What has long been discussed as a rather cynical point of view among many, it was recently openly admitted by Germany’s Finance minister Wolfgang Schaeuble at an interview to the Focus magazine. There Mr Schaeuble mentioned that Greece’s exit from the Euro would lead to Euro appreciation and eventually hurt German exports. Despite of public and political concerns in Northern Europe, Euro’s relative weakness benefits Germany’s exports and strong rebound. At the same time healthy European economies can take their dividend from lending to the periphery for a markup through the EFSF/ESM facilities.
Mr Schaeuble is among the European politicians with the more sound positions regarding the European currency and governance, expressed throughout the crisis. He underlined long ago the need for a common fiscal policy to support the Euro, something which is challenging under EU members’ current governance regimes. It is long overdue though and would have averted excesses in certain countries should it have been in place or if effective supervision was exercised by EU mechanisms. Maybe a crisis was needed to bring about this change. Now a much needed support to debt ridden countries through debt buyback and rescheduling using the EFSF or ESM facilities could only be given the go-ahead pending acceptance of the proposed European Competitiveness Pact; what has bluntly been called by EU officers the “Great Bargain”.
We will revisit the European Competitiveness Pact as more information become available. At this point it seems however that fiscal measures included there cannot alone solve EU periphery’s developmental problems. More far reaching structural reforms and investment in innovation is needed for that. Maybe this will be the next centrally designed policy plan to be introduced on the back of a future crisis, once fiscal policy has run its limitations and can’t respond to employment/growth needs.
Or, are we aiming for a Euro nanny-state where the periphery will be in perpetual life support/lower gear compared to developed EU states?