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New Book Dismisses Euro

Euro currency: time-bomb or miracle?

Ex-board member of the Bundesbank, Thilo Sarrazin exposes the disinformation from the supports of the European Community and explains why Europe has no need for a common currency.

To the consternation of the German political establishment and the political elites across the European Commmunity, Thilo Sarrazin’s book traces the intent of the creators of the Euro to try to achieve political integration through the back door of a common currency because they could not succeed overtly through the political process.

The ex-president of the Bundesbank destroys the central myth of the common currency, that it lowers transaction costs and brings stability.
“I worked at the Ministry of Finance in Bonn before the introduction of the Euro. There were crises, but they were easily resolved.  The system was sometimes chaotic, but  at base rather stable, with exchange rates evolving within limits.  What did they promise us with the Euro?  It was supposed to stimulate growth, reduce unemployment,
favor trade.”

The book carefully documents the contrary: growth has stagnated in the Euro zone since the Euro was introduced, unemployment has steadily increased since, and the economies of the Eurozone have grown apart rather than toward each other.  As regards Germany, its foreign trade grew twice as much with non-EU countries than with the Euro zone.

Still worse, under cover of a single currency, the EU has assembled under the same roof countries with policies and mentalities completely incompatible.   With the result is that in order to erase the debts of the mediterranean economies and compensate for their lack of competitivity, the pressure is on Germany and the Netherlands to accept 5-6% inflation.

If Germany agrees to this, it will erase in fewer than 10 years over a third of people’s savings (hitting retired persons hardest).

Sarrazin notes that Germany spent roughly 2 trillion Euros to absorb 18 million East Germans, who shared, despite the communist parenthesis, a common history and the same approach to work. Such an effort cannot succeed for 400 million Europeans of which a large part come from different cultures.

“The EU’s centralization of culture doesn’t work,” says the ex-Minister.  “In addition, the budget of the EU is too small compared to the PIB of the Eurozone.”  He estimates at over 70% the chances that Greece will leave the Euro, and in contrast to those  predicting dire consequences should that occur, asserts that there will be no serious repercussions. “Similar measures were taken in the past by sother countries.  You need to simply prepare the
passage to the new national currency, suspend transactions over a long weekend, redefine the capital base for the banks.  Then transactions resume in the new money. Which would undoubtedly depreciate against the Euro.  Obviously the Greeks would no longer honor their engagements in EUros and the creditors would never see their money.  So it’s normal that European banks and portfolio managers are against this option.  They prefer that the ECB or Germany support them as long as they can.”

Thilo Sarrazin, “Europe Doesn’t Need the Euro”

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