Oskar Lafontaine, the German Finance Minister that was instrumental in creation of the Euro, indeed being of the true founders of the currency, came out last weekend with remarks that were pretty sceptical about its future. Indeed, he somewhat ironically, sees Southern Europe assuming control of Europe at Germany’s expense – pretty different to the current reality where the Southern Europeans are effectively in the pocket of Ms Merkel and her fello Troika participants!
“Austerity is finished”, he believes, and “this is a decisive turn in the history of the EU project since the Euro was introduced…we are nearing the end of austerity dogma… a victory of the French point of view”.
Oskar Lafontaine
Oskar Lafontaine was Germany’s Finance Minister for a short period of time, between 1998 – 1999, serving as part of the Social Democratic Party (SPD). At that time he assumed an important role in the Euro’s introduction with currency finally being brought nto circulation on January 1, 1999. He was, at the time, called “the Europe’s most dangerous man” by The Sun newspaper as his ideas involved a tax harmonisation for the whole EU. The Sun was, for once, actually bang on the money!
A few years later, Lafontaine left the SPD to become part of the recently created Left Party. It is during his time here that he has been turning somewhat more sceptical about the European project. It seems this is not because he doesn’t believe in it anymore, but rather because there is a current imbalance of forces with Germany leading many other countries into ruin in his opinion.
Lafontaine is now calling for a break-up of the single currency in order to let Southern Europe recover – a stance we have been advocating here for many months. He believes the current course is leading to disaster – plain and simple and is apparent in the falling GDP rates of the Southern European countries and inordinately high unemployment rates amongst her youth – a social travesty that will have repurcussions for many years to come in our opinion…
Lafontaine also blames the current German political class for trying to squeeze wages in Germany to gain export share and he says that Southern Europe will be ultimately forced to fight back against the German hegemony due to their current miserable conditions. Chancellor Angela Merkel will “awake from her self-righteous slumber” once the Southern European countries finally unite to force a major change in the current policy and politics – and, very likely, at Germany’s expense.
Lafontaine’s comments and views seem sensible to us. Only Germany still believes the path to prosperity is through austerity, job loss, social unawareness and internal devaluations. There is precious little evidence we can see thus far that this medicine is working.
Along with the bailout funds given to Portugal, Greece and others – the “strings” attached have not only effectively ruined those countries’ economies in recent years but is now also creating social and political change with the rise of anti German parties a sort of reverse Nazi-ism. Misery is the watchword in these countries and in Angela Merkel’s case the saying “there is none so blind as them that can’t see” that seems apparent to us. The current policies are a disaster and may ultimately lead to Germany’s permanent loss of power at the European level.
Had austerity been implemented in a somewhat more sensible and measured way, it could possibly have worked to help consolidate government finances. The current application of a rush to consolidate debts is patently the wrong approach, and when influential German politicians are also being vocal about this, we know that some course changing is near. Perhaps it is time to let automatic stabilisers work – euro exit and currency devaluations. Prepare for cheap holidays in the years ahead!
Below is our 2013 outlook book in which we postulate about a Euro break up – click below to receive your free copy.