other countries would become more competitive with devalued currencies. Germany would become priced out. So everyone else must suffer on Germany’s behalf.

  27. Viv Evans
    December 7, 2011

    I’m not so sure about the drift of this post, John.

    For starters, hasn’t rich Germany been transferring money, subsidies or what have you, to the poorer EU periphery for years, through being the major contributor to the EU by a country mile, since the EUs inception?

    Secondly – this often heard argument about German exports being so huge: doesn’t that sound like asking the Germans to stop working so hard and stop producing goods which are not shoddy so that Buggins can sell their inferior products?
    Which of course doesn’t take into account that a poorer Germany would contribute less, so the periphery wouldn’t be better off anyway.
    Btw – Germany doesn’t export just to the Eurozone, and their exports were always huge even when the DM was much higher in value than all the other currencies in Europe.

    Why should they support ever more people with their hard work? Such demand is no different from our benefit dependants demanding of those of us who work to pay ever more taxes, and live ever more austerely, so that the benefit dependants can keep on living at the economic level they have become accustomed to.

    1. Gary
      December 7, 2011

      Precisley. Germany had strong exports with the strong d-mark and when the euro was 1.7 to the pound. Some people cannot believe that you can be competitive without devaluing. It is the last refuge of the statist.

      1. albion
        December 8, 2011

        Not just the statist – but of plenty of Little Englanders too who simply cannot accept the hard truth that the UK economy is a basket case (just look at the structural budget deficit, the trade deficit, private and public debt, the state of most of its infrastructure) with a broken society (just consider the recent urban riots and the mass irredeemable underclass).

    2. Mike Stallard
      December 7, 2011

      Nicely put!

  28. Iain Gill
    December 7, 2011

    funny I can walk in off the street in both Germany and Greece and see a GP there and then, no 2 hour on the phone queuing to speak to someone to be offered no choice of appointment several days in the future, to wait in a waiting room for 4 hours, to be rushed in and out

    if a doc in Germany or Greece thinks I need high blood pressure medicince they can prescribe it there and then, no 3 month wait for a 24 hour blood pressure test a la NICE guidelines, if we decide to try diet/excercise first we can give that a go for a number of months and then do a 24 hour blood pressure test on exactly the day thats best for me and have medicine prescribed immediately afterwards, no further 3 month wait for a 24 hour test and so on (how the “£$%^ was NICE allowed to mandate a 24 hour blood pressure test when many surgeries just have one machine and many more patients who need blood pressure medication than can possible be single threaded through that one machine)

    if I work away from home in Germany or Greece I have no problem getting access to medical care, I am not treated as some kind of leper for having the nerve to work so far away from home (unless you are an MP of course who get a nice local GP next to their work as well as their one at home)

    really this country is such a mess of mixed up poor service and waste I really dont think we should be lecturing Germany, Greece or anyone else

  29. bertsanders
    December 7, 2011

    The PM tells us at question time it is vital that we endeavour to save the Euro but he offers no further explanation as to why. I have twice asked a question concerning the relativity of imports to exports – which is ignored. He does not want to admit they need us as much as we need them in the event of an unlikely trade war. In the 17 it seems to me Germany will have to “carry” the majority. I do not believe the Euro will ever work.

  30. Gary
    December 7, 2011

    It is time to realize that
    Leviathan aka EU can not be saved. We live in an era where governments
    account for an enormous share of
    economic activity, while the
    producers of wealth have become
    a tiny minority on whose shoulders
    the entire edifice rests. The promise
    of a perpetuum mobile that the
    perpetual growth of the debt
    mountain was seemingly held to
    represent does not exist. The
    endgame has begun, regardless of
    how many tricks are employed to
    delay it.

  31. nicol sinclair
    December 7, 2011

    “They associate it with high levels of exports throughout the EU, and rising cash balances as they seek payment for their goods.”

    The way out, therefore, is for: Spaniards to buy SEATs, Italians to buy Fiats and the other two to buy carts with wheels instead of BMWs…

  32. john w
    December 7, 2011

    John,i am glad you do the maths.If the Germans want it then let them show some of that solidarity they keep talking about.They can pay for the lot in my opinion.I would prefer to leave the eu and have no opinion on eu internal affairs.I want the government to make our rules.I dont want government to to have to waste so much time kicking out eu directives.They have better things to do and so do i.Half hour of PMQ did not seem to be long enough today,2 hours would be better.I wonder if mrs bone was satisfied with the PMs performance

  33. NickW
    December 7, 2011

    The Global Bank, Goldman Sachs, probably has more say in the future of Europe than either its electorate, or Merkozy.

    The leader of Italy is an ex Goldman Sachs employee.

    The Leader of Greece is an ex Goldman Sachs employee.

    The US Ambassador to Europe is an ex Goldman Sachs partner.

    Goldman Sachs were the consultants appointed by Brussels to design the ESFS.

    Goldman Sachs was appointed by Greece to fudge its figures to enter EMU in the beginning.

    Goldman Sachs has a huge business advising clients how to make money by trading in European Sovereign debt.

    Goldman Sachs advisers cause the problems which are inflicting Europe, and get paid by Europe to (NOT) sort out those problems.

    Goldman Sachs traders have the advantage of inside information from its placemen throughout Europe.

    It is not the rating agencies who should be getting the flac is it?

    1. alan jutson
      December 7, 2011

      Nick W

      Perhaps its worth buying shares in Goldman Sachs then !.

      I know you do not allow investment advice John, and its not, its a fun remark on a very serious issue.

      If True one Company would seem to have so much influence over possible future events.

      Could such influence result in increased opportunities for increased profits ?

  34. BobE
    December 7, 2011

    This does seem to be “kicking the can down the road” again. There is no percieved growth for the PIIGS and so the continual rise in debt will continue. I hear nothing that suggests any real plan to change anything and so the whole thing will continue to be a slow motion train wreak.

  35. NickW
    December 7, 2011

    There are seventeen Eurozone Nations and all the discussions have been taking place between only two of them.

    Cameron is not the only leader to look behind him and suddenly discover that he is about to enter the front line with no one behind him.

    Every Country wants concessions; fifteen Eurozone Countries haven’t even been consulted.

    It’s going to be an extremely acrimonious summit; it will be interesting to watch the body language at the final Press Conference, which has every chance of being even more of a total farce than usual.

  36. Martin
    December 7, 2011

    Thank you for pointing out how successful Germany’s exporters have been. These exporters’s live by the same EU rules as us.

  37. Barbara Stevens
    December 7, 2011

    Thank you for making the whole saga more understandable. We can see that being within the eurozone makes it more difficult for nations to deal with debt, and I’m thankful we’re not. However, listening to PM questions today, I saw clearly from Labour’s response they would take us into the euro if they got the chance. This must be avoided at all costs, and the next election this must be made clear to the electorate. I am disappointed with Cameron, he’s not really stating what powers he wishes to claw back, or is he going far enough to satisfy the nation, I don’t think so. He says this may not be the time to seek more powers back, when will be a good time with that lot over the Channel? The sooner we withdraw the better, the sooner the Tory Party wake up and stop this dithering over a referendum the better. This nation now faces a German take over of proportions we never envisaged, who won the war then? What did our ancestors die for? Please Mr Redwood, with any influence you can muster we must get ourselves free before it’s to late.

  38. Paul Danon
    December 7, 2011

    Or you don’t have a currency which straddles areas with such different economies and work-ethics.

    1. Gary
      December 7, 2011

      You like London vs the rest of the UK ?

  39. Bernard Otway
    December 7, 2011

    I agree with Ken Mourin,IF the piigs devalued [which is absolutely necessary] Germany’s
    captive customers would be able to buy from elsewhere ,as German goods become unaffordable,then the East will supply. As an example I worked in senior sales in the Car industry in South Africa mostly imported vehicles from Japan/Korea,I know NOW what ex factory FOB prices are for their cars,AND they are just as good as VW/BMW/Mercedes
    even now they are penalised into europe based on their ex factory costs, a small korean car for instance not naming names is US$3000 + – and this goes for all cars incrementally that small car should sell here to the buyer for about US$6000 assuming decent margins
    and taxes @£ 3900 +- BUT it is nearly £7000 base model WHY.Greece with no car manufacture to protect could be awash with Hyundai/Kia/Chevrolet[Daewoo] and cheaper instead of european cars.Also in 2007 I co-imported a container of Flat screen tv’s from Shenzen with a friend to SA their FOB prices were incredibly low,we sold them at 25%
    of the shop prices there and still made a decent profit,they were sets made in the same factories as Brand names BUT with a different name .these were privately sold with NO Warranty on the basis of their low price,to friends we could have sold an infinite number
    but only did the one container,my kids bought and their sets are still working perfectly
    4 years later. To me that is what Globalisation is about buy from the best and cheapest source AND as a country DO WHAT YOU ARE BEST AT and NEVER OUTSOURCE
    your INTELLECTUAL PROPERTY unless at a PREMIUM,to amortize your effort in doing
    the original work and pay for your new ongoing development.

  40. Gary
    December 7, 2011

    Going back to before 1970, Germany has kept pace with the USA as the world’s largest exporter. This is not a new euro phenomenon. During the D-mark , before and after unification, they have been right up there. Global exports really took off in 1999, probably coinciding with the bank credit boom, leading to a consumer boom. Nothing to do with the Euro, per se.

    See pages 12 and 13 :

    The excuses by the other countries for not keeping pace are sounding ever more churlish. We have a global debt problem , irrespective of country , border or currency union.

  41. NickW
    December 7, 2011

    Text of a Letter from Merkozy to Van Rompuy, in preparation for the summit.

    Another European President?

    1. NickW
      December 7, 2011

      Get this;

      “We need to foster growth through greater competitiveness as well as greater convergence of economic policies at least amongst Euro Area Member States. To these aims, building on Article 136 and/or on enhanced cooperation, a new common legal framework, fully consistent with the internal market, should be established to allowing for faster progress in specific areas such as :
      – Financial regulation;
      – Labor markets;
      – Convergence and harmonisation of corporate tax base and creation of a financial transaction tax;
      – Growth supporting policies and more efficient use of European funds in the euro area.”

      The cause of the Euro is going to be advanced by the Euro group treading on the faces of those who choose to stay outside.

  42. NickW
    December 7, 2011

    The situation is this.

    France and Germany between them have hashed out a meeting schedule which lists the multiple Franco-German demands.

    Any Member State which objects to these demands will be blackmailed by the accusation that their objections will destroy Europe and the Euro.

    Any Member State which has the temerity to make its own demands will have those demands refused, and be told that to insist on them would destroy Europe and the Euro.

    Do you spot the logical, inconsistency?

  43. Frances Matta
    December 7, 2011

    Having whinged here before about German manufactured goods lasting forever but not, in my case, being well designed, I have observed that the latest German cars being heavily advertised all look like extremely angry biscuit tins.

  44. John Maynard
    December 7, 2011

    As an occasional shopper in a certain German-owned supermarket, over the past ten years, I have seen John’s blog in microcosm.

    They used to sell a variety of Greek food products, Italian regional delicacies, and Spanish snacks.
    Nowadays, they have been replaced with strange, hybrid Teuto-Greek products (think Tex-Mex), Teuto-branded “Italian” cakes etc.
    If southern Europe cannot even sell simple agricultural-food products, it is surely heading for penury, there is less and less space for these countries to earn a living.
    The once thriving, Italian Bresciani machine industry is severely threatened – notice how many German(Chinese) expresso machines there are in retailers these days ?

    Germany is the last primitive-mercantilist country amongst the industrial nations.
    The Hanseatic league would have been proud – and David Ricardo must be turning in his grave !

  45. Rebecca Hanson
    December 7, 2011

    I like this clearly presented perspective on the Eurocrisis.

    Previously I had thought of this in terms of there needing to be political union to approximately the level of the union between states in the US to sustain a single currency. Are you arguing that it would be possible to sustain a single currency if appropriate balancing transfers were agreed without political unification John?

    All this raises some interesting questions for Scottish devolution.

    Reply: No, you need a single country and government to gain acceptance for the consequences of a single currency and to organise the transfers

  46. lojolondon
    December 8, 2011

    In a normal situation, the Deutschmark would have gained value as the German economy grew, eventually making their products prohibitively expensive for foreigners.
    BUT due to the poor economies of MOST European countries the Euro has stayed low, even as the Germans dominate sectors of high-tech manufacturing.
    So by hitching themselves to a rubbish monetary system, the Germans have prospered far more than would have been the case, if there were normal checks and balances.
    That is why the Germans SHOULD bail out the poor countries they have impoverished, and why the UK should stay right out of the whole sorry mess, it has nothing to do with us!!

  47. PPP Lusofonia
    December 11, 2011

    Portugal and Greece are not the problem, but the symptom.

    These huge external deficits are simply the more acute symptom of the “German exporters take it all” syndrome which plagues the entire Eurozone, with the help of imprudent financing from German banks.

    Merkel is resorting to illusionist politics, berating Germany’s trading partners downstage center to distract German taxpayer from the need to absorb the banking mistakes in the upstage corners.

    And this time they can’t call it the “soli tax”.

Comments are closed.