Wolfgang Kasper on the Euro
By David Henderson
When, as a Senior Fellow at the Kiel Institute of World Economics in Germany, I wrote my PhD thesis about international monetary affairs, it became clear to my colleagues and me that an imposed Europe-wide currency would be a stillborn child.
This is from this month’s Feature Article, “Nothing New on the Euro Front,” December 2011 by German-born economist Wolfgang Kasper who moved from Germany to Australia in the 1970s.
By now, it is evident that the idea of a continent-wide Europe growing into a harmonious family is an illusion. In reality, solidarities are increasingly strained, and petty hatreds and resentments emerge and are exploited by political opportunists on the fringes. Crude protest slogans are scratched into Mercedes cars with German number plates parked on Athens streets; Greek politicians demand German compensation for Nazi crimes committed seventy years ago; street demonstrators in Berlin revile Spaniards and Portuguese; and the young, unemployed Spanish indignados become furiosos, occupying city centers and demanding that their government stop obeying directives from Brussels and the ‘Berlin-Paris Axis.’ As the political decision makers subordinate every other economic variable to the political goal of fixed exchange rates under a single currency, Southern job losses and enforced cutbacks in government programs impose harsh sacrifices on Mediterranean Europeans. With good reason, the Greek middle class now dreads anome (Greek for loss of order and trust in the future), and a young generation is profoundly cynical about all politics. This is likely to destabilize and weaken Old Europe in the long term.
Why do Eurocrats hang on to the goal of saving the Euro? Kasper suggests one reason:
One major reason that “Eurocrats” reject the idea of exchange-rate flexibility is that they want more influence and direct tax receipts. So far, they have had to depend on national tax collectors and remittances. If the Euro crisis produces plausible arguments for more Europe-wide regulations and new taxes that go directly to the unelected masters in Brussels–whether they are taxes on international capital transactions, airline tickets, or whatever–the crisis is welcome. Crises always favor politicians and bureaucrats. Just as “war is the health of the state,” in Randolph Bourne’s famous phrasing, so are crises in general the health of the state.
Kasper ends with a proposal:
The technical and administrative problems with an introduction of a New D-Mark could also be solved: The government can declare that to forestall an imminent crisis, it has, most regrettably, no other option but to withdraw legal tender status for all Euro banknotes that do not carry a German identifier (all banknotes show a national code). All other Euro notes and coins will be exchanged at a fixed rate within three months. Political leaders can, after all, explain that it is free travel, free trade, free capital and enterprise movements, and the freedom for young Europeans from different countries to marry that matter for European integration, prosperity and lasting peace, not the artificial bond of an imposed unitary currency.