Why Berlin Is Balking on a Bailout
By HANS-WERNER SINN
The New York Times
June 13, 2012

It is unfair for critics to ask Germany to bear even more risk. Should Greece, Ireland, Italy, Portugal and Spain go bankrupt and repay nothing, while the euro survives, Germany would lose $899 billion. Should the euro fail, Germany would lose over $1.35 trillion, more than 40 percent of its G.D.P. Has the United States ever incurred a similar risk for helping other countries?

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?

 

Eurodämmerung
Paul Krugman on his blog on the NYT
May 13, 2012

Some of us have been talking it over, and here’s what we think the end game looks like:

1. Greek euro exit, very possibly next month.

2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.

3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro.

And we’re talking about months, not years, for this to play out.
 

It's time to start calling the current situation what it is: a depression. True, it's not a full replay of the Great Depression, but that's cold comfort. Unemployment in both America and Europe remains disastrously high. Leaders and institutions are increasingly discredited. And democratic values are under siege.

On that last point, I am not being alarmist. On the political as on the economic front it's important not to fall into the "not as bad as" trap. High unemployment isn't O.K. just because it hasn't hit 1933 levels; ominous political trends shouldn't be dismissed just because there's no Hitler in sight...

BTW:

The main reason for the ECB to reside in Frankfurt/Germany might be the fact, that this is the most important city for finances in Europe except London.

One of the most dangerous problems of the Euro is (and was) the missing balance in European economy. How can we expect Greece or Portugal to play in the same league like Germany and France?

Another point is the lack of common sense of politics in the community. Too many different ideas and countries and the process to find a common way is too slow and too sedate.

In fact Germany has always paid for the smaller countries in the European community. This is definitely ok 'cause those countries have always been the main market for German exports. But now some of the countries struggle and seem to be bankrupt. They used to live over their conditions (rates?). Thy dynamic development we experience right now is a mixture of bad economy and completely wrong fiscal politics in those smaller countries. And of course of the system that allows investors to fire against the countries by betting against their economy. This leads into a maelstrom that will take all countries with it.

I believe that the Euro as we know it will be history in the nearer future....

Angela Merkel is just reacting, never acting. She's selling the financial future of Germany right now.

The big problem is, that even well informed people like me hardly understand the way the markets run. I have no idea wether it's better to install Euro-bonds or not. Or to build a new Euro based on the rich countries (the northern countries in Europe).