Opinion: Greece may fail, but the euro won't

[unhappycamper]

http://www.dw.com/en/opinion-greece-may-fail-but-the-euro-wont/a-18546287

The euro if of a faulty design, which is bound to drive economically weaker member states to ruin. This was clear to almost all economists but not to the politicians, writes Rolf Wenkel

Opinion: Greece may fail, but the euro won't
Rolf Wenkel
28.06.2015

Make no mistake about it: The way things look, the European monetary union will have one less member in a few days. True, this member is of marginal economic importance, but it is also of great symbolic value for European integration. Is this the beginning of the end of the euro?

The statement that: "If the euro fails, then Europe fails" is dramatic, exaggerated and factually wrong - even if it came from the mouth of German Chancellor Angela Merkel. The euro cannot fail as long as anyone still recognizes it as a valid means of payment. And Americans, Asians, Russians, Brazilians and the rest of the world will continue to do so, with or without Greece.

But one can certainly ask the question whether the euro is of a flawed design that is almost inevitably bound to drive economically weaker member countries into ruin. "We say yes to the euro!" the German Federation of Trade Unions and the most powerful trade union IG Metall declared in the mid-90s, long before it was introduced.

Back then, I rubbed my eyes in disbelief. Have the unions no economists? Don't they know that when you give up your national currency, you also surrender the tried and tested tool known as devaluation? Don't they know that in the absence of a national currency, you can only achieve devaluation by pushing down wages, cutting jobs, and make those who still have a job work longer?

[DetlefK]

1. I saw a documentary about the Euro on the weekend. Nasty stuff.

The german government under Chancellor Kohl wanted a stable Euro with lots of regulations, securities and fail-safes. With the exception of the Netherlands, all the other EU-members wanted a less strict enforcement of stabilization. Kohl wanted this unified currency really hard, so the german government backed down again and again and again until a foul compromise was reached. Most heads of the german national bank had doubts whether it would work, but the implementation of the Euro was a foregone conclusion.

Greece wanted to join the Eurozone. To do this, they had to make sure their national deficit is no more than 3% of the gross domestic product and the national debt is no more than 60% of the gross domestic product. Greece started collecting the numbers and... A miracle! Greece made the criteria for joining the Euro!
Years later it turned out that those numbers were falsified. In some cases, Greece hasn't even had the necessary data available at all, so they just made up numbers. (A former greek finance-minister was interviewed and he complained how antiquitated the equipment of the finance-ministry had been. Up until 1997, the greek finance-ministry operated solely with pen&paper and telephone.)

The greek numbers were passed on to EUROSTAT, the agency responsible for statistics in the EU. They didn't believe the numbers one bit, but they had no means of fact-checking them. The numbers were then passed on to the European Central Bank. They also didn't believe the numbers one bit and they also didn't have the means to fact-check them. And that's how Greece joined the Euro.

Once Greece was a member of the Eurozone, the next task was to hide the huge debt. The threshold was 60%. Greece's debt was 104%. And the deficit was supposed to be below 3%. It was more like 5-6%.
Greece contacted Goldman Sachs to make the debt disappear and Goldman Sachs delivered: They engineered a swap-deal for Greece. The debt magically disappears in the present, only to magically reappear in the future.
But this was just a problem postponed, not a problem solved. Greece got more creative over time. They not only booked present expenditures into the future, they also booked future earnings into the present.