It’s simple really.  As John Maudlin says: “… the money to solve the crisis does not exist. The only way to find it is for the ECB to print money and print in size, enough to lower the value of the euro and make exports cheaper (which gives southern Europe a chance to grow out of its problems).”

That’s step one.  But there would remain the problem of the relative uncompetitiveness of the peripheral countries, especially Greece.  So here is my cunning plan, worthy of Baldrick at his best: all German workers would be required to be given a 30% wage increase by their employers.  (Same would happen in quasi-German satellites such as Finland, Austria, Netherlands.)

This would, 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.

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Todays Financial Times has an interesting comment piece from Bill Clinton’s former Treasury Secretary, Lawrence Summers.  Here is a small extract.

 ….no country can be expected to generate huge primary surpluses for long periods  for the benefit of foreign creditors. Meeting debt burdens at rates currently  charged by the official sector for credit – let alone the private sector – would  involve burdens on Greece, Ireland and Portugal comparable to the reparations’ burdens Keynes warned about in The Economic Consequences of the Peace ….  The twin realities that Greece, Italy and Ireland need debt relief and that the  creditors have only limited capacity to take immediate losses, mean that all  approaches require increased efforts from the European centre.

Given the comparison used by Summers, it’s ironic that it is the Germans that are in the vanguard of attempts to avoid sensible burden-sharing among the wealthier Eurozone nations.  Current ECB policy is trying to impose a “Carthaginian Peace” on the Eurozone, which will have severe consequences for all, not just the bailed-out countries.

As an aside, I wonder does German Chancellor Angela Merkel (a highly-qualified physicist) agree with Summers’ controversial remarks in a 2005 speech where he suggested that the under-representation of women in science and engineering could be due to a “different availability of aptitude at the high end,” and less to patterns of discrimination and socialization?  His remarks are believed to have contributed to his resigning his position as president of Harvard University the following year.

Bini Smaghi at it again

13 April, 2011

In today’s FT our “friend” from the ECB, Lorenzo Bini Smaghi,  is saying that Irish taxpayers shouldn’t complain if they have to bear heavy burdens which arose from failures in local financial regulation.   This is the same tune we have heard him singing before: ‘Ireland’s meltdown is the outcome of the policies of its elected politicians’

Just because it’s true doesn’t mean he has to keep rubbing it in….

There has developed a popular theme (meme?) in Ireland of late: namely that Germany, France and other countries must share the pain with us because it was their banks that lent boatloads of money to our banks to throw at property developers.

It certainly suits the Irish case (and character) to maintain that others must share responsibility, and only the very hard-hearted (which no doubt includes Lorenzo) would see no merit whatsoever in that argument.

But it’s a bit like the argument as to whether a bar owner bears any responsibility if he keeps selling drink to a clearly inebriated customer who then smashes himself up in a drink-driving car accident.  Is the drinker fully to blame, or does the bar owner have any legal (or moral) liability? 

In most States of the USA, under what are known as dram shop laws, a bar that lets an obviously drunk customer drive away can be held financially responsible for damage caused by that customer.   The principle has yet to be established, or legislated for, in Ireland.

Nevertheless, perhaps the Irish taxpayer should mount a lawsuit against the ECB to establish that they share responsibility for the damage caused by the Irish Government’s and Irish banks’ fiscal drink-driving.  If it would shut Lorenzo up, it might be worth a try.