I have, for long, been reading about the never-ending drama of the Euro-Zone and have quite been bemused with it too. Trust me; it really is amusing, for many non-obvious reasons. The drama has been unfolding itself since the onset of the Great Recession of 2008. Technically, the Euro Zone is out of the recession now, but the hangover of the recession is still there! It seems the Euro-Zone has fallen in love with the hangover itself :-)
The core factors at play for the ongoing drama are:
1) The Euro itself. The workings and the interests of the Euro are at loggerheads with the interests and purposes of the Euro-Zone economies! In a plain vanilla term, the widely differing Euro-Zone economies never needed a common currency in the very first place. It was the fear of the hegemony of the Greenback that rushed the creation of the Euro. The 17 Euro-Zone economies are very different from each other, as some (peripheral Euro-Zone economies) are import-driven economies -- that need a strong Euro to pay less for its bills -- and some are export driven economies (such as Germany) -- that need a weak Euro, for pumping its export up and for making its export much more competitive on the global markets. Hence, the straight-jacket-solution, the Euro, has, since its inception, been at conflict with the interests of the economies that use it as their local currency. The obvious consequence of this conflict is the prosperity of the German export during the Great Recession, riding the tide of the undervalued Euro. Whereas, the peripheral Euro-Zone economies have been struggling to pay their debts off, and have literally been "begging" around for bailouts -- these economies primarily are import-driven and a weak Euro is detrimental to their economic health. Undoubtedly, there are other strong factors at play for the sufferings of these peripheral economies as well. I will discuss those equally important factors later.
2) Germany is not playing its supposed leadership role. It's the strongest economy amongst the 17 members of the Euro-Zone. The reasons for Germany taking a back seat are many. For example, it's benefitting from a weak Euro as its export is growing by leaps and bounds; it is skeptical of its leadership role, thinking that the economically weaker Euro-Zone members will ask it for money, if it gets desperate to save the Euro by extending a helping hand to the struggling member economies; it still is feeling guilty of having dragged Europe into two world wars, and, now, it doesn't want itself to be the reason for the third disaster to Europe.
3) There is going to be a tightly contested election in Germany this year. So, all political parties and leaders in Germany are playing safe by not committing any national resources to the bailout of the struggling European economies. There is a widespread ill-feeling in Germany of the luxurious social benefits in the struggling Euro-Zone economies, and most Germans believe that their tax monies should not be used for paying for the lavish social benefits to the peoples of those struggling economies.
I believe that the Euro-Zone drama will not end until the upcoming election is concluded in Germany, and that Germany has to come to the forefront to bail its fellow members out, consequently saving the Euro, and ending the long drama. I guess that's the cost Germany has to bear with, after having enjoyed the weak Euro for long. After all, the struggling member economies will indirectly have paid Germany for bailing them out by giving the global financial markets enough reasons for shorting the Euro! Haven't they? :-)
The core factors at play for the ongoing drama are:
1) The Euro itself. The workings and the interests of the Euro are at loggerheads with the interests and purposes of the Euro-Zone economies! In a plain vanilla term, the widely differing Euro-Zone economies never needed a common currency in the very first place. It was the fear of the hegemony of the Greenback that rushed the creation of the Euro. The 17 Euro-Zone economies are very different from each other, as some (peripheral Euro-Zone economies) are import-driven economies -- that need a strong Euro to pay less for its bills -- and some are export driven economies (such as Germany) -- that need a weak Euro, for pumping its export up and for making its export much more competitive on the global markets. Hence, the straight-jacket-solution, the Euro, has, since its inception, been at conflict with the interests of the economies that use it as their local currency. The obvious consequence of this conflict is the prosperity of the German export during the Great Recession, riding the tide of the undervalued Euro. Whereas, the peripheral Euro-Zone economies have been struggling to pay their debts off, and have literally been "begging" around for bailouts -- these economies primarily are import-driven and a weak Euro is detrimental to their economic health. Undoubtedly, there are other strong factors at play for the sufferings of these peripheral economies as well. I will discuss those equally important factors later.
2) Germany is not playing its supposed leadership role. It's the strongest economy amongst the 17 members of the Euro-Zone. The reasons for Germany taking a back seat are many. For example, it's benefitting from a weak Euro as its export is growing by leaps and bounds; it is skeptical of its leadership role, thinking that the economically weaker Euro-Zone members will ask it for money, if it gets desperate to save the Euro by extending a helping hand to the struggling member economies; it still is feeling guilty of having dragged Europe into two world wars, and, now, it doesn't want itself to be the reason for the third disaster to Europe.
3) There is going to be a tightly contested election in Germany this year. So, all political parties and leaders in Germany are playing safe by not committing any national resources to the bailout of the struggling European economies. There is a widespread ill-feeling in Germany of the luxurious social benefits in the struggling Euro-Zone economies, and most Germans believe that their tax monies should not be used for paying for the lavish social benefits to the peoples of those struggling economies.
I believe that the Euro-Zone drama will not end until the upcoming election is concluded in Germany, and that Germany has to come to the forefront to bail its fellow members out, consequently saving the Euro, and ending the long drama. I guess that's the cost Germany has to bear with, after having enjoyed the weak Euro for long. After all, the struggling member economies will indirectly have paid Germany for bailing them out by giving the global financial markets enough reasons for shorting the Euro! Haven't they? :-)
