1997 Prediction: "Monetary union, in the end, will result in a gigantic blackmailing operation"

Arnulf Baring in 1997

"They will be subsidizing scroungers, lounging in cafes on the Mediterranean beaches.

Monetary union, in the end, will result in a gigantic blackmailing operation.

When we Germans demand monetray discipline, other countries will blame their financial woes on that same discipline, and by extension, on us. More they will perceive us as a kind of economic policeman.

We risk once again becoming the most hated people in Europe."

  • Matthew Slyfield

    If you lay down with dogs you will wake up with fleas.

  • craftman

    I wonder if he was taken seriously at the time (obviously monetary union happened - so it couldn't have been too seriously).

  • Mondak

    Casandra Syndrome is a very tough thing to live with. It is maddening and must be hard for this guy because by the fact that he was right did nothing to change the course of action.

  • me

    (Mondak) - so true. I argued my mouth off about monetary/political unions in 97, only to be told that I just didn't get the idea of the EU. Nothing you can do, but to be proven so spectacularly correct way later feels like a miserable defeat.

  • morgan.c.frank

    well, to be fair the germans are the ones who really broke EMU discipline.

    the original emu has a strict cap of 3% budget deficits. breaking that resulted in a huge fine (0.5% of gdp). the germans broke the cap first. reunification proved far more costly than expected. once they did (and refused to pay the fine), they lost all authority to demand others follow the rules.

    the club med countries were all in deep deficit in nothing flat.

    counter factuals are always tricky ans this may well all have happened anyway, but it was the germans that undermined the authority of the rules. if nothing else, they made it happen faster.

    this is not to say they caused greece's problems. clearly, they did not. greece is the kid who cheated to get into a college and then could not do the work and flunked out. but the chances of this working were better had germany not provided such a negative example themselves.

  • roxpublius

    I honestly thought i DIDN'T get the idea. it seemed so obvious a disaster to me, and it was unbelievable that countries like Germany would agree to such terms. Therefore, I felt I just must not fully understand.

    Hard to believe I was once so naive and trusting in "experts".

  • Matthew Slyfield

    It's never too late to wake up and smell the lousy coffee. Congratulations.

    The EU might have worked if they went a more US like route and made it the USE, but I knew at the time that they couldn't get along well enough to go that route.

  • Matthew Slyfield

    The Greeks didn't break the cap, thet burned it to ashes and buried it in unhallowed ground.

  • kidmugsy

    "greece is the kid who cheated to get into a college" with the college conspiring in the action.

  • marque2

    I thought Emus were from Australia,

  • marque2

    They have pills for that now.

  • sean2829

    The reason Germany pushed the Euro so hard was without it, the Deutsche Mark would have ended up like the Swiss Frank, very pricy. This would have wrecked their export based economy. So as much as the German's like to berate Club Med, they do a lot to make German goods more competitive around the world.

  • Matthew Slyfield

    They have pills for everything now.

  • morganovich

    i believe the migrate. perhaps carrying coconuts.

  • morganovich

    sean-

    actually, that is not the case. the germans did not want the euro. it was the french who wanted the euro. the germans really, really wanted to keep the d-mark.

    the germans wanted to reunify. the french feared (correctly) that as it would create a massive economic center of gravity in germany which would dominate the EU.

    this led to what was, at the time, referred to as the "grand bargain". the french agreed to reunification, and the germans agreed to join the euro and give up the bundesbank.

    to get to agreement, the ECB was given some real powers and the EMU inclusion criteria were quite strict and the punishments for violating them were major.

    then, the germans broke the budget deficit rule due to reunification costs and blew the credibility of the regime to hell which led to everyone else blowing through the 3% deficit cap.

    but they were most definitely NOT fans of the euro or a weak currency.