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German Cabinet Minister Calls For Greek Eurozone Exit

Everybody thinks it; now somebody has said it.

Hans-Peter Friedrich is the interior minister of Germany, and he has publicly stated that it would be better for all concerned if Greece just left the eurozone. It would certainly have been better if the Greeks (and the Spaniards, Portuguese, Italians and Irish) had never joined, and it would probably have been better if the Germans and French had never cooked the whole crazy scheme up.

But Minister Friedrich has a point. “I’m not saying that Greece should be thrown out but rather to create incentives that it can’t say ‘no’ to,” he said in an interview with Spiegel. If Europe is going to have to spend money on Greece, and it will, why not use that money to help Greece cope with the consequences of exiting the zone, rather than on continued quixotic and increasingly unpopular and expensive efforts to keep it in?

One suspects that German taxpayers would be more willing to stump up the money to get the Greeks out than to try to keep them in.  And while for now polls show that most Greeks want to stick with the euro, much of that is no doubt due to their fears of a chaotic return to the drachma. Helping Greece go back to its own currency without massive economic losses and chaotic financial conditions would ultimately do much more for the causes of European unity and Greek democracy than slogging forward on the current unpromising path.

Ultimately I still like the idea of two common European currencies: a ‘neuro’ for the north and a ‘seuro’ for Club Med. To avoid catastrophic defaults and legal consequences, the seuro should be called the euro and be the successor to the current currency, and the neuro would be formed by a group of northern countries who leave.  Perhaps the two currencies could be administered by one central bank. Over time, the south could reform and the relationship between the two currencies could become more stable.  In the short term this looks almost impossible to do, but in the medium to long term it would work much better than trying to keep all the current members in the eurozone.

At this point the Europeans are too deep in the weeds to think about big picture reforms, but the continuing problems with trying to manage the Greek situation within the current conceptual framework will ultimately force some fresh thinking. Incentivizing an orderly Greek withdrawal from the eurozone is the kind of out of the box thinking that Europe urgently needs.


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  • Doug Schmitt

    Sorry, no comment about this article… I’m looking for a link to what I think is a ViaMedia/WRM post that described what Iran learned from its past naval adventures in the Strait of Hormuz, and how it now had considerably more assymetrical warfare type weapons, and that the US mine detection ships were not in tip top shape. Did I in fact read this on ViaMedia? I tried searching google for it, and this site, but I’ve not found it. I read it within the past two weeks.
    Thanks for doing a great blog,

  • WigWag

    “To avoid catastrophic defaults and legal consequences, the seuro should be called the euro and be the successor to the current currency, and the neuro would be formed by a group of northern countries who leave. Perhaps the two currencies could be administered by one central bank.” (Walter Russell Mead)

    The proposal to create a Northern European currency and a Southern European currency is an interesting one that is well worth thinking about, but I am not sure that the divide necessarily works well on geographic grounds.

    Should Slovakia and Estonia which are Northern use the “seuro” or the “neuro?” What about the enterprising Slovenes who have their economic act together pretty well and have more in common with the Germans than they do with their Italian neighbors; is it a “sueuro” nation or a “neuro” nation? Ireland isn’t exactly in Southern Europe but it has had all kinds of economic difficulties; is it “neuro” or “seuro” for the Irish? Does Belgium, which is, after all, the Capital of a United Europe, follow its French and Flemish population into the “Neuro” or does its economic difficulties mean it should take its place with its weaker and less economically competent brethren in the South?

    It would also be interesting to know where Professor Mead believes the French belong. Does he think that where the French should be placed has anything to do with who ends up winning the impending French election?

    One last question about the Professor’s interesting proposal is how could one central bank for two currencies possibly work? Is there any precedent for that idea world history?

  • dearieme

    “…rather to create incentives that it can’t say ‘no’ to…”: vee haff vays of incentivizing you.

  • Wifman

    Sorry, won’t happen.

    The French will not allow any country to get out of the Euro but stay in the European Union. After all, they just cooked this thing up so they could get their hands under their arch-enemies skirt: Us, the Germans.

    If they allow the Greeks to get out but stay in, what is to keep the Germans? At best this is a test to see how the French will react to these ideas, at worst a placating gesture towards the German taxpayer.

    Most likely it is just bull.

  • Kris

    If the Greeks are shown the door (especially with benefits), I will derive great enjoyment from their indignant protests. (Hey, one takes one’s enjoyment where one can.) “You must accept us in your club, and you must pay our dues and debts, and we refuse to abide by the club regulations!”

    WigWag@2: The “breakaway” Northern European currency bloc would be composed of countries that the scalded Germans approve of. France? Get ready for la mère de toutes les hissy fits.

  • Jacksonian Libertarian

    The NEURO and the SEURO, how is this going to fix the fundamental problems? It sounds like a face saving measure for the stupid Politicians, hoping to kick the can down the road for a few more years.
    There will always be another Greece, until the fundamental problems of Fiscal Union, and Political Union are fixed.

  • Corlyss

    So the godfathers have gotten together and want to pay Greece to go away. That’s perfectly rational.

    “it would probably have been better if the Germans and French had never cooked the whole crazy scheme up.”

    Amen. The Euro was never going to be the solution a repeat of WW1 or WW2. It should just revert to the economic alliance it once was. Put all those delusional bureaucrat gnomes out of business in Brussels. Restore Freedom and control to the nations’ publics.

  • Lorenzo

    Then the crisis would move on to the new Weakest Link. Greece is dysfunctional, the euro was a bad idea but this particular crisis is caused by the tight money policies of the ECB, and a Greek exit will not change that.

  • WigWag

    As usual, Krugman gets it right on Europe while at the same time proving that his critics just don’t know what they’re talking about.

  • Eurydice

    Yes, of course – because the solution to a problem of insufficient unity is to cut things up into little pieces.

    But, as the Greeks say, “makari” (would that). If the Germans want to orchestrate an orderly withdrawal of Greece from the union and back to sovereignty, they should go ahead and do just that. Then, when the next debtor arrives with its begging bowl, Germany might wish it had orchestrated that withdrawal for itself.

  • Jim.


    Ah, for the time to tear apart a Krugman piece the way it deserves… But for now, two of his most egregious errors in this piece:

    – Borrowing at 2pct “Long term”: It’s a 10-year term. That’s not long enough to get us back to a budget surplus that could repay the trillions of dollars we’re borrowing. Krugman is trying to convince us to take a 10-year ARM with a teaser rate of 2%. He’s as bad as the most reckless executive at Washington Mutual, there.

    – His bloodless talk of “devaluation” is deceptive in the extreme. There is no substantive difference between devaluing a country’s currency and cutting the wages and benefits of its workers. None. Each one reduces the purchasing power parity of the workers in question. “Devaluation”, or “inflation” as it’s known to those it’s happening to, also destroys savings, eliminating peoples’ independence from the overwhelming technocratic state that Krugman wants to impose and rule.

    Krugman’s an idiot, a destructive force for economic evil. The NYT cannot go bankrupt fast enough for my taste, while it continues to provide a platform for such profound stupidity.

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