I’ve heard this many times before, and it has come from all sorts of directions. But now two people that I respect – Martin Wolf and Peter Zeihan both say that Germany has in fact a lot to do with the current financial crisis of the eurozone.
Martin Wolf talks about the strategy of “Chermany” – that is, China and Germany, to encourage deflation in countries with trade deficit during the current economic crisis. Mr. Wolf criticizes the proposals of the German finance minister Wolfgang Schaüble that include combining emergency aid for countries running excessive fiscal deficits with fierce penalties; suspending voting rights of badly behaving members within the eurogroup; and allowing a member to exit the monetary union. Mr. Wolf believes this will weaken the entire eurozone economy because of the necessary deflation in trade deficit countries. He also says that trade surplus countries (and Germany in particular) refuse to accept that their reliance on export surpluses must rebound upon their internal markets.
Peter Zeihan goes much further. He bluntly says that the Germans crafted the euro to rewire the European Union for their own purposes. He points out that European states are borrowing money (mostly from Germany) in order to purchase imported goods (mostly from Germany) because their own workers cannot compete on price (mostly because of Germany). Mr. Zeihan concludes that the European Union is becoming a kind of a Mitteleuropa.
I am not an economist and therefore I cannot evaluate in substance the arguments of the authors. I am worried, however, about the repercussions of such a line of thought.