Economics Politics

Should Germany Exit the Euro?

ImageThere is an interesting recent post on Project Syndicate by Hans-Werner Sinn, Professor of Economics at the University of Munich, commenting in George Soros’ call for Germany to “lead or leave” the European Union. Prof. Sinn makes the point that “many investors echo Soros. They want to cut and run – to unload their toxic paper onto intergovernmental rescuers, who should pay for it with the proceeds of Eurobond sales, and put their money in safer havens.”

I agree with Sinn who thinks that this idea, which has populist appeal, is a dangerous one that should not be tossed about lightly by any business or social leader in Europe. Anyone who thinks that Germany returning to an independent state, its coffers brimming with wealth while the rest of Europe sinks into depression, is a good idea is ignorant or mad or both. Even a cursory review of 20th century history shows what happens when Germany is strong and Europe is weak, and vice-versa, and who would think that the economic and political future would be any different?

As Sinn goes on to note:

Politically, it would be a big mistake for Germany to exit the euro, because that would reinstate the Rhine as the border between France and Germany. Franco-German reconciliation, the greatest success of the postwar period in Europe, would be in jeopardy.

Thus, the only remaining option, as unpleasant as it may be for some countries, is to tighten budget constraints in the eurozone. After years of easy money, a way back to reality must be found. If a country is bankrupt, it must let its creditors know that it cannot repay its debts. And speculators must take responsibility for their decisions, and stop clamoring for taxpayer money whenever their investments turn bad.

Soros and other should leave this kind of talk to the political fringe where it belongs. The EU may be flawed and in many ways undemocratic but it needs to be fixed not abandoned.


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