Mario Draghi, head of the European Central Bank, is warning countries not to leave the eurozone. The reason for the warning is that it might well happen. A run out of southern European bank assets already has occurred. The Bundesbank has already lent other European central banks $400 billion to help them replace lost deposits among their own banks. The banking crash has already occurred in southern Europe.
United Europe is a secular faith to rival its predecessor, universal Christian empire, which founded in 1648 with the Treaty of Westphalia, and the Eurotopians view the prospective breakup of the eurozone with horror. Scare scenarios abound that European GDP will collapse if the eurozone breaks up. A Franco-German split, to be sure, would be catastrophic; those two economies (along with the Benelux and Denmark) might as well be Siamese twins that wouldn’t survive an operation to separate them. Not so Italy.
If German exports are so dependent on southern Europe, why is the head of the German exporters’ association inviting Italy to leave the EC? Inexplicably, English-language press accounts of Germany’s view of the eurozone mess have ignored the most pertinent opinion of all, namely that of the country’s exporting businesses.
On Nov. 29, the chairman of the German Association for Wholesale Trade, Foreign Trade, and Service Industries (Bundesverband Grosshandel, Aussenhandel, und Dienstleistungen), Anton F. Börner, made the comment about “still waters” to a Nov. 29 told a press conference. That made it into the Financial Times. But the rest of his statement was reported only in the German-language media (we translated):
The Italian economy is so strongly cartelized and organized on the corporatist model that this country is not in position to achieve a long-term economic growth trajectory and a significant improvement in competitiveness. If the Italian economy is not ready to open up, and Italian society is not willing to do this – and we will see whether this is true in the next twelve months –I would recommend to Italy that it leave the eurozone. For two reasons, Italy would find it difficult to remain within sight of the international competitiveness of other European countries. First, Italy’s rigid system is not capable of survival, and second, Italy suffers from a lack of investment in research and development.
By contrast, the departure of France from the eurozone would be a “horror scenario,” the German industrialist added. With almost 10% of Germany’s total export volume, France is essential to the German economy. “The political costs would be incalculable,” said Börner. Should France leave the eurozone, it would adopt a protectionist policy with disastrous consequences.
Germany and Italy have been decoupling for years. Germany’s export future lies to the east, not the south. The eurozone will be reduced to a northern core. It will be a nasty, choppy mess. Don’t own any part of European banks’ capital structure.
