Megan McArdle had an amusing observation about the Greek Government putting their bailout deal to the people:
If EU economic policy were a soap opera–and apparently, it is–Greece would be the sultry, irresponsible beauty in a tumultuous love-hate relationship with rigid, authoritarian Germany. Â Obviously after years of tumultuous breakups and teary reunions, this is the season finale where he finally beats the hell out of her during a screaming fight over thier impending bankruptcy, and in despair, she drives both of them, and his prize Volkswagen, off a cliff.
She doesn’t see how this will end well. I don’t either. I never quite understood why the Germans would want to be in a monetary union with basket cases like Spain, Greece and Italy to begin with.
3 thoughts on “Megan McArdle on the Greek Referendum”
“I never quite understood why the Germans would want to be in a monetary union with basket cases like Spain, Greece and Italy to begin with.”
Back when the monetary union was set up, there were significant transaction costs from exporting to another currency. Germany has always been a big exporter so they got benefits because it was easier for their markets in other countries to buy their stuff. Now that ATMs are everywhere and financial markets are all computerized I think the benefits are much smaller.
To be fair, Spain was actually doing very well when the Euro was set up – better than Germany in some ways. When the real estate market collapsed, a large part of the Spanish economy went with it, seeing as how many people from other countries were building vacation houses on the coast, and that very valuable tax revenue stream dried up when they stopped building.
Also, nowadays Germany has a very strong interest in maintaining the Euro – were they to shift to the Deutschmark again, it would soar like an F-15 pointing straight up on full afterburner – meaning that the products they make would become much more expensive to buy outside of the country, putting a serious set of brakes on the German export-driven economy. (Being in a currency union with lower-performing economies was a benefit for this reason – it made their exports cheaper, meaning they made more from African dictators buying Mercedes, American construction firms buying Bosch power tools, and Chinese utilities buying Siemens gas turbines.)
Note the dig on NJ’s impeccable former Senator and Governor…
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