I just translated it. The article did not state what this was compared to. I suspect that this is not a per year figure but a comparison to a hypothetical economy without the Euro, so the figure is spread out over several years.

If the Euro is in Germany badly valued, why does Germany have positive balances of trade and payments since the year 2000 ?

They refered not only to external value, but mainly to effects in the nominal and real interst rates. I guess they are arguing that external competitiveness has been achieved at a high internal price.

Why did the ECB recently complain that Germany’s labor market is too flexible and that Southern Europe is at a disadvantage because of this ?

They did not rule out that others were equally bad or worse off. The interest rates are surely too high for Italy, too.

If the growth gap due to this were indeed that large, this begs the questions:

Typically, a lot of other issues (neccessary liberalization , welfare state, high taxes, globalization etc.) are named as reasons for sluggish german growth. Maybe these are not the real reasons ? Maybe the proposed reforms are actually irrelevant and unneccessary ?

Or maybe the diagnosis about the Euro is wrong ?
Is the 1,4% disadvantage more than a wild guess ?

If the Euro is in Germany badly valued, why does Germany have positive balances of trade and payments since the year 2000 ?
http://www.bundesbank.de/stat/download/aussenwirtschaft/S201ATB30607.PDF
Why does Germany have a positive trade balance with Spain, Portugal and Greece and all other EU countires except Ireland and the Netherlands?
http://www.bundesbank.de/stat/download/aussenwirtschaft/S31DATB31819.PDF

Why did the ECB recently complain that Germany’s labor market is too flexible and that Southern Europe is at a disadvantage because of this ?

“Real interest rates far below average” are giving Greece, Ireland, Portugal and Spain “enourmous advantages in financing, having the effect of tax cuts” For Spain alone they estimate the effect at 3.1% GNP. The interest rate disadvantage for Germany in 2004 they computed at 1.4% GNP. That is 30*10**9 €. In civil service german the evaluation is: “The worsening of relative financial conditions can be used to a certain degree to explain Germany’s gap in growth compared to other countries of the eurozone.

Well, on the one hand it does, and on the other it doesn’t. It depends whether you were being super vigilant, or I was being remiss .

Basically I tried to deal with some of the questions you raise here:

http://fistfulofeuros.net/archives/001393.php

I think it’s hard to be prescriptive. The only major issue is the outsanding notes and coin in circulation. All the electronic stuff can be done at a push of a button.

Since the IT programming might be extensive for any ‘unwind’, it would be interesting to know if anyone has commissioned anything, just as a ‘research exercise’. Maybe one day Stern will tell us.

If it tranquilize you, I was aware of this clause before the votes began. Still I thought that the process lacked flexibility. As I see it the TECE may be thought as having two parts, one which is a fusion of previous treaties, and so if the TECE is “well-written” could enter in effect even if a member state doesn’t approve the TECE. The other is the part that establish reforced collaboration, which could be subject to a delayed approbation.

DSW

I guess it would not happen as in eg. Czechoslovakia, as that was an orderly transition.

I asked Edward and I have a few points to add.
1. If you need to give confidence to the people, you cannot devalue as you exchange. You would change back at the introduction course.
2. For the same reason, you’d declare the old money as new medium of payment.

And an observation:
The coins have national backsides and, more importantly, the banknotes can be told apart by their serial numbers.

So, on friday evening, the borders are closed and people are not allowed to bring in cash (in Euros). Then you issue an emergency order for the banks to be opened on Saturday and Sunday for one purpose only and the ATMs switched off for the night. Then you attach a special sign (eg. a holographic sticker) to your national Euro bank notes. You allow your citizens to exchange foreign Euro notes and coins during that weekend only. By emergency law you declare all debt and accounts to be in your old currency and declare the Euro notes (stamped only) and coins as a transitional means of payment for a month or so and then you print money 24h a day.

Maybe you would at the same time allow foreign holders of your national notes and coins to exchange them. You would settle the account deficits due to that by taking into account the notes you exchanged during switchover.
You’d probably need some exceptional rules for vending machines which cannot be switched over immediately.
Although the old notes and coins are largely destroyed, the templates are not and most institutions have experience in switching.

You have not addressed my main question. How would it actually happen ? What is involved ? How was it done in Eastern Europe ?

The article itself is very, very strong stuff. For Stern’s level it is “J’accuse” and quite unprecedented. It mentions several more official documents of the ministry of economics that mention severe economic losses the Euro has cost Germany to date.

I am unable to read the rest of the magazine now, which has several articles on the EU and the Euro. It looks like a general attack on the Euro. It will be very interresting to read next week’s Spiegel.

If it is to be done than it can be done only overnight. This is a thing you cannot announce beforehand. Otherwise there would be absolutely crazy movements of money. And you cannot let hang the economies in the unknown for weeks. So the transition itself must be quick.