How the euro was saved

Peter Spiegel launches a special FT series that looks back at 2011-2012 with this article.

18 replies on “How the euro was saved”

@ MH

Missing? Or not impacted to the same extent?

“When I look at the rates in Germany or even Ireland, which are a fraction of what we pay, it is a reflection of the huge problem that the Portuguese have been struggling with, and of the injustice to which we are condemned,” he said. “We will always be a poor peripheral country if nothing changes in Europe to make opportunities more equal.”

The chicken and egg aspect of the situation jumps out of the narrative. It will not be resolved until the situation with regard to the overall health of European banks is firmly clarified.

The piece begins in dramatic fashion:

To the astonishment of almost everyone in the room, Angela Merkel began to cry.

“Das ist nicht fair.” That is not fair, the German chancellor said angrily, tears welling in her eyes. “Ich bringe mich nicht selbst um.” I am not going to commit suicide.

For those who witnessed the breakdown in a small conference room in the French seaside resort of Cannes, it was shocking enough to watch Europe’s most powerful and emotionally controlled leader brought to tears.

But the scene was even more remarkable, those present said, for the two objects of her ire: the man sitting next to her, French President Nicolas Sarkozy, and the other across the table, US President Barack Obama.

It would be the low point in a brutal, recrimination-filled night, one many participants would recall as the nadir of the three-year eurozone crisis. Mr Sarkozy had hoped his leadership of the Group of 20 summit would cement his standing on the global stage en route to re-election. Instead, everything was falling apart.

It’s a well-written story and drama is merited with Greece and Italy in the frame but it doesn’t merit the French delegate’s fear, methinks!

“It was the point where clearly the eurozone as we know it could have exploded,” said a member of the French delegation at Cannes. “It was the feeling [that with] the contagion, at this point, you were on the brink of explosion.”

Just in case anyone is labouring under the illusion that the Germans ever change:

Instead, a cornered Ms Merkel threw the French and American criticism back in their faces. If Mr Sarkozy or Mr Obama did not like the way her government ran, they had only themselves to blame. After all, it was their allied militaries that had “imposed” the German constitution on a defeated wartime foe six decades earlier.

Ah, yes, Germany the great victim of WWII. “You shouldn’t have imposed that constitution on us. You should have just left us to our own devices…”

And have you not heard about the horrific bombing of Dresden?

I didn’t deny that she was correct on the facts but I did implicitly criticise her way of spinning them: like many of her predecessors, she likes to portray Germany as some sort of victim of the actions of others (the Jews, the Americans, the Gypsies, the PIIGS, et al). Germany is never responsible for anything; it is only the victim and if you don’t like what we’re doing, you have only yourselves to blame, because you so unfairly constrained us from doing what we’d like to do.

Meanwhile, she completely forgets some of the lessons (generosity, for example) of the American example in the years following the war: where’s Germany’s Marshall Plan for Greece. Oh, sure, I forgot: it got buried in an avalanche of racist drivel about the feckless southerners who cannot be trusted.

The Euro was saved only to protect the existing economic order so that debt trade investing and currency carry trade investing could continue unto creating peak moral hazard.

Major World Currencies, DBV, ie the Euro, FXE, the British Pound Sterling, FXB, and the Swiss Franc, FXS, as well as Emerging Market Currencies, CEW, are trading lower as well; this means the crush of investment in Global Growth, DNL. There are no investable markets anymore. Ireland, EIRL, was the crown jewel of debt trade investing and currency carry trade investing, in the age of credit and the age of currencies. Now with IRE, JHX, IR, CRH, RYAAY, XL, ACN, trading lower, it is one of the age of debt servitude loss leaders.

The death currencies, that is the wheels of economic activity, means the dissolution of traditional governance.

A global economic crash is coming as investors derisk out of debt trades and deleverage out of currency carry trades.

Fiat money will be replaced by diktat money, that is the mandates of regional fascist leaders for regional security, stability, and sustainability.

Democratic governance will be replaced by regional fascism as is foretold in Daniel 2:20-45 and in Revelation 13:1-4.


Peter Spiegel’s first installment looks a little bit like Dynamite Fishing. Throw a hand grenade into the sea, and look what is popping up.

Via DOCM’s worthful ekatherimi link, another one, where Timmie Geithner tells his view of it:

“Geithner reveals ‘frightening’ plans for Grexit in 2012 meeting with Schaeuble”

on the side, Merkels view of the Ukraine thing:
“ Merkel wies Vorwürfe zurück, die EU habe in der Ukraine-Politik Fehler begangen.“

Geithner got it quite right in my above ekathimerini link:

“Still, Geithner realized that his position was compromised, as the Europeans didn’t want lectures from the US.

“They surely thought of me as the walking embodiment of moral hazard,” he writes, as Germany and France “still blamed our Wild West financial system for the meltdown of 2008.”

What a majority of Germans feels about the EU and the Euro, is represented here:
Die harte Deutsche Mark crucified at the European Altar.
“Woran wir glauben. Echtes Geld. Sein ist die Kraft. Und die Herrlichkeit. In allen guten Banken und Sparkassen.”

After the US caused the second global massive financial crisis in only 80 years, Bordo in DOCM’s voxeu link, points out that the Target 2 system was more appropriate, especially in a system of sovereign nations. Bordo should however shown the Target 2 data until recently , with the cutback in the last 2 years, like in

Has Germany caused any crises in the last 80 or 100 years? Or is it always only a victim of others (damn furriners) in your view?


but Germany did not run around in 1950 and tell people how to win e.g. the Korea War. Timmie Geithner and Barack Obama are just the latest numbers in a long string of US politicians, who hand out “advice” which mainly serves their own interest.

We ignore them since at least 40 years and that will not change.

…as opposed to German politicians whose “advice” is pure altruism directed toward their European brethren, nay, the entirety of humanity…

You really should try listening to your own brand of bullsh*t to hear it as others hear it…

Never mind that German in 1938 or thereabouts (i.e., not that long after the Great War) was perfectly happy to tell others how to behave under threat of annexation, threats that were, of course, carried out.


The Euro Area is actually remarkable robust. Even in the countries that go through pretty hard times right now, like Spain and Greece, very clear 2/3 majorities of the population and not just “the elites” want to keep the Euro, actually somewhat astonishing.

Your “political upheaval in Germany”, Jesus, where should this come from? A Meteor hitting us is more likely.

Germany is at very deep peace.

The government is backed by 80% of the vote in parliament, because the

Green party knows very well, that they are out of touch with present requirements, namely that energy policy cannot be reduced to a solipsist goal of minimizing CO2 output.

The liberal party did not make the 5% hurdle, because tax reduction is not the most important thing. Their former economics minister “capitalist” Brüderle, was pretty open to encourage the unions to be a little more demanding with the wage increases “Einen Schluck aus der Pulle nehmen”. Kubicki openly admitted that he “could sleep very well” with Merkel and Steinmeier at the helm during the last Grand Coalition.

I doubt I would lose any sleep over my good communists being part of a different government coalition, with a spokeswoman Sahra Wagenknecht, who has an economics PhD and somewhat daringly claims to be the true heir to Ludwig Ehrhard.

We live in deep peace with all of our neighbors, with all of them we have completely open borders.

Merkel in my FAZ link (redoubled for convenience:
)made it very clear that we will continue our “close partnership with Russia” unless Putin does something really unexpectedly stupid.

We have those 1600 fine Leo 2 panzers in storage, and plenty of people who know how to use them, to defend all our NATO allies, and Euro Partners. And Putin knows, that we know, that he knows.

And because those could roar their engines in Warsaw or Riga, if their democratic governments would like to hear the sound for their own peoples good sleep, they can stay in storage. Merkel explicitly refused to waste one more cent on defense, because of recent events, whatever the US, UK, and NATO Rasmussen said.

According to the BBC ( Germany is the most popular nation in the World, whatever that is worth.


If you think, you could get any mileage out of talking up stuff from 80 years ago, just forget it. Langweiler. It does not even cause mild resentment, we heard it often enough. Maybe you try to look up the popularity of your own kin? With your blatant “brand of bullsh*t”, in your own words, you are just ranking slightly above North Korea : – )

Ernie, facts and numbers, and not racist propaganda, is what counts.

Michael Hennigan

mentioned somewhere here around, that the German Current Account / Trade surplus is falling. Not fast enough from my point of view, with 6% GDP per anno, and accumulated some 40%. Speculators like Soros know very well that they cannot fight this machine, but it is not a purpose in itself. We can put a little more on wage increases, beyond productivity growth for quite a number of years. Our minimum wage should push demand on the lower income side, where it is needed most.

The social democratic / green government Agenda 2010 worked a little too good, in 10 years hindsight, despite scratching the 3% buoy a fourth time.

Something people like me have on mind, to not get overly pious with France and Italy.

I actually hope that we lose in the World Cup semi finals, because life would be too good otherwise.

For general information, this BIS study from 2012 on Target 2 balances which is still the best and almost certainly still relevant.

Professor Bordo is right! Whether it was the intention or not, the operation of the Target 2 system has been instrumental in “saving the euro”. Fixing the banking system and removing any “re-denomination” risk would appear to be a sine qua non if the rescue is to prove permanent.

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