Thursday, August 29, 2013

Angela Merkel criticised for stating the obvious

There is an old joke that the definition of a "gaffe" is when a politician, general, or other senior figure tells the truth without meaning to.

I am quite sure, however, that Angela Merkel knew exactly what she was doing when she said that Greece should not have been allowed to join the Euro.

Speaking to supporters in Rendsburg on Tuesday, Ms Merkel criticised her predecessor, Gerhard Schröder, for admitting Greece into the single currency.

“The crisis emerged over many years, through founding errors in the euro. For example, Greece should not have been admitted into the euro area,” she said.

I suppose it is inevitable that the remark should have attracted criticism in Greece, but frankly, this was a statement of the obvious. There was not enough convergence between the Greek economy and those of the remainder of the Euro-zone to make it wise to include Greece when the Euro was created. It would have been bettter both for Greece, and for the other Euro-zone countries, if they had waited for a far higher degree of convergence before Greece was admitted. And probably not just Greece, either.

For the avoidance of doubt, I am not suggesting that Greece should leave or be expelled from the Euro-zone tomorrow - they are where they are and have made considerable sacrifices over the past few years to try to get into a better fiscal and economic position.

But it's pretty ridiculous if you can't learn from mistakes. Anyone in Greece who imagines that the former Greek finance minister was correct when he said that

“I don’t really think Ms Merkel really believes what she says – it’s part of the party games played ahead of [German] elections.”

is living in cloud-cuckoo land.

Just hope the lessons are learned when it is being considered whether any of the other European countries which are not currently in the Euro should join.

And incidentally, although I have been opposed from the beginning to the idea that Britain should scrap the pound and join the Euro instead, I do not want the Euro to fail.

The Euro is the currency of a lot of our major trading partners, and what hurts them is likely to also hurt Britain.

It is precisely because taking in too many countries whose economies are not sufficiently harmonised is likely to make it harder for the Euro to succeed that I hope the eurozone avoids this mistake.

1 comment:

Jim said...

No one really wants the Euro to fail, but sadly it is inevitable. Ideally it would never have never began in the first place, but that's done now. The economy of Germany and Holland, just can not be compared to that of Greece / Spain / Portugal.

On the plus side for it, at least Greece don't have access to a money printer, that's a small mercy for the Greek people.

I think the Euro will fail when the dollar does (so will the pound) and failure of the dollar is much closer than a lot of people realise