Is Europe a graveyard?
When eurozone-chairman Jeroen Dijsselbloem commented in the aftermath of the Cyprus-rescue that from now on everyone with savings in a failing bank would be accountable, fear was rising that investors around the world would pull their money out of Europe. Since then, the euro fell as far as 1.25 against the dollar, from 1.35 before Cyprus. A few weeks later though, the euro already came back to 1.31 while stock markets recovered also to pre-Cyprus levels. Was Cyprus just a storm in a teacup?
Euro-bashers will say Cyprus is just the beginning. Other countries are to follow: Slovenia, Malta, to name a few. Portugal and Spain are not out of the woods yet, let alone Italy, where people can't even form a government. Many banks around Europe are still facing rough years ahead with billions of write downs to come. Southern economies are still contracting; Northern can hardly keep up half a percent of growth. The deficits of almost all the European countries are still over 3 % while governments already have been cutting billions of expenses.
All of this is true. In fact, euro-bashers are quite right in their opinions. But look at it this way. Let's say the euro is in fact the deutschmark, and that all other countries in the eurozone are using the deutschmark as their currency for almost 15 years now. The only country benefiting from all this is Germany simply because of the fact that neighbor-states no longer can devalue their currency. In the background, the ECB is standing ready with the money hose. Mr. Draghi sees and watches the politicians do their thing, and when they are about to blow it, he does what he has to do.
In America there is a saying: don't fight the Fed, and for Europe, eventually we can say the same. Central Bankers will keep printing money simply because there is no way back once they've started. Certain parts of Europe may turn out to be a graveyard, but with the ECB operating FED-style, eventually Europe will follow the United States on the road to recovery. The only reason Europe is a little slower comes from the way Europeans make decisions: all 17 countries have equal votes.
Too bad for the European economy that the Germans are still too modest to demand the single lead.