My cunning plan to solve the Eurozone crisis (cont.)
7 May, 2012
Six months ago I revealed my plan to resolve the Eurozone crisis: all German workers would be given a 30% wage increase by their employers. This would, I said, “at a stroke, level the competitiveness playing field within the Eurozone while, at the same time, putting lots of new Euros into the hands of Germans to spend on Greek holidays, Spanish wine and Italian shoes.”
Bizarrely, I have seen no evidence that my plan has been taken up by European leaders. My phone has not exactly been hopping with calls from Berlin and Paris, expressing gratitude for my brilliant insight into how to solve the major economic crisis of our times. Sarkozy, at least, will now have plenty of time to repent for his lack of action.
But at least one solid citizen (of the USA as it happens) has taken up the cudgels and written a letter to the Financial Times (3rd May) promoting the very policy I suggested here. Take a bow, Raul Elizalde, of Path Financial, Sarasota, Florida:
It’s time to recognise that Germany reaped enormous gains from the creation of the common currency. If it is really committed to the eurozone’s survival, it will have to give back some of those gains, not only by providing bailout money or booking private sector losses, as it is doing, but also by surrendering some of its relative competitiveness. The most direct way is by running a higher inflation than the periphery ……. recent German unions’ demands for higher wages present just the right opportunity. Conceding higher pay could ease some built-up political pressures brought about by austerity, reward the long contribution to competitiveness made by German workers, and make the periphery’s relative adjustment easier to achieve.