When might Germany get fed up with paying for the Euro?


               In February European car sales fell by another 10%. They fell last year as well.

                Prior to the Euro crisis Germany did well out of the Euro and the EU. Germany worked hard to produce good products and to keep her own costs under control so her products were competitive. She was then able to sell her cars and other items throughout the Eurozone, earning a large surplus for Germany.

               Germany was not expected to  pay much extra in tax to send grants and loans to the rest of the zone. The theory was each member state in the Euro had to take responsibility for financing its own government, and balancing its own external payments. The system differed from a single country single currency area, where much higher levels of grants and internal transfers are made to let the system work without an exchange rate to correct the imbalances.

             Now the deal is a much worse one for Germany. She is having to look outside Europe for markets for her products, as the demand in the weaker Euro states has been in freefall. They cannot afford nearly so many luxury cars as before. Meanwhile Germany is being expected to put up much more money to help finance the overborrowed states and to pay for the balance of payments imbalances and to recapitalise the weak banks.

           Frau Merkel is no longer an automatic ally of Mr Hollande. Germany backed the UK’s calls for cuts to the EU budget recently. There are signs that Frau Merkel has to tell her voters she will not use too much German money to prop up the Euro. The more the EU market declines as a source of German prosperity, the more likely it is German voters will oppose putting more money in to keep the whole system going.

           The best hope we have all the time we do not have a Eurosceptic majority in the UK Parliament is the growth of Euroscepticism in Germany. It appears that Mrs Merkel now has to accept that German voters are turning against Germany paying ever larger bills for her partners. That mood forced Mrs Merkel into a tougher approach towards Cyprus than she adopted to Greece. The Euro cannot survive for many more years without Germany and the other rich states agreeing to put much more of their taxpayers’ money into the common cause. The UK is more likely now to get German support for less Europe.

         Meanwhile, some Germans are beginning to worry about stealth ways of Germany paying for all the losses and economic disaster elsewhere in the zone. Too much monetary experimentation could give Germany inflation, eroding the value of her savings. Tougher approaches to broken banks could lead to German losses on desposits around the currency area. German money has been committed via the European Central Bank to keep the weak banks elsewhere in funds.

         The truth is, all the time Germany remains in the Euro, they will have to find ways to make the German public pay. If they will not vote for higher taxes to send the rest of the zone grants, the officials and politicians will find back doors ways of taking German wealth to do the job.  The Euro comes with a high price for the prudent and successful caught up in it.

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  1. Electro-Kevin
    Posted March 28, 2013 at 8:01 am | Permalink

    “Too much monetary experimentation could give Germany inflation”

    A semantic point to make on this:

    An experiment is done risk free away from real life – in a laboratory using substitute items in small amounts so as to minimise losses and danger.

    In the political world the word has a different meaning. We have people “experimenting” with drugs and this week we had a Labour official describing mass immigration as an “experiment.”

    None of these things are experiments. They are real policies with real and irreversible impacts.

    I believe that the clever use of euphamisms is what inures the public to these stupid policies. And is why we have a pro EU majority in Parliament.

    • Andy Baxter
      Posted March 28, 2013 at 8:10 am | Permalink

      Couldn’t agree more

    • lifelogic
      Posted March 28, 2013 at 9:11 am | Permalink

      Indeed not trials nor experiments, just mad and dangerously damaging, huge disasters and risks taken with other people’s lives and their money usually against their will.

      You say “I believe that the clever use of euphemisms is what inures the public to these stupid policies. And is why we have a pro EU majority in Parliament.” – that and the fact the the voting system, the political parties, the politicians, the BBC and the use of EU funds (taken from the public first) is all used to frustrate and distort the public’s true wishes.

    • Disaffected
      Posted March 28, 2013 at 9:42 am | Permalink

      JR agreed in some respect, but Ambrose Pritchard’s article in the DT today is spot on the money. Frau Merkel is deceiving her population until the elections in September.

      What is Cameron doing about the situation of EU dictatorship? He is pretending to be interested in international suffering, wasting billions of our taxpayers money on foreign aid, when he knows the EU is causing suffering to millions of people in the Europe which is a man-made by fanatical politicians who want an EU superstate- he is in coalition with a party of them!

      Similarly what is he doing about the quangos not fit for purpose ie FSA, DECC, NHS? An ideal opportunity to have that bonfire of quangos he promised. All have proven to be not fit for purpose the latter guilty of negligent manslaughter (similar to railway companies who were prosecuted) and nothing has been done, no one even sacked after 1200 people were killed through neglect of care- primary reason for being in a hospital! His answer, more czars and more quangos, breath-taking incompetence.

      • Christopher Ekstrom
        Posted March 29, 2013 at 11:24 am | Permalink

        This is the second greatest scandal & betrayal after his Cast Iron promise. A “Tory” that declines to decimate quangos is not a Tory at all. It’s a Lib/Lab BlairClegg horrorshow. But little davey is by miles the worst ever. I believe he should be dangling from Traitors Gate; & I am most literally serious.

      • uanime5
        Posted March 29, 2013 at 3:16 pm | Permalink

        There’s no crime of negligence manslaughter. The closest thing is the common law offence of gross negligence manslaughter where you have to show that the negligence was so great that it should be considered a criminal offence. This is difficult to prove, so there are few convictions.

        What the railway companies were prosecuted for was negligence, which is a civil law tort not a crime. Even when negligence results in injury or death it doesn’t automatically become a crime.

        • Electro-Kevin
          Posted March 29, 2013 at 7:44 pm | Permalink

          Uanime5 – As a police officer (and when I took my A level Law) the definition of the offence of manslaughter included ‘reckless’ or ‘careless’ of the outcome in order for their to be a prima facie case and grounds for arrest/charge.

          Neither carelessness nor recklessness need be very great at all – just sufficient enough to cause the death. I think you may be getting confused with corporate manslaughter here.

          Feel free to correct me if I’m wrong – my service and study were a long time ago.

    • oldtimer
      Posted March 28, 2013 at 9:57 am | Permalink

      You make a good point. The political class is well practised at changing the conventional meanings of words to propagandise their agenda – this is but the latest example. Gordon Brown is notorious for redefining current government expenditures as “investments”; the CAGW hypothesis has already been through several naming mutations: > global warming > climate change > extreme weather events – all in the cause of a single minded pursuit of ill-conceived and utterly ineffective policies.

      • zorro
        Posted March 28, 2013 at 10:36 pm | Permalink

        Don’t forget Gordon’s unforgettable ‘0% growth…..


    • English Pensioner
      Posted March 28, 2013 at 10:18 am | Permalink

      You are right. I spent years experimenting on radar systems design, but we certainly wouldn’t have used the radar to control aircraft until we had concluded our work and shown that our experiments were successful.
      Governments don’t “experiment” they carry out policy changes which do permanently affect people regardless of whether the “experiments” are successful or not.

    • Nicol Sinclair
      Posted March 28, 2013 at 1:25 pm | Permalink

      @Electro: I couldn’t agree more. Our politicians (apart from notable exceptions) are living on a different planet…

      • Electro-Kevin
        Posted March 29, 2013 at 8:55 am | Permalink

        To Nicol and all,

        Thank you

        Presently the Left have control of the language. The parameters for debate (therefore the parameters for options) are staked out this way.

        ‘Poverty’ is one of the key words which has been hijacked and distorted in meaning. ‘Harassment’ (and its mispronunciation) another. ‘Racist’ used to require abusive language or physical actions, perhaps harmful omissions for it to apply – now all it requires to be a racist is to disagree with leftist policy. All three have been used to change Britain for the worse and to cut the ties between the Tory party and its traditional electorate.

        Even ‘traditional’ has become a pejorative term.

        ‘Experiment’ is most commonly used to mitigate the crime of drug abuse. I’m sure Mr Redwood didn’t mean to misuse the word ‘experiment’ but this word has become a way of introducing policy whilst making it sound as though the effects are temporary. Mostly the effects are permanent and it’s a great way of taking unpopular action without mandate.

        Reply I think the extraordinary monetary policy being pursued is experimental. It should defintiely not become normal, and those advocating ti did n to know what all its effects were going to be when they embarked on it, because it had n ot been done before.

        • Bob
          Posted March 29, 2013 at 9:55 am | Permalink

          “didn’t know what all its effects were going to be when they embarked on it, because it had not been done before.”

          Wouldn’t the term “reckless gamble” be more accurate then?

        • Bazman
          Posted March 30, 2013 at 5:18 pm | Permalink

          The experimentation of drug/alcohol abuse. Seems simple to me. A crime only in law. Is it liberal to agree with you right wing view?

  2. Andy Baxter
    Posted March 28, 2013 at 8:07 am | Permalink

    Question: “When might Germany get fed up with paying for the Euro?”
    Answer: Never
    Analysis: Why? because the Franco German alliance is the EU. ‘Le Project’ has always and will always be about domination of the European land mass of Europe and its peoples, politically, ideologically, financially, legislatively, psychologically, and a whole host of other ‘ically’ ways never even thought of yet by a ruling elite or what we call a ‘political class’ unelected, unaccountable and totally corrupted by the exercise of POWER!

    And by the way Mr. Redwood Germany doesn’t pay for the EU, we do, all 500 million of us irrespective of our nationality. And we do so because people of your ilk under the broken not fit for purpose system of ‘representative democracy’ don’t and won’t listen to people like us and our wishes.

    • Christopher Ekstrom
      Posted March 29, 2013 at 10:58 am | Permalink

      Franco should be making a comeback in Spain. Italy is ripe for anything. The Greeks are off the rails. Nice job, Peter! A bit more like this & Euroland will be back to the early 1930’s.

  3. Andyvan
    Posted March 28, 2013 at 8:11 am | Permalink

    “The Euro comes with a high price for the prudent and successful caught up in it.”
    It comes with a high price for those that are not prudent , successful or caught up in it as well, i.e. us.

  4. lifelogic
    Posted March 28, 2013 at 8:22 am | Permalink

    The truth is that it is a hugely damaging system for the whole of the EU and will, almost certainly, never work efficiently. Unless we have one EU government which is also very unlikely ever to work, could never be democratic and would probably (and violently) break up. The mystery is why on earth the “experts” at the EU ever thought it would work. I suppose they did not really, but thought it just expanded their power bases at the time.

    The way government “experts” and politicians can all agree on insane policies with “group non think” like the ERM, the AGW religion, HIP packs, HS2, the pointless counterproductive wars, the green deal, the subsidy for PV and wind, the gender neutral insurance, the employment laws, the scrapping of sound power stations …………. never ceases to amaze. But then the “group think” rarely goes beyond thinking – what can we get away with, will it increase our power base, our wages, our careers, get us more free exotic travel and increase our pensions?

    • Bazman
      Posted March 30, 2013 at 5:29 pm | Permalink

      Daily Mail and Telegraph. Group non think believed as it is right wing. Disassembley of their stories gives no comments. Why? Group think thats why. Dingbats opinions on other opinions. Pure group think. Blind criticism of the BBC and the cause of all Britains problems and being the only person to see any bias, but no right wing bias.Classic group think . No evidence of non global warming and unable to come up with credible sources against this. Group think. Need I go on. I will. Belief in the free market and no subsidy for energy except nuclear which needs massive subsidy. What is is that? It’s stupid group think and a belief in no labour free energy. Water into wine. Free market blind religious fatalism in all thing except when it effectsd the ‘thinker’ The basis of all right wing group think. Ram it.

      • Edward2
        Posted March 31, 2013 at 5:43 pm | Permalink

        You are describing in vivid terms the opinions of people who have right wing views, but you always fail to appreciate that those on the left wing of politcs have similarly fixed opinions.
        To those of us on the right politically they appear equally odd.
        Just as there is your hated Daily Mail and Telegraph, there is The Guardian, The Observer, The Mirror and The Independent.
        Politics is all about the arguments in this wide spectrum of views.
        Who is right, only time will tell.

        • Bazman
          Posted April 1, 2013 at 3:23 pm | Permalink

          You are getting opinions and facts mixed up again along with deference. Much of the right wing rhetoric is non factual and based on simple assertions such as how can poor be fat when they have no money? Explanation of the causes are ignored and the person continues to believe their own fantasy. Fat middle classes are victims of success of course.The Daily Mail story of the woman on benefits who saved two grand. The reality of this is not wanted to be known by their readers. Middle class suffering is so stoic and working class suffering is deserved so she is scrounging. No mention of middle class scrounging via their own social security system. Who wants to tell me it does not exist? Thought not. Who would you trust more The Observer or the Sunday Telegraph The Mirror or the Sun to give a more accurate picture?

  5. Mike Wilson
    Posted March 28, 2013 at 8:32 am | Permalink

    I find the idea that Germany’s cars are competitively priced interesting.

    Our local roads are clogged with Mercedes, BMWs, Audis and Volkswagens. Many of them big cars that cost a lot of money. Are they ‘competitively’ priced?

    Who has the money to buy these things? I would suggest most are bought, one way or another, on credit – either by re-mortgaging or contract hire. And that many people can’t really afford them – they just buy them and defer the cost one way or another and gradually go into more and more debt.

    If a result of the credit crunch had been a real contraction of credit – or a change in behaviour to only buy what we can afford to pay for – I suggest that Germany’s car industry would go straight down the pan and South Korea’s would become completely dominant.

    • Christopher Ekstrom
      Posted March 29, 2013 at 11:01 am | Permalink

      Petrol cost will the downfall of German cars; hung on their own Green petard!

    • Bazman
      Posted March 30, 2013 at 5:32 pm | Permalink

      Exactly right Mike. Who buys a car outright these days. Pay for it and pay again for the credit. Anyone can have a flash car and live on cornflakes.

  6. Matthew
    Posted March 28, 2013 at 8:41 am | Permalink

    Yes, but the relatively low value of the Euro assists German exports to countries all over the world, not just to the Euro zone.

  7. Peter van Leeuwen
    Posted March 28, 2013 at 8:44 am | Permalink

    Interestingly, just this morning the eurozone business news in the Netherlands was more optimistic:
    * The Euro money growth in the EZ has been quite moderate in spite of ECB easing of money supply and a low interest rate.
    * Inflation at 1.8% is very moderate as well (the Netherlands with 3.2% is a very bad exception)
    * The “paying of bills” by Northern EZ countries is still mainly lending with interest and guaranteeing.
    * Looking outside Europe for markets and products is the very thing that should happen, so no problem there.
    * Exporting more to outside the EU is helped by the suppressed Euro exchange rate during this financial crisis.

    Even painting of Hitler mustaches on Mrs Merkel’s image won’t turn Germany away from the EU or EZ, as is it a reminder of a past Germany will never want to risk to return to. I would expect more euroscepsis in the Southern EU countries, very understandably with all the current hardship.

    • Denis Cooper
      Posted March 29, 2013 at 11:23 am | Permalink

      Peter, because the Netherlands economy is less than a quarter of that of Germany excess inflation of 3.2% has relatively little importance compared to the level of inflation in Germany, which in February was below the ECB target at 1.6%.

      If you constructed an average inflation rate for just Germany and the Netherlands then your excess inflation would more or less cancel the undershoot in Germany and the average would be 1.9%, much closer to the ECB’s target of 2.0%.

      The Irish are even less important, with their economy about a quarter of that of the Netherlands and only about 6% of Germany; so major excursions of Irish inflation from the ECB target have virtually no effect on ECB policy.

      Or indeed on the external value of the euro against other currencies for the purposes of Irish trade, which has been all over the shop since its inception:


      “Minimum (26 October 2000): 81.1584 – Maximum (18 December 2008): 114.3456”

      And there have been major excursions of CPI inflation in Ireland, in round figures ranging from +7% in late 2000 – note the rough correspondence with the minimum in the euro trade weighted index – to -7% in late 2009:

      Given that the Irish authorities said that they wanted to join the euro mainly to get better control of inflation, that little experiment has been a catastrophic failure.

      We complain about the Bank of England failing to meet its inflation target over recent years, but the record in Ireland has been far worse for much longer, and of course the reason for that is that the ECB euro interest rates and the euro exchange rate are both determined mainly by the state of the German economy but necessarily apply to all other eurozone countries even where they are clearly inappropriate.

      • Peter van Leeuwen
        Posted March 29, 2013 at 11:37 pm | Permalink

        @Denis Cooper: Well Denis, it depends a bit which kind of inflation rate you use for international comparisons. Eurostat uses HICP: Short Description: Harmonised Indices of Consumer Prices (HICPs) are designed for international comparisons of consumer price inflation. HICP is used for example by the European Central Bank for monitoring of inflation in the Economic and Monetary Union and for the assessment of inflation convergence as required under Article 121 of the Treaty of Amsterdam. Here below I copy these rates from the Eurostat datebase for Ireland and the UK from 2005 to 2012:
        Ireland 2.2, 2.7, 2.9, 3.1, -1.7, -1.6, 1.2, 1.9
        UK 2.1, 2.3, 2.3, 3.6, 2.2, 3.3, 4.5, .8
        Different picture from yours.

  8. Kevin R. Lohse
    Posted March 28, 2013 at 9:06 am | Permalink

    Surely there is absolutely no point in Germany now caviling about the cost of ever-closer monetary union when the German government were amongst the leading proponents of such a system? there were plenty of commentators pointing out the weaknesses of such a system, and the German government have only themselves to blame for their present state. If the UK had treated the Scottish banks in the same way as the the EU, at German insistence, has treated Spanish, Portuguese Irish, Greek and now Cypriot banks, there would have been hell to pay. As it is, the insanity of economic and monetary union has been revealed to the whole world and I cannot see the rest of the global village funding the euro much longer.

    • sjb
      Posted March 30, 2013 at 5:23 pm | Permalink

      Kevin wrote: I cannot see the rest of the global village funding the euro much longer.

      Then you need to remove your eurosceptic spectacles 😉

  9. Brian Tomkinson
    Posted March 28, 2013 at 9:06 am | Permalink

    As Ambrose Evans-Pritchard has written in today’s Telegraph: “Chancellor Angela Merkel will do anything before the elections in September to disguise the true cost of the EMU project. It has been clear since August 2012 that she is willing to let the ECB carry out bail-outs by stealth, as the lesser of evils. Such action is invisible to the German public. It does not require a vote in the Bundestag. It circumvents democracy.” Which brings us to the real threat to us all from the EU – it is anti-democratic. It is basically a totalitarian regime. Those in the eurozone are the first to see the consequences but are told that the alternative to their currency imprisonment is even worse. Their politicians are rendered impotent or discharged and replaced by the EU commissars. Why does anyone in the UK wish to remain in such a wicked regime?

  10. Kenneth
    Posted March 28, 2013 at 9:08 am | Permalink

    In my opinion the German government – although it won’t admit it – would prefer a much smaller Eurozone of richer countries. Effectively this would be a Deutschmark area.

    The Med countries are good at many things – e.g. attention to quality and style is an Italian trait – but German style efficiency is not one of them.

    I am sure most Germans realize that the mutualisation of debt across the Eurozone is more likely to drag Germany down rather than bring the PIIGs up.

    They would prefer a global solution with the IMF being the main guarantor and not Germany.

    That explains why Germany has taken a hard line. Cyprus was indeed a small-scale trial; a way of establishing a template for similar problems in bigger EZ countries in future.

    I believe Germany would not have blinked had Cyprus defaulted and printed its own currency. Germany is not bluffing. It is prepared, in my opinion, to allow the shrinking of the Euro area.

    We must also consider that the single currency is no longer single. Capital controls now operate in a tiny part of it, rendering this a separate currency area, at least for the time being. The cracks are now showing.

    • Denis Cooper
      Posted March 29, 2013 at 11:42 am | Permalink

      I think you’re wrong; in the past the German government has insisted on allowing countries into the euro on political – in fact geopolitical – grounds when it knew perfectly well that the economics said that they should not be allowed to join; and, no, it was never deceived about the true state of the economies and the government finances of those countries, that was always a ludicrous idea and has now been utterly disproven by the relevations in Spiegel, see below; Merkel has said that the goal must be for all EU member states to join the euro, and incidentally making no exception for the UK; if any country however small left the euro then that would run counter to her goal and could lead to the whole project unravelling, and she has absolutely no intention of permitting that to happen.

  11. Mr. Frost
    Posted March 28, 2013 at 9:21 am | Permalink


    I agree with most of what you say, however, Germany also benefited from a competitive Euro during the ‘good years’ as the Southern European countries kept it artificially low.

    She was happy to reap those benefits and now must take her part in the pain.


    Mr. Frost

  12. stred
    Posted March 28, 2013 at 9:22 am | Permalink

    The Euro has certainly come at a high price for some honest hardworking Cypriots.
    There was a businessman on TV last night who had been paid for a large delivery of processed produce, banked the money and now cannot pay the farmers who supplied his factory. Bearing in mind that there is Russian money over other EU countries and a lot in the UK and that the ECB leaned on the failed banks to buy defaulting Greek bonds, the theft from honest depositors is the most disgusting action taken by the EU elite.

    • Bob
      Posted March 29, 2013 at 11:01 am | Permalink

      “There was a businessman on TV last night who had been paid for a large delivery of processed produce, banked the money and now cannot pay the farmers who supplied his factory. “

      This EU sanctioned theft made no allowance for the possibility that the bank account holders had liabilities to pay.

      I wonder how many property transactions will go into default and how many businesses will fail as a result.

      This is proof, if such were needed, that the EU is a brutal dictatorship in the making.

      • uanime5
        Posted March 29, 2013 at 3:28 pm | Permalink

        Cyprus brought this on itself by allowing the banks to become too big and letting them loan too much. I suspect the UK will suffer a similar fate it politicians continue to encourage the financial industry to the detriment of all other industries.

    • Denis Cooper
      Posted March 29, 2013 at 11:55 am | Permalink

      How would ordinary Germans like it if the same was done to them?

      The answer is that they wouldn’t, which is why they have to be fed the line that it’s all about taking ill-gotten money off Russians, not about hurting Cypriots who are as innocent of any wrong-doing as themselves.

      • uanime5
        Posted March 29, 2013 at 3:30 pm | Permalink

        Ordinary Germans don’t have over €100,000 in their bank accounts so this wouldn’t effect them in any way.

        • Denis Cooper
          Posted March 29, 2013 at 6:42 pm | Permalink

          You forget that as originally proposed by the German government and the IMF it would have been a 40% tax on ALL bank accounts.

          And you forget that an ordinary German might be a small businessman, like the small businessmen in Cyprus who are losing between 40% and 80% of their working capital; or the ordinary German might be a member or supporter of a church or a trade union or a charity or a society or some other organisation, which in Cyprus will now lose between 40% and 80% of its funds; or indeed the ordinary German might even have more than €100,000 in his personal account at a particular time, either because he hasn’t taken the precaution of spreading his savings around or because he happens to be engaged in some legitimate transaction which involves transferring a large sum.

        • Bazman
          Posted March 30, 2013 at 5:40 pm | Permalink

          I suspect many more Germans than you think have over a 100k in their accounts. The rich Russians in Cyprus have basically plundered Russia and the population and so having their money stolen by a government or bank is ironic. The idea of Russia bailing them out out laughable. No Russian banks or taxes for them. It’s like the British caught up in Cyprus. They left the country to get away from foreign freeloaders and British taxes and are now asking for British taxes to bail them out. LOL!

          • Edward2
            Posted March 31, 2013 at 5:49 pm | Permalink

            Having your money stolen by a Government is not “ironic” it is theft pure and simple theft.
            I wouldn’t be so laid back if I were you Baz the idea has now been tried and tested in Cyprus so don’t think it could not happen here and affect people like you and me who may have less than the limit being imposed in Cyprus.

          • Bazman
            Posted April 1, 2013 at 3:24 pm | Permalink

            Many Russians would agree with you. Thats why they just drink it.

  13. Denis Cooper
    Posted March 28, 2013 at 9:33 am | Permalink

    As I pointed out in a comment submitted on the last thread but not yet published, the latest German government propaganda campaign has German politicians and tame journalists waxing indignant about unfair criticisms of Germany:


    But the fact is that the current problems in the eurozone were not only predictable but widely predicted, and in particular there were many publicly expressed concerns about the decision to allow Italy to join the first wave of euro – I recall the FT running an article headlined “Fudge Romana” – and similarly with the Iberian countries.

    And we now know that the German Chancellor Helmut Kohl was strongly advised not to agree to Italy joining, but he disregarded the economics and insisted that Italy must be allowed to join on political grounds:


    “Newly revealed German government documents reveal that many in Helmut Kohl’s Chancellery had deep doubts about a European common currency when it was introduced in 1998. First and foremost, experts pointed to Italy as being the euro’s weak link. The early shortcomings have yet to be corrected.”

    “The documents prove what was only assumed until now: Italy should never have been accepted into the common currency zone. The decision to invite Rome to join was based almost exclusively on political considerations at the expense of economic criteria. It also created a precedent for a much bigger mistake two years later, namely Greece’s acceptance into the euro zone.”

    Which was then followed by allowing other unsuitable countries such as Cyprus to join.

    “However, the Kohl administration cannot plead ignorance. In fact, the documents show that it was extremely well informed about the state of Italy’s finances. Many austerity measures were merely window dressing — either they were accounting tricks or were immediately dialed back when the political pressure subsided.”

    And I have no doubt that the German government was also extremely well informed about the true state of the finances of Greece, and it cannot now be pretended that when the German government decided to allow Greece to join the euro it had been duped by deceitful Greek politicians, and similarly with Cyprus.

    The German government had the power to restrict membership of the euro to those few countries which could comfortably share a currency with Germany, but instead it knowingly chose to allow in countries which should never have been allowed to join, and now that those countries have now got themselves into deep trouble there are complaints that this is costing the German taxpayer too much.

    And of course if the EU treaties had been observed it should not now be costing the German taxpayer anything, because it was not just a theory that “each member state in the Euro had to take responsibility for financing its own government, and balancing its own external payments”, it was deliberately laid down in the Maastricht Treaty.

    • uanime5
      Posted March 29, 2013 at 3:32 pm | Permalink

      How is it Germany’s fault that Italy, Greece, and Cyprus cooked their books to get into the euro and are now suffering as a result of their own actions?

      • Denis Cooper
        Posted March 29, 2013 at 6:48 pm | Permalink

        They cooked their books to get into the euro with the full knowledge of the German government, which could have stopped them joining but chose not to do so and on the contrary insisted that they must be allowed to join; so why shouldn’t the Germans now suffer as a result?

  14. Martin
    Posted March 28, 2013 at 9:49 am | Permalink

    Germany benefits from having an easier exchange rate for its exporters than would be the case if it kept the Deutsche Mark. It is worth pointing out that stopping things going totally pear shaped in the Mediterranean might well cut the losses that German Banks have to write down.

    Indeed there was some speculation that the USA was planning on having a weak dollar relative to the Euro to boost its exports. The Cyprus bail out has done otherwise.

    Meanwhile over in the slow train crash of Sterling-land the often tax payer funded banks have to find umpteen billion Pounds more.

  15. Voice_From_The_Floor
    Posted March 28, 2013 at 9:52 am | Permalink

    ‘The truth is, all the time Germany remains in the Euro, they will have to find ways to make the German public pay. If they will not vote for higher taxes to send the rest of the zone grants, the officials and politicians will find back doors ways of taking German wealth to do the job.’

    Quite so..…..but the ultimate truth is that the level of indebtedness of governments everywhere is so high that they will ALL have to seek back door ways of taking their citizens’ wealth and failing that, they will simply steal it (as in Cyprus).

    The scale of the debt is so huge that economic stability is now beginning to spiral out of control and there is absolutely nothing that governments can do to control it, even if they knew how to (which they don’t).

    There is a financial storm coming. God help us all.

  16. bluedog
    Posted March 28, 2013 at 9:52 am | Permalink

    When might Germany get fed up with the Euro?

    Just before they vote in September.

  17. English Pensioner
    Posted March 28, 2013 at 10:10 am | Permalink

    You could argue that the EU/Euro is part of a German plan to take over parts of Europe by financial means. (etc ed)
    With Cyprus taxing their savers, there will be no money to invest in order to build up their failing economy, and so any investment money will need to come from outside. And where is any outside investment likely to come from other than Germany? They will end up owning vital parts of the island’s assets and might develop the off-shore gas reserves, which would leave them just as much in control. (words left out ed) Indeed the EU decision that the Cyprus parliament would not vote on the proposals, whilst the German parliament would, confirms my ideas.
    OK, I know everyone will claim the idea is simply unjustified “conspiracy theory”, but time will tell if I’m right.

    Reply I do not think most Germans wish to take on so much financial responsibility.

    • Denis Cooper
      Posted March 29, 2013 at 12:00 pm | Permalink

      Reply to reply: as in this country, I think it is necessary to distinguish between the attitudes and ambitions of ordinary citizens and those of the politicians they elect.

    • uanime5
      Posted March 29, 2013 at 3:35 pm | Permalink

      The tax on bank accounts doesn’t effect those with less than €100,000 and even those with more than €100,000 will retain 60% of their bank account, rather than lose 100% if the banks go bust. So investment can still come from within Cyprus and can also come from Russia.

      • Denis Cooper
        Posted March 29, 2013 at 7:10 pm | Permalink

        According to the Telegraph:


        ” … the deal … will impose an unprecedented levy on depositors with more than €100,000 in the country’s two most troubled lenders, Bank of Cyprus and Laiki Bank.

        Account holders in Laiki Bank, the country’s second largest, stand to lose up to 80pc of their money, while those in Bank of Cyprus are at risk of seeing 40pc confiscated.”

        And that is not just 40% to 80% of individuals’ personal savings, it is also the working capital of businesses and the funds of organisations.

        Including the funds of trade unions, presumably, and no doubt if that ever happened here you’d be screaming blue murder.

        • Bazman
          Posted March 30, 2013 at 5:44 pm | Permalink

          Of course they are not leaving. No free market fantasists telling us that the banks should crash and they should use their own currency again. Wonder why that is? The savings would then be next to nothing so good old scrounging will have to do whilst blaming the giver.

          • Edward2
            Posted March 31, 2013 at 5:53 pm | Permalink

            Sitting here in the UK Baz, you can afford to sound ruthless when other people are losing their jobs, their small businesses and their life savings.
            Lots of talk about Russians money which it seems is Ok to take but none about your fellow workers misery.

          • Bazman
            Posted April 1, 2013 at 3:27 pm | Permalink

            How left wing of you to want the government to bail out the savers and the banks. How ‘absurd’. Let them crash and just start again. It’s the only ‘sensible’ way.
            Funny how financial Darwinism does not apply when their own skins are on the line.

  18. John B
    Posted March 28, 2013 at 10:42 am | Permalink

    Another consideration is those wartime and just postwar generations who donned sackcloth and ashes in perpetual atonement and a desire to make restitution, are being replaced by generations who, blameless, feel no debt of redemption and no need to pay any price for indulgence for sins they did not commit.

    And why should they carry that monkey on their backs?

    Just like the War, the NAZIS, Lebensraum, the camps, the EU is the work of older generations to meet their needs: the young have their own needs and aspirations.

    Another money to be shrugged off.

  19. Bob
    Posted March 28, 2013 at 10:51 am | Permalink

    “The best hope we have all the time we do not have a Eurosceptic majority in the UK Parliament is the growth of Euroscepticism in Germany.”

    You’re clutching at straws John, Frau Merkle has shown how determined she is to maintain the Euro, and the LibLabCons are committed to the EU with all their “heart and soul.”

    The best hope we have is to mark an “x” for a EUsceptic party at the ballot box.

    • Europhile
      Posted March 28, 2013 at 11:44 pm | Permalink

      I want us to stay in and steer to the left.

      I’m voting Millicleggeron.

      • Christopher Ekstrom
        Posted March 29, 2013 at 11:04 am | Permalink

        More like “South of no North”.

  20. Gary
    Posted March 28, 2013 at 10:52 am | Permalink

    In a currency union that won’t allow inflation, either the strong bailout the weak, or the weak have to write of the debt and restructure. The latter option does not necessarily involve Germany bailing anyone out, apart from any German creditors involved in the writeoff possibly taking a haircut.

    The problem is the bank debt may be so huge that it sinks the sovereigns involved. Then we are also finished, except our demise will be via the printer with currency collapse.

    • Denis Cooper
      Posted March 29, 2013 at 12:10 pm | Permalink

      “In a currency union that won’t allow inflation”

      Here’s an educational tool for you:


      “Ever wondered what monetary policy is? Or how the key interest rate affects inflation? Play €CONOMIA and find out how it works.

      Your goal: Keep inflation low and stable at just under 2%. Your tool: the key interest rate.”

      Note: the inflation of just under 2% is the weighted average for the eurozone, and you need not concern yourself too much if one small country has inflation of plus 7% or minus 7%.

  21. mactheknife
    Posted March 28, 2013 at 11:09 am | Permalink

    I have German friends and relatives and they have told me for a long time that the public mood and sentiment towards Europe and the Euro has been significantly diminished and is continuing to wane. The money grab in Cyprus is just the start I fear.

    By the way is this legal for the EU to raid private bank accounts ?

    • Electro-Kevin
      Posted March 28, 2013 at 11:46 pm | Permalink

      Would the Human Rights Act extend to protecting honest (peaceful) taxpayers’ money ?

      • uanime5
        Posted March 29, 2013 at 3:40 pm | Permalink

        Given that the human rights act doesn’t prevent the state from levying taxes it won’t protect you from Cyprus style taxes on deposits.

        • Electro-Kevin
          Posted March 29, 2013 at 7:52 pm | Permalink

          I used the word ‘peaceful’ because it seems that Abu Qatada is better protected using taxpayer’s money than taxpayers are protected themselves.

          What do the political class think is going to happen in Britain when real austerity, power cuts and mass bankruptcies hit ?

    • cosmic
      Posted March 29, 2013 at 11:04 am | Permalink

      It was a confection between a couple of banks going bust and a country bailout.

      The ECB didn’t want to mess with accounts less than the guarantee, that appears to have been Anastasiades’ interpretation. Normally, if a bank goes bust, the depositors are the most senior creditors, shareholders, and bondholders should suffer first.

      Now, other banks were drawn in such as Hellenic and local branches of foreign banks which is certainly doubtful at least.

      it looks like a God awful mess and the way it’s been handled, destabilising to the banking system as a whole.

      There are persistent rumours that people with the inside track shifted their deposits in time.

    • Bazman
      Posted March 30, 2013 at 5:45 pm | Permalink

      Is it legal to let the banks crash and the savers lose everything?

  22. Bert Young
    Posted March 28, 2013 at 12:20 pm | Permalink

    Dr. JR I have responded on several occasions indicating that Germany would be obliged to re-evaluate and cause its relationship with the EU – particularly with the Southern EU , to change . The forthcoming elections in Germany is creating the political atmosphere to bring this about . Bring it on ! There are only advantages to us if this happens .

  23. Normandee
    Posted March 28, 2013 at 12:32 pm | Permalink

    I agree with Electro Kevin, whilst people keep using euphemisms for what is happening the seriousness is diluted. To talk about ¨haircuts¨ and ¨levies¨ etc is to ignore the fact that what has happened is straight forward legalised theft. Politicians are the very worst users of these types of euphemism, and the politicians that stop doing this and call it as it is are those that will get listened to. Have you heard Nigel Farage say haircut? no, and as you can see he is getting listened to.

  24. Bernard Juby
    Posted March 28, 2013 at 12:40 pm | Permalink

    Just as UKIP arose from a wish to leave the EU there is a new Party emerging in Germany with the express desire to challenge Frau Merkel and her “wedding” to the Euro.
    As the Chinese curse says, we do live in interesting times!

  25. Tad Davison
    Posted March 28, 2013 at 1:22 pm | Permalink

    I am tempted to say, the Germans wanted this thing called the EU whilst it suited them and their lofty status within it, so let them pay for it. Just as long as we don’t have to pay any more towards it than the amount we have already paid, and if it does go down, that it doesn’t take us down with it.

    I just cannot believe the political classes couldn’t see this whole pile of dung coming a long time ago. The stark facts have been there for all to see. And ask any young child about borrowing money, and even they will tell you that one day, it has to be paid back, usually with interest.

    It is very disconcerting, if not downright scary, when the political elite continues to drive us to the edge of financial oblivion, because of some fanciful notion that we’d all be better off in every conceivable way, were we to give up our sovereignty and right to self-determination altogether, in order to belong to this magical Utopia called the EU. The term, ‘slow-motion car crash’ is perhaps too widely used these days, but it suits this present situation rather well. For every so-called ‘positive aspect’ of EU integration, there must be ten reasons why it is doomed to failure. Yet the pro-EU protagonists persist, and their will prevails.

    There was a similar situation in Germany after about ten years of Nazi rule. Everyone could see the necessity of the removal of one person who would not flinch, and would not yield or be deflected from his ideology. He, through outrageous misfortune on our part, was allowed to carry on, and just look what happened as a consequence!

    Winston Churchill often remarked, ‘….those who don’t change their minds, don’t think.’ What else could explain the intransigence of the pro-EU lobby?

    But as history has shown, to continue on the same course, when ultimate disaster has been so widely envisaged if not thoroughly proven, is an incredibly dangerous game to play – especially in these times when some of our traditional enemies are in the ascendency. Our weakness is their strength, but as we have seen, being part of the whole EU mess doesn’t make us stronger, as others would have us believe. It makes us weaker, and is therefore a bad thing for every thinking, democratically-minded, freedom-loving person.

    Tad Davison


    • uanime5
      Posted March 29, 2013 at 3:53 pm | Permalink

      Nazi rule started in 1933 when Hitler became Chancellor, called for new elections, and with the help of a small party passed the enabling act which allowed him to make any law he wanted. So after 10 years it would be 1943, when the Nazis were losing the war in Russia because Hitler kept overruling his own generals who actually knew how to fight a war. While the military leaders may have felt that removing Hitler was advantageous the ordinary people still supported Hitler. So your claims that everyone wanted to remove Hitler are inaccurate.

      You also fail to provide any evidence that being in the EU makes us weaker or how leaving would somehow help us against our “traditional enemies”, whomever they may be.

      • Bazman
        Posted March 30, 2013 at 5:52 pm | Permalink

        The French are Englands traditional enemy and every small setback by France such as in sport brings a warm glow to every true Englishman. Says I with a French surname and facial features.

  26. Nicol Sinclair
    Posted March 28, 2013 at 1:26 pm | Permalink

    Frau Merkel is a hostage to her own electorate. Were that the majority of ours were,

    • Denis Cooper
      Posted March 29, 2013 at 12:46 pm | Permalink

      Would it make any difference if Merkel was replaced by another member of the German political elite?

      Kohl, a Christian Democrat like Merkel, allowed Italy and the Iberian countries into the first wave of the euro knowing perfectly well that this was economically very dangerous, then the Social Democrat Schroder allowed Greece to join the euro knowing perfectly well that this was economically very dangerous.

      Even the BBC was prepared to acknowledge the concerns:


      “Some investors have said they are worried the decision to allow Greece to join the euro will send out the wrong signal to financial markets – suggesting that in future other, weaker economies may be allowed in without complying fully with membership conditions.

      Greece has one of the highest inflation rates in Europe. Public sector borrowing is also much higher than would be permitted normally under the EU rules governing entry to the project.

      Greece had hoped to join the euro with the first wave of member countries in January 1999, but failed to meet the economic tests of low inflation and government debt and deficits – the so-called Maastricht criteria.”

      But then most of the countries allowed to join in the first wave had also failed to meet properly those economic tests, and in fact the UK would have been more eligible to join than many of them.

      If it is right for the Cypriots to suffer for the mistakes made by their politicians, Cyprus being a democracy, is it not also right for the Germans to suffer for the mistakes made by their politicians, Germany being a democracy?

  27. Nicol Sinclair
    Posted March 28, 2013 at 1:28 pm | Permalink

    Sorry, should have been a full stop & not a comma. My laptop doesn’t ‘do’ punctuation. Neither does it do spelling & grammar…

  28. uanime5
    Posted March 28, 2013 at 1:29 pm | Permalink

    Given that European car sales represent all car sales in Europe you can’t assume that because the sales have fallen by 10% that Germany’s sales must have also fallen by 10%. It’s entirely possible that Germany is still selling the same amount of cars and that car sales have fallen because people aren’t buying non-German cars.

    Germany has for some time been looking outside of the EU for car sales, as has every country that competes in the global economy. Most companies have been investing in developing countries for decades, even if they making a loss, to ensure that when the developing country improves they’ll be able to quickly reap the rewards.

    I suspect that Germany will remain in the euro because if they went back to the euro it would quickly become much stronger than the euro, making German exports more expensive. I also suspect that the German people will demand that eurozone countries that get into trouble should be forced to take a large “haircut” rather than be bailed out with German money.

    In other news due to the bedroom tax coming into force on Monday expect people to destroy walls to combine rooms or foster children in order to avoid losing their benefits. Along with protests throughout the UK. This cut will definitely come back to haunt the Government during the 2015 election.


    Reply German car sale to southern Europe are down – try checking the figures before you make allegations. People living in rented housing cannot knock walls down in their homes as the landlords especially the state would not permit it. Many walls are also load bearing.

    • uanime5
      Posted March 28, 2013 at 1:32 pm | Permalink

      Also the Job Centre is now being forced to sanction people, even if they haven’t done anything wrong. Care to explain why there are targets for sanctions John.


      • Bob
        Posted March 28, 2013 at 10:26 pm | Permalink

        I’d be interested to know how many successful placements have been made by Job Centres, compared to commercially run recruitment firms.

        • uanime5
          Posted March 29, 2013 at 4:17 pm | Permalink

          Well given that most Job Centres no longer try to place people in jobs because getting people into work has been outsourced to private companies I’d have to say any comparison would be flawed.

        • Bazman
          Posted March 30, 2013 at 5:55 pm | Permalink

          Paid lots of money for very poor results the company has Bob. Google it and get back to us. Will you change your mind? I doubt it. Explain why.

      • NickW
        Posted March 29, 2013 at 8:45 am | Permalink

        So; how would Labour go about reducing Government spending?

        Or would you argue that we can simply carry on with deficit spending and rely on borrowing money until the end of time?

        Would you care to explain?

        • uanime5
          Posted March 29, 2013 at 4:18 pm | Permalink

          Government spending can be reduce through high tax rates, or by clamping down on tax avoidance and evasion.

          • Edward2
            Posted March 31, 2013 at 5:57 pm | Permalink

            Best of luck with reducing the £130 billion a year deficit with these two policies Uni.
            Especially as you want to hugely increase public spending as well.

  29. Alan Wheatley
    Posted March 28, 2013 at 1:37 pm | Permalink

    While broadly happy with the theme of this post, what is one meant to make of the sentence “The best hope we have all the time we do not have a Eurosceptic majority in the UK Parliament is the growth of Euroscepticism in Germany.”?

    Does this indicate that while German politicians are listening to the electorate those in the UK are not?

    Is this a call for allies to work for a better EU rather than to walk away from the whole beastly monstrosity?

  30. Acorn
    Posted March 28, 2013 at 1:53 pm | Permalink

    The Cyprus thing makes you think. We have global citizens, they can live here and work there and vice versa. We have global corporations that are based here and operate there and vice versa. But we still have “local” nations with their rule making governments for there little patch of Terra Firma, that end up with the bill.

    So the price you pay for having global banks on your patch; with assets supposedly eight times your GNI for Cyprus but, only a mere 6.5 times for UK; is your little nations citizens get screwed when things go mammaries up.

    Imagine how the UK would get on if we did not have a government Treasury. The actual entity that spends all our own pounds sterling into existence. And, the central bank had to try and run a monetary policy while not having any control over fiscal (tax and spending) policy. That is what life is like in the Eurozone, except it’s worse because all seventeen countries have their own Treasuries and they are all using a foreign currency that is controlled by a foreign central bank they call the ECB. What sort of idiot would design a system like that?

    Anyway, I expect you have seen the Quarterly National Accounts that came out yesterday. Would someone please explain to George Gideon Oliver Osborne, the sector accounts on pages 13 – 18.

  31. Christopher Ekstrom
    Posted March 28, 2013 at 2:07 pm | Permalink

    Now the hope for UK euro”skeptics” resides in Germany turning “skeptic”? WRONG!

    Of course it’s wonderful to contemplate Germany changing course; unless Germans wish to squander their competitive advantage an about-face makes sense. But that’s in the real world. In the amazing world of visonary politicians, unfettered by the consent of those governed, all that miserable economics 101 rot can be ignored. Frau Merkel should be kicked back to her kitchen. Instead she will likely continue as Boss. If you are waiting for rescue by Germany I guess it’s more clear than ever that UKIP are England’s only hope.

  32. Andy
    Posted March 28, 2013 at 2:23 pm | Permalink


    I know you read all your contributers, please take the time to read this:

    How would we go about persuading you to sponsor legislation to protect savings and investments in the UK from punitive tax and regulation changes? In particular, I am concerned about the possibility of a future (or this) government raiding pension funds, ISA’s and other retirement savings.

    Whilst the government would like people to save for retirement it (and previous governments) are continually altering the rules and limits associated with pensions.

    How can anyone have confidence that that the system will remain even vaguely as it is now when we come to retire in decades to come?

    Will the age we can take out pensions be changed again (as it was changed from 50 to 55)? Will the 25% tax free lump sum be removed as an option, or the % tax free reduced? Will a one off tax or levy be applied to those with funds over a certain size? Will the lifetime allowance continue to be reduced? Will tax relief be changed? Will the amount that can be contributed each year be reduced further?

    How can anyone have the confidence to save the substantial amounts needed into a pension fund that would generate even a modest annual annuity when all the elements above are subject to tinkering and adjustment?

    If it is possible to set up press regulation is such a way that governments cannot make changes to the system without a larger than normal majority (am I right in my understanding here?) then why can such a system not be put in place to ensure the stability of a much more important area, our pensions?

    To put this in perspective, all I am trying to achieve is the ability to retire at 60 with an inflation proof pension of around £18,000 a year for myself and my wife. On current figures this will mean I need to have a pension pot of around £600,000

    £600,000 is a lot to put into an unstable system.

    Thank you.

    • Bob
      Posted March 28, 2013 at 10:06 pm | Permalink

      I see that five Centrica bosses are due to receive a share of a 16.5 million bonus pool.

      I own shares in this company, but because the shares are held in a SIPP, I cannot vote on the remuneration of the directors.

      Tell me Mr Redwood, is there any good reason why I should be disenfranchised by tax regulations? If we are to end excessive bonus payouts for fat cats, all shareholders must be allowed to vote.

      reply Good point

      • Denis Cooper
        Posted March 29, 2013 at 12:59 pm | Permalink

        Nowadays institutional investors are dominant, and even if you have an investment in a fund that owns shares in a company you’re not normally asked how you want the fund managers to vote. And because the senior managers of investment institutions are often on the same kind of bonus schemes based on short term performance that makes it difficult to get a reasonable bonus system except through its imposition by law.

      • alan
        Posted March 30, 2013 at 2:30 pm | Permalink


        ref Reply -Reply

        Same if you hold shares within an ISA wrapper, no vote.

    • alan jutson
      Posted March 29, 2013 at 12:08 am | Permalink


      You make some excellent points, indeed, if the real facts were put down on a purchase contract, it would never be allowed for any other type of goods to be sold in this manner.


      You give us lots of your money money, and in excghange we will eventually give you a pension


      We cannot tell you for how long you will need to contribute.
      We cannot tell you how much you need to contribute, but the more the better.
      We cannot tell you how much you will get because we do not know the eventual annuity rate.
      We cannot tell you how much you will be taxed, because this can change.
      We cannot tell you how much we will be taxed when we look after it for you, because this can change
      We cannot tell you how it will perform because that is out of our control.
      You cannot legally get any money out in a dire emergency if you are below retirement age.
      You cannot tell us how long you will live
      We cannot tell you how long you will live.
      You will get less if you want it inflation proofed.
      You will get less if you want to make provisiion for a spouse after your death.
      The rules may change at any time, as may the tax rates or anything else the government may decide it will change.
      We may indeed go broke, and you may get considerably less than our annual statements show.
      The value of money may reduce to such an extent, that no matter how much you put in now, it may never be enough for your present wishes.
      The tax free lump sum may change.
      The tax relief on future contributions may change.
      We will take our charges from your fund every year so we get paid in full no matter how we perform.
      Given you now have a Pension it will probably exclude you from any Benefits.

      Just a thought

      I would suggest this looks just a little one sided and open ended,

      I wonder why people take out personal pensions ?

      Perhaps better to make other provisions for old age !

      • Andy
        Posted April 3, 2013 at 10:05 pm | Permalink

        Hi Alan,

        It does not look great. I invest in a sipp, so have less concern about fees etc. The two main reasons I continue down this path are 40% tax relief on my contributions and by contributing large amounts over next couple of years I can keep my child benifit. I would predict the end of tax relief over 20% after the next election, so making the most of it while I can.

        I still expect that at some point my pension fund will be raided by a future government, hence my request to Mr. Redwood to look into the possibility of creating a stable system that we can trust.

    • Christopher Ekstrom
      Posted March 29, 2013 at 11:07 am | Permalink

      Vote UKIP.

  33. margaret brandreth-j
    Posted March 28, 2013 at 2:33 pm | Permalink

    I see that you are pushing the ball down the slippery slope, but all I have heard from Mrs Merkel are positive noises. If you say that Germany is looking for alternative markets , they will be looking in the same place as the UK and this is where we have to strike whilst the iron is hot . We need those competitive contracts etc.

  34. cosmic
    Posted March 28, 2013 at 2:37 pm | Permalink

    There are signs of euroscepticism growing in Alternative für Deutschland. However, it isn’t a euro withdrawalist movement, it’s back to Maastricht, a mechanism for leaving the Euro, no bailouts and a referendum before further transfer of power.

    At a more superficial level there’s widespread resentment that they are paying for bailing out Greece etc and seeing pictures of Merkel with Hitler moustaches for their trouble.

    One obvious end point for the Euro is when it eventually bankrupts Germany.

    • Denis Cooper
      Posted March 29, 2013 at 1:01 pm | Permalink

      Well, I ask again:

      If it is right for the Cypriots to suffer for the mistakes made by their politicians, Cyprus being a democracy, is it not also right for the Germans to suffer for the mistakes made by their politicians, Germany being a democracy?

      • cosmic
        Posted March 29, 2013 at 4:52 pm | Permalink

        That was a question JR asked a few days back and my view was that if we lived in a democracy it would be right for us to accept the liabilities of our decisions. As we don’t, the question hardly applies. The same is true of Germany and Cyprus.

        Anyway, the fact that it may be considered morally correct for you to shell out for something certainly does not mean you will go along with it happily and won’t use every means at your disposal to wriggle out of it.

  35. Chris Rickard
    Posted March 28, 2013 at 4:02 pm | Permalink

    Germany is the one country who benefits from the Euro crisis ! Its economy benefitted hugely from the creation of the Euro as German products flooded into the Club Med countries. The lack of fiscal re-distribution in the Eurozone, unlike, for instance, that which exists in the US amongst the various States, meant Germany kept all the profits and surpluses. Since the financial crash, those Club Med countries can’t afford to buy products from anywhere else except Germany because of the Euro exchange rate. And who pays for the Club Med financial crisis – the IMF helps, private bond holders and depositors are forced to make major contributions, the EU steps in via the ECB, and Germany – its liability is contingent only, as guarantor. If anyone is doing well out of the Eurozone crisis its Germany.

  36. Adrian drummond
    Posted March 28, 2013 at 4:13 pm | Permalink

    Perhaps not in the specifics but this scenario was predicted almost twenty years ago. I think that John Redwood himself may have said as much in the early nineties. For all those people who had the foresight to see where this Euro project was likely to lead, there is little self-satisfaction; all that could be said, was said and continued to be said.

  37. formula57
    Posted March 28, 2013 at 4:17 pm | Permalink

    I pity the Germans, living in a country where their leaders are so dishonest as to mean “If they will not vote for higher taxes to send the rest of the zone grants, the officials and politicians will find back doors ways of taking German wealth to do the job”.

    Rejoice, rejoice that we live in a country where such naughtiness would not be countenanced by our beloved leaders.

  38. Leslie Singleton
    Posted March 28, 2013 at 5:04 pm | Permalink

    Given that we – or, mercifully, the Latin countries more than we – are where we are solely because of Germany’s need to expiate its guilt (and the fact that it hasn’t worked doesn’t alter that), maybe somebody should put it to Germany that the way for them to complete that process is for them not just to leave but to do everybody else a favour by leaving the Euro. Who can doubt that the resultant currency adjustments wouldn’t immediately start to rectify the obvious imbalance between North and South? (Le Chatelier’s Principle applies.) That wouldn’t be such a large change because the EU doesn’t have a single currency anyway and as things stand that is unlikely to change anytime soon. This isn’t a game and some people are suffering dreadfully.

  39. David in Kent
    Posted March 28, 2013 at 5:07 pm | Permalink

    It seems to me there are two huge benefits that Germany gains from the Eurozone which have, to date, out balanced the issues you raise.
    Firstly the political reach, power and legitimacy from a zone which includes France and Poland. Secondly economic as it gives them an undervalued currency without having to constrain their own exports whether they are to the zone or elsewhere.
    After the investment of so much political capital in the zone it is hard to imagine them giving up easily.

  40. Pleb
    Posted March 28, 2013 at 5:14 pm | Permalink

    Blimey, no comments, is everybody at Lifelogics funeral!

  41. backofanenvelope
    Posted March 28, 2013 at 5:17 pm | Permalink

    So far the Germans and their Benelux allies have destroyed the economies of Ireland, Portugal, Spain, Greece and Cyprus. Now their beady eyes are turned on the Slovenians and the Baltic States. Not to forget their misgivings about Hungary. One day, perhaps, all these countries will get their act together and sort the Germans out. After all, more and more of the EU activity is subject to majority voting. How about a special tax on Germans?

    • Christopher Ekstrom
      Posted March 29, 2013 at 11:10 am | Permalink

      Very clever! But rioting in the streets will come long before…

  42. miami.mode
    Posted March 28, 2013 at 5:37 pm | Permalink

    It seems to me that Germany is already too deeply involved and for the reasons you have outlined is due at some stage to lose enormous sums of money.

    The euro is surely doomed in its current form and to a large extent it is entirely Germany’s fault.

    In the early days of the euro economic policy was formulated to suit Germany – low interest rates to help them establish a sound footing after absorbing East Germany which was economic dynamite for such as Ireland Spain and Portugal.

    Remember Wim Duisenberg following where Germany led and the constant calls in Britain for lower interest rates during the early to mid noughties as the euro area was consistently about 1% below British rates.

    It almost strikes me as history repeating itself with Germany initially sweeping all before it only for it to go sadly wrong and they end up with a disaster.

    Remember the old story – if you can’t take a joke, you shouldn’t have joined up.

  43. rd
    Posted March 28, 2013 at 6:24 pm | Permalink

    German Target2 exposure is appalling.

  44. margaret brandreth-j
    Posted March 28, 2013 at 6:41 pm | Permalink

    I have just read your document “The future of the Euro” (2011).
    Do you still think that a solution is for Germany to exit the Euro and reuse the DM?
    Do yo still think the Euro will survive?

  45. Jon
    Posted March 28, 2013 at 7:14 pm | Permalink

    There was a documentary a little while ago and it didn’t seemed to be biased or slanted.
    The presenter was just asking how people on the continent felt about the Euro.

    The majority of the Germans felt it was good and liked the message from the EU that they wouldn’t pay for the Mediterranean.

    The people in Greece liked the Euro because the message they got from the EU was that the Germans come northern block would bail them out and there would be a spread of wealth.

    The EU will look to play the long slow game so the Germans don’t notice, but will they?? I’m not confident they will in huge numbers but who knows?

  46. D K McGregor
    Posted March 28, 2013 at 8:24 pm | Permalink

    Wow! That last para was a cracker , John. I think you can smell your time is coming. Let it be soon.

  47. Mike Stallard
    Posted March 28, 2013 at 9:12 pm | Permalink

    Why only one comment I wonder?
    Are we turning back to our Christian roots?

  48. Lindsay McDougall
    Posted March 28, 2013 at 9:42 pm | Permalink

    Whether it is through transfer payments or through the ECB turning the Euro into a soft currrency, it will cost Germany somehow or other. Germany’s only hope of limiting the damage is to encourage the fiscally weak economies to leave the Euro zone (or to reinstate the Deutchmark!!).

  49. Steve Cox
    Posted March 29, 2013 at 4:39 am | Permalink

    John, you conclude that, “The Euro comes with a high price for the prudent and successful caught up in it.” Perhaps so, but between ZIRP, inflation and devaluation, the Pound comes with an even higher price for prudent British savers.

    • Denis Cooper
      Posted March 29, 2013 at 1:05 pm | Permalink

      Not so.

  50. NickW
    Posted March 29, 2013 at 8:38 am | Permalink

    Germany’s handling of Cyprus is going to lead to an inevitable consumer boycott of German products throughout Southern Europe.

    Germany’s external markets are going to disappear.

    Reply There has already been a sharp fall in German car exports to the southern part of the zone, owing to plunging living standards. Germany as a result is exporting far more to emerging market areas who can afford their cars.

  51. NickW
    Posted March 29, 2013 at 2:13 pm | Permalink

    The EU appears to have destroyed most of the businesses in Cyprus.

    All those businesses which kept their working capital in Cypriot Banks and had over 100,000 Euros are now unable to pay wages or suppliers and will have to instantly lay off their entire staff and close their Cypriot businesses.

    Will there be any businesses or jobs left, now that working capital has been confiscated?


  52. Barbara
    Posted March 29, 2013 at 5:11 pm | Permalink

    The truth is Germany is fed up now with providing funds, its showing in recent polls, and Frau Merkel know that she may not win the next election. Germany will not allow inflation to get out of hand so something as to give. Cyprus, being small, was the test ground for the new approach. The approach being personal bank accounts being robbed to service monetry neeeds.

    • Denis Cooper
      Posted March 29, 2013 at 6:51 pm | Permalink

      Not just personal accounts, all accounts including business accounts.

  53. Jon D
    Posted March 30, 2013 at 7:56 am | Permalink

    Whichever way you look it doesn’t look good for the Euro. If Germany does start to have any doubts then it is dead in the water.

  • 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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