Germans Becoming Resigned to Messy Euro Divorce
by David Marsh
Monday, June 27, 2011
BERLIN (MarketWatch) — Two years ago, at a semi-official Anglo-German meeting with financial and business figures in London, I asked a well-known German bank chairman with whom I have a reasonable acquaintance how he would react if Greece one day asked to leave the euro. This was an open question-and-answer session in front of about 50 people "I would act like Clint Eastwood," my banker friend said, with rollicking good humor. "I would say, 'Go ahead, make my day.'"
Rather revealing.
That was back in the good old days. Spreads between Greek and German 10-year bonds had started to widen. But there was nothing like the same crisis-laden atmosphere as now. I relate the story fairly often to illustrate that, in truth, there's not a great deal of love lost between the Germans at the core of the euro and the outlying states.
Highlighting the mood of growing dismay, an opinion poll in the Sunday edition of the Frankfurter Allgemeine newspaper indicated that 71% of Germans no longer trust the euro — up from 66% in April and less than 50% in 2008.
The Germans are happy enough to pool their currency with a bunch of homogenous states with which they have stable trading links and share similar economic and business characteristics. Countries that leave them alone, don't make them feel guilty and don't ask them for money. They are not too happy, though, about extending the relationship to countries which — for whatever reasons — are piling up debts owed to the Germans and other creditor nations that will never be repaid.
German finance and business representatives are a hard-headed lot. For them, the euro was an economic and political project that seemed a good idea at the time. But now a retreat seems to be underway.
One bellwether is the No. 1 news magazine Der Spiegel. Mind you, it's never been keen on the euro. Its founder, the late Rudolf Augstein, a conservative left-wing radical (yes, you can be all those things in Germany) whom I visited years ago in his lair in Hamburg, believed that Germany was forced to give up the D-mark as a punishment for being too successful in recovering from defeat in the Second World War. The magazine, which has never knowingly indulged in positive reporting when a little negativism will make more enthralling reading, has long pointed out that the one-size-fits-all interest-rate policy was likely at some stage to come unstuck.
So it was perhaps not all that surprising that Der Spiegel ran a cover story last week with a front-page picture of the euro being carried to its grave on a coffin draped with a Greek flag. "Sudden and expected," was the sardonically Spiegel-esque headline. "Obituary for a common currency."
Sandwiched between a graphic showing the shocking size of Greek debts and a large photo of an flimsily dressed young female demonstrator being kicked by a large helmeted and booted Greek riot policeman, the magazine wrote: "The euro forges together strong and weak countries for better or worse. There's no exit and no rules to follow in an emergency. Only the hope that, in the end, all will be well." The phrase "for better or worse" was (presumably) a conscious flashback to a key element of a Bunde*****ank statement in September 1990 (written by monetary veteran Hans Tietemeyer who later became Bunde*****ank president) pointing out that members of the single currency would be irrevocably linked by bonds of common solidarity. They would sink or swim together.
Irrevocably? Perhaps not. Sink or swim? Sink, probably.
Worries about the euro inspired 50 business leaders from France and Germany, all chairmen and chief executives, to sign prominent advertisements in French and German newspapers last week extolling the single currency's advantages. The idea was dreamed up by Gerhard Cromme, the chairman of steel and engineering group ThyssenKrupp, and was apparently discussed in some detail with the German chancellor's office.
It was, though, something of a damp squib. For a start, the copy was hardly scintillating. "The euro is necessary," ran the headline, a little underwhelmingly. "Monetary union is in crisis, the euro is under fire…but the story of the euro is a real tale of success." Oh yes? Significantly, the advertisement was signed by only 20 German business people (all men) against 30 French company heads (including a few women). Only 12 of the 30 DAX companies were represented. What happened to the other 18? This seems to me a bit half-hearted.
And yes, in case you were wondering: my friend the German bank chairman was not among the signatories. Perhaps he was too busy studying the obituary notices.
David Marsh is chairman of London and Oxford Capital Markets.
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