Wednesday, June 13, 2012

Europe Squabbles

Your Move, Greece
I liked this quote that appeared in Gideon Rachman's column in yesterday's Financial Times.  I think it nicely summarizes some of the reasons behind the current angst in Europe right now (my emphasis):

Consider just one of the proposals on the {euro bailout} shopping list:  a Europe-wide bank deposit insurance scheme.  As a senior Dutch politician  who shares the German view, puts it: "We cannot push through a banking union when the French have just cut their retirement age to 60 and we have raised ours to 67." From the Dutch and German point of view, it is unfair for their citizens to underwrite the banks of countries using their own money to pay social benefits that are more generous than those on offer in Germany or the Netherlands.

The New York Times this morning carried an editorial that also highlighted the German frustration at being asked to make the euro work.

Authored by Hans-Werner Sinn from the University of Munich,  the article notes that the German efforts at stabilizing the euro have already been substantial, particularly when it comes to Greece:

Some critics have argued that Germany, having benefited from the Marshall Plan, now owes it to Europe to undertake a similar rescue. Those critics should look at the numbers. 

Greece has received or been promised $575 billion through assistance efforts, including Target credit, E.C.B. bond purchases and a haircut after a debt moratorium. Compare this with the Marshall Plan, for which Germany is very grateful. It received 0.5 percent of its G.D.P. for four years, or 2 percent in total. Applied to the Greek G.D.P., this would be about $5 billion today. 

In other words, Greece has received a staggering 115 Marshall plans, 29 from Germany alone, and yet the situation has not improved. Why, Mr. Obama, is that not enough? 

Still, I continue to believe that the most likely outcome for Europe will be to "muddle through".  Reports from European companies (especially in Germany and France) continue to indicate that business trends remain positive, despite the high levels of unemployment throughout much of the euro block.