The Polish letters: The Euro, that unnecessary mistake

At 8pm in the evening, I am in no position to deeply debate many of the subtle economic points you raised in your email (actually, I might not even be able to do that at 9am!). But some of the philosophical ones I want to tackle.

First of all, I actually don't like anybody or any country forcefully exporting his/her/its view of anything to anywhere, being the exporters Germans, Japanese, Americans, gypsies or PhD trained economists. Diversity is the great wealth of the world in general, and Europe in particular. But people have to live up to the consequences of their actions. And the reality (I hesitated to write "the truth") seem to be (I hesitated to write "is") that for the euro to survive, Europe has to die. Or in other, less dramatic terms, Europe has to become a big Germany (meaning competitive). Which would be a terrible tragedy. Now, there are different ways in which that could be achieved, that would involve fiscal restraint in most cases, but would not simply mean pasting additional German institutions on Greek or Italian societies and polities. And, as a matter of fact, I think M. recognized this, his position was that Italy was in trouble because Italians did not make any structural reform, while the Germans did, not that Italy failed to implement a Germanic reform agenda (as some commentators in the financial press are fond of suggesting). Incidentally, in the good ol' times (before the Euro), these situations could easily and relatively painlessly be dealt with a blow-up in some segment of the ERM. A few weeks of adrenalin, a couple of parliamentary governments went down, FT and WSJ had better sales for a few days, Soros pocketed some capital gains, and that was it, everybody back to work.  Now, it seems that the "adjustment" will certainly mean either long periods of wage deflation and possibly social unrest in Club Med Europe, or relatively high inflation (and social unrest?) in mein geliebtes Deutschland.

In regards to the role of Chinese imports on Germany's trade balance (the ultimate reason of my initial email), it seemed to me that you were surprised about my statement, which is the only reason why I brought this up again, otherwise I guess I would have forgotten about the whole thing. Your mild surprise made an impression on me (I obviously see you incapable of ignorance, if not mistake...).

Moreover, I did not say that you personally were supporting the idea of Germany's as an unfair trader, but the table's discussion was slightly drifting in that direction, something that I, a consummate germanophile, could not allow. Now I must say I totally share your three favourite eurocrat's ideas, maybe only swapping 1 and 2.  On the other hand, even though it is probably true that Germany is benefitting from some heavy degree of flight to quality, the fiscal impact of that effect is marginal (kicking in through the rollover of maturing debt, peanuts), compared with the massive size of the support that Germany might need to provide to her European buddies to "buy" time. So, it is not yet, but it could become a case in which to a large extent frugal Germans end up paying the bill for sinful Southerners (though their main sin was getting into a poorly designed monetary union with Germany… remember Hayek: to each people their money...).

Now, to cap it all, if your Polishness was somehow offended by the capricious projections of my incomplete European history knowledge, here's a tip, were you in the mood for petty revenge: you can really piss off an Argentinian if you ask him/her whether the capital of Argentina is Rio de Janeiro. A final dangerous remark: almost everything in life is relative. So if the benchmarks are the Kievan Rus' or the Grand Duchy, Ukrainians and Lithuanians have "some reason" to felt occupied…

Schön Wochenende!!!

PS: since Argentina was almost a desert before the XV century, we used to fill up the time gap in primary (and even secondary) school with long European history lessons  -- the Chinese were too far away, and Aztecs and Mayans were Mexicans, whereas we Argentinians thought of ourselves as Europeans in exile :). (Alas, the lavish display of European stupidity in the current juncture does nothing to prove countless generations of Argies wrong...)  Anyway, Kievan Rus', Grand Duchy of Lithuania, the old kingdom of Poland, Golden Horde, needless to say the Holy Roman Empire, are all entities with which I was quite familiar way before Wikipedia. Though I won't lie to you: I keep building up thanks to it!!