Commentary on How the Greek Deal Could Destroy the Euro

This article is from our reader Mark Witz who lives in Germany.

I just read the article on New York Times titled: “How the Greek Deal Could Destroy the Euro”.

Most interesting to me is not the opinion, but who this writer is and what his opinion tells us about what is going on inside the Eurozone.Google for the author's name produced more details:"June 2012 when he was appointed Economic Advisor to the President of the European Council, Herman Van Rompuy. He worked in particular on questions pertaining to the architecture of the euro area and the consequences of the economic and financial crisis. He is since September 2014, the Economic Advisor to the French Economy Minister." That Economy Minister was appointed in a reshuffle days before to replace one who was anti-austerity. Thus, this opinion comes from the new guy, who was on board with the reform and austerity ideas.

He worked on exactly these questions from the inside. That gives weight to his explanation of events.

He writes here, "In practice, [Germany] used what amounted to an economic embargo — far more brutal than the sanctions regime imposed on Russia since its annexation of Crimea — to provoke either regime change or capitulation in Greece. It has succeeded in obtaining capitulation."

He tells us this has done fundamental damage to the way that Germany and France papered over their original differences.

"Regardless of what happens in Greece now, the July 13 agreement has made the prospect of a future euro breakup far more likely."

It is different reading such harsh language from an insider on board, rather than an outsider carping.

I am reminded of the saying "be careful what you wish for because you may get it" in regard to Germany getting the D-Mark back.

A new Deutschmark would be the worst thing that could happen to a country with a thriving export economy based in large part on manufacturing. The relative prices of German exports would rise. The Euro has been a boon to the German economy, something to which many German politicians and the public seem oblivious.

That BMW I have in my garage, made in Dingolfing, would soar in price here in the US if Germany were to go back to having its own currency as would the price of the several trips a year I take to Germany.

Following rules is important, but it seems to me that German thinking has become overly focused on this one thing while ignoring the fact that the Euro has brought some very tangible benefits to the German economy, which is one of the rare developed economies that actually has a manufacturing base left and makes some of the best products on the planet.

Being from the US, I view the German economy with admiration; in spite of the general trend under globalization for wages and goods quality to race to the bottom, Germany has done well at resisting this and it remains a vibrant example to the rest of the world of the viability of a strong social democracy.

If you want to see what happens when your manufacturing base is eviscerated and the social safety net falls apart, come over here. Why risk a good thing you have going?

As one of the German commentators remarked, I am almost 79 and feel the old have the right to speak bluntly.

He, and some others posted here, have a selective memory. They forget that the only reason they had a chance to become prosperous is because others rebuilt them when they were down due to there own actions. They almost
destroyed much of Europe, and finally themselves in World War II. The USA poured billions into their infrastructure. Debts were, to a huge extent, forgiven. For decades after that, the USA not only provided Germans their military defense against an implacable enemy, but headquartered it's Army in Germany, pumping billions more into its economy.

The USA did this as it had internally with its Southern States, providing substantial aid while getting some benefits. Germany has decided not to follow that lead in dealing with Greece; in fact going the opposite way (for example forcing Greece to take actions which will cripple its agricultural production, as opposed to the US boosting agricultural supports in the weaker States.)

The worst part of it is they are starting to sound like many US Southerners; ignoring all the help they have gotten, and calling others, who have not gotten near the freely given help they received, indolent and profligate.

Yes, some of us old folks do remember. We also remember where Germany has taken the world twice in the last 100 years. Never again!

"the European institutions led by Germany seem to have decided that waging an ideological battle against a recalcitrant and amateurish far-left government in Greece should take precedence over 60 years of European consensus..."

This is of course, true. But perhaps we should go deeper --that is, this is not just an ideological battle. This is all about the interests of bankers and their loans to Spain, Italy, Ireland, and Portugal trumping democracy. Greece is being made into a sacrificial lamb to minimize the chances of any debt reductions and lost profits by private interests that lent to Spain, Italy, Ireland, and Portugal.

The irony is that Ms. Merkel has sidestepped democracy in Germany as well. While her voters are blindsided with tired moral arguments, her government bailed out Germany's private bankers by providing them with a sweetheart deal, by swapping the private debts of Greece with loans of the German state to Greece.

I'm enjoying all the insightful editorials on the Greek situation and the Euro. The way I see it the Euro was never predicated on the principle of equality, but on the principle of the 'strong' imposing their will on the 'weak'.

But that kind of 'strength' always eventually implodes, as it's doing in this instance. Exploitation of any kind isn't a sustainable social model, no matter how you try to cloak it and no matter where you apply it.

It all was a deception.
We (germans) were never asked if we wanted a currency union, and we would have voted with a sounding no. We do believe that this union was a prerequisite for the approval of the french for the reunion of germany. A contract to leash our economic power. Everyone told us back than, that this will never be a transfer union, it look quite different now.
We do believe, that the euro is draining our revenue.
And don't tell us we do benefit from our export-excess,
first of all, we had always an export-excess, and had even in Deutschmark been a top-exporter,
second, we have in absolute numbers more than twice the excess of china, the second, who needs that kind of excessive excess ?
third, we have a declining purchasing power (average 2000 Euro), it is already 400 Euro less than in france, compared to other countries with an own currency like Norway (4500 Euro) or Swiss (5500 Euro) we are looking needy. By the way, aren't there right now french farmer blocking highways to germany because they are protesting against the german dumping wages ?
And here we are, calling for some kind of transfer, and the sums will be huge. Will the french pay in or will they use it as their own piggybank ?

I want to break it up -
We are not in charge for Europe, we don't want to pay up for the appearance of an union of national extravagances. The euro is enraging us all. Germany should leave before their anger festers. We are all better on our own.

Yes, that was the price for German unification, to harness the huge new Germany to Europe. Do you want to give up unification? No, you don't want to pay the price, just keep the benefit.

The French and others would have vetoed reunification. Thatcher was against it even so. They don't want the huge German power that you say would result without the Euro.

OK, I know the French have a longstanding envy and resentment of the Germans, but this is over the top.

Face it: Merkel saved the eurozone -- and the EU -- for now at least. Had Merkel not stood her ground, but had instead caved in to Greece's blackmail, there were plenty of other copycats in Portugal, Spain and Italy (and probably in France too) who would have demanded similar concessions. Not just the eurozone but the EU would likely have collapsed under the strain.

How can Vallee lecture the Germans about democracy when he shows such utter contempt for the democratic rights of voters in Germany, the Netherlands, Finland, and so on, who were fed up with bailing out the poisonously ungrateful Greeks -- whose government has come to power on the platform of tearing up Greece's promises to the EU?

Isn't there another option? Couldn't they make a monetary and political union wherein every citizen of the union has an equal vote, but regions with poorer economies receive more federal government spending in their area than they contribute in federal taxes? This is what we do in the US, correct? South Carolina is supported by New York every year, every decade. If SC's revenue imbalances were counted as debt, it would be in worse shape than Greece is.

This article in the 7/30/2015 London Review of Books reveals the role of German arms dealing in the Greek crisis.

Greece, in fact, has a lot of tanks, because the German and French arms industries, eager to get rid of surplus hardware in a world where wars are fought by bombers and drones, bribed the politicians. During the first decade of this century Greece was among the top five importers of weapons, mainly from the German companies Ferrostaal, Rheinmetall and Daimler-Benz. In 2009, the year after the crash, Greece spent €8 billion – 3.5 per cent of GDP – on defence. The then Greek defence minister, Akis Tsochatzopoulos, who accepted huge bribes from these companies, was convicted of corruption by a Greek court in 2013.

Prison for the Greek; small fines for the German bosses.

This is a fascinating situation, with some interesting parallels in the United States. Here, the monetary union has been clear for 2 centuries; states long ago ceded this role to the Federal government. However, we have endured, and still are enduring, political gridlock based on quite different role-of-government philosophies. The political gridlock is clearly holding back progress of the country along a number of fronts: improving education, investing in infrastructure, combating climate change to name a few. It's not clear what breaks us out of this gridlock, just as it's not clear what causes the EU nations to commit to true fiscal union or fully scrap the idea.

In essence Shahin Vallee is correct in my view. I can't help but be impressed by the selfishness of the German view, when they were the recipient of leniency after WWII. The rules will simply not sort out the problems of the Euro. Some sense of compassion and of the greater good is in order. France seems to best typify this attitude in their dealings. Most of Europe in general leans in this direction, except for Germany. I also did not like the author's description here of the Greek's new government as amateurish. The Greeks have been forced into an underground economy, which ultimately could be the model for any country's peoples in the world, that dare to resist the neoliberals. Fortunately, the winds are shifting, and the great underpinning of the neoliberals of fossil fuels, the banking cartel and the endless wars, is starting to fray. Fossil fuels are quickly becoming obsolete, and Europe in many ways is leading the world in getting off of them. Of course, there is resistance by the old powers. Now the wizard behind the curtain may shout, don't look here, but the game is up. The world will move on from this.

I've noticed a lot of the pro-German comments seem very concerned about money - people getting free money, people burning money, people getting someone else's money, yada yada yada.

Money, however, isn't economic product. It's not goods, nor is it services. It's just a claim on goods and services available in the market, and frees us from the inefficiency of barter. It is the blood that animates the body economic - necessary for life, but useless without a body. Without the goods and services, money is just so much paper. The larger the body, the more blood it needs; more economic production needs more money, ever growing in a virtuous cycle.

Right now, the Greek (and Spanish and Italian) economic body is dying for lack of blood. Blood - money - is necessary to get the production of services and goods going again. These services, these goods are wealth, but only if they are produced. Money is the only thing that's going to get them produced.

People in the German camp need to realize that hoarding and controlling all the money just kills the economy that creates the goods. It's counter-productive, and all you end up with is less goods and services to go around.

If Germans are to take the leadership role in the Euro, they need to understand what money is for, and not be such short-sighted greedy fools about it. Otherwise, the rest of Europe would be better off with Germany back on the Mark.

Underneath this articulate and plausible piece is something deeper and unsaid: the nations of Europe are still tribes. Despite technology and a lot of hype, people still identify most with those who live near them and share their language and culture and still fear and sometimes deeply resent others. And, though it is impolite to say so, there are some very sound historical reasons to fear that Germany's 'obstinance' could eventually become belligerence.

There WAS a moment in history just after the fall of the Soviet Union when it was easy to believe that all the old alliances of Eurasia were about to be replaced with a new social order that would usher endless peace and prosperity. The problem is that there have been many times in history when such notions came easily but every one of those eras was later proven dangerously naive.

The author is right. Germany must fundamentally change its behavior or the Euro cannot last.

Yes, Mr. Vallée, thank you for saying this. It is a difficult thing to say, but regrettably, we now have to face some ugly realities and questions, which until now we have been able to paper over.

Let us start with the facts.

1. The design of the Euro and the Maastricht Treaty was fundamentally flawed. There is no longer any question about this. Any monetary union which results in a country suffering what Greece is suffering is fundamentally flawed.

2. The policy of austerity is a failure. The whole world knows this now. If there is any doubt about it, one need only look at Greece to see its effects.

3. Germany's destruction of Greece is a matter of choice, not necessity. Economists around the world know that there is no sound economic reason for the pain which Germany is inflicting upon Greece. In fact, it is known to be counter productive. Germany is therefore destroying Greece out of a desire to do so.

Faced with these facts, the european countries must realize that if Germany is willing to do this to Greece, Germany will be willing to do this to them.

If I were in charge of a European country, I would be making all arrangements necessary to exit the Euro and go back to my country's old currency at the first sign of trouble.

In regions of uneven development, a union needs to be preeminently political. Otherwise, those more developed economically will take advantage of the other ones. The political aspect needs to combine equality and self determination (democratically decided flows from the most developed to the less ones). However, this requires a totally different organization of the economy and society. The powers that be don't want that, though.

Let there be no doubt: most Germans would welcome a return to the deutschmark. A common currency requires joint values. And yes, playing by the rules may be one of them.

This article explains in no uncertain terms why a common currency for countries of very different cultures without achieving greater political integration cannot succeed forever.

I only differ with one remark by the author, the one about the the so-called amateurish far-left government in Greece, a government that was elected after numerous conservative ones had caused the economic crisis in Greece.

The only person that really acted in not only an amateurish way, but like a schoolyard bully to boot, was the German Finance Minister, Wolfgang Schaeuble.

He told his newly elected Greek counterparts in the very first round of talks about yet more austerity measures imposed on Greece: "Now go home and sell that to your people".

Having lived in Europe for some time now, I am not certain that a European Union is necessary. In fact, a union of trading partners pre-existed the official treaties that formed and codified the EU. These relationships have not changed.

Unfortunately, tying the Euro to global banking affairs, and each country's debt, has become the problem.

That said, the bankers now want to force fiscal unification laws on the EU's sovereign governments. Most bridle at this invasion, perhaps Germany does not. The point is, while the idea of a unified Europe sounds good, the laws supporting this idea have done nothing to add to the financial stability of the continent. Each country still follows its sovereign laws, and I can only say, "Why not?"

Who would want to sacrifice their centuries-long sovereignty, their hard-won constitutions, to be ruled by bankers?

I would suggest the European Union be dissolved, that trading partnerships remain in place (as they have for centuries), and that each country return to negotiating the best terms for themselves, based on their laws and constitutions.

Financial difficulty and debt can be resolved through these partnerships--some countries will not fare as well as others--but at least it will be their decision on solutions.

As to the bankers and their debt, again, deal with each country on an individual level, and stop trying to rule the continent. That goes for you, too, Germany.

Weird and scary -- how stereotypically righteously Protestant work-ethic-y and authoritarian the Germans have seemed, as opposed to the equally stereotypically good-life loving, unmanageable Latins. Seems like something with a long, dark history is playing out ... again. I so hope I'm misreading this.

To my mind the issue here is not about Rigid Germans or feckless Greeks; it is about the values that should guide us for the 21st Century. The 20th Century bequeathed us a grand experiment the European Union as an alternative to War. Warts and all it is a worthy ideal.
Now, economically illiterate elites throughout the Union – who are very similar to the nomenclature of the former Soviet Union in their delusions of grandeur – have brought the European Union to the brink of collapse.
Those of us within who still hold the principles of true democracy dear will have to work harder to counteract the depredations of this illiterate and dangerous elite.

How many BMWs would Germany be selling in southern Europe if each European country had its own currency? The rise in the DM caused by Germany's export boom would have priced its products beyond the reach of 99% of the Mediterranean rim's population.

The Euro has become in effect a subsidy for German exports, which M. Vallée seems to suggest was always its purpose from the Germans' point of view.

So why would Germany give up such an effective way to keep its hands so deep in its neighbors' pockets?

No surprise that the answer from the French left is for more government, a eurozone parliament etc. No doubt they would be happy for a federal Europe which would just formalise annual free money from the north.

That's what has France, Italy and Greece in such trouble in the first place! You need structural reform, all three of you. Stop looking for external enemies. Stop thinking more government cash and civil servants is the answer to every problem. And a devaluation is what banana republics do when they can't compete.

As opposed to the other 'answers to every problem' that have worked just as badly: Privatize, bail out banks and large companies, suppress wages, distribute income upwards.

You can't support business when the effect of 'deals' is to make it impossible for people to buy anything. Austerity suppresses activity, it doesn't encourage it. Unless of course we 're talking about creating German-sponsored opportunities for their own companies to take over a larger market share.
(PS: German products are competitive because the euro is undervalued.)

The future of Greece is not a matter of political negotiations or the European solidarity but a matter of criminal investigation.

The reason why more than 300 billion Euros failed to economically reinvigorate Greece is because that money was stolen by the Greek leaders and their companions and transferred back into the Swiss banks.

Greece doesn’t need the additional European loans. Greece needs to recuperate the looted funds, move them back and use to revamp the local economy.

Again, it’s the matter of criminal investigation but the Greek leaders have chronically failed their country...

I remember very clearly when the euro was introduced in France, the ordinary citizens in the street, many of them, hated the idea. Some still do. In addition, the Schengen Agreement was very hotly contested in France for many reasons, as Tony Judt wrote of in his long essay, "A Grand Illusion?" in 1996. As the interrogation mark implies, he was skeptical.

Unless Germany and other large economies are willing to hold together the countries on the periphery of Europe, both in the East and the South, it is not likely that the European Union will survive, either economically or as a social experiment. That would be a great shame.

Greece will leave the Euro, and it will eventually balance its current accounts by a devalued Drachma. Europe will either take a lesson from this and Federate or Europe will disintegrate.

Currency union without political union was doomed to fail from the start, and Germany's attempts to enforce discipline upon the sovereign's has only made a political solution less possible.

The first goal of the "bailout" of Greece was to use Greece as a liquidity conduit to claw back the bailout money before it could impact the Greek Economy in order to save European Banks.

The second objective of the Troika was to transfer the debt to the taxpayers of Europe, who are now the creditors, although they may not know it.

The Taxpayers of Europe are going to be angry when they wake up to the bait and switch which has been pulled on them. The last thing that they will want to do is give up sovereignty to a political machine which has betrayed them. Therefore any idea of political union through Federation is now probably still born, thanks to the Germans.

So we are back to European disintegration, but I am sure that it won't be long before another Napoleon has a dream. "Those who fail to learn from history are doomed to repeat it."

The underlying trouble in Europe is the same as in the United States. Banks want to make bad loans and risky loans and pocket the profits, while having others make up for losses. This is usually expressed as privatize the profits and socialize the losses and it is very true.

What configuration of European countries would keep the bankers from running amok?

"And don't tell us we do benefit from our export-excess,
first of all, we had always an export-excess, and had even in Deutschmark been a top-exporter ..."

Um, Matthias, Germany benefits from its "export-excess."

And Germany has benefited from the euro by being able to export its unemployment to the rest of the EU.

If the eurozone were to shrink to the core euro, that would signal the rebirth of the German Mark in all but name. That is the legitimate spectre which haunts Merkel and Schäuble.

Though one would have thought that, with all the forgiveness Germany received during the 20th century from other countries, that Merkel and Schäuble could have handled the Greek situation with a bit more finesse, rather than turning it into the auto-da-fé that they have.

Of course, what Matthias is really saying is that Germany is being unfairly penalized for its success.

No, Germany is still being rewarded for its failure in two World Wars, both of which it, ahem, started.

If, for example, Germany had had to support the defense establishment necessary to keep the Soviet Union at bay during the Cold War, and had not been able to rely on the more enlightened approach taken towards its own debt overhang by the London Debt Deal of 1953, there would not have been the Wirtschaftswunder to the extent there was. Germany would have ended up closer to the bucolic pasture that the Third Reich imagined would be the condition of Eastern Europe.

That's history, Matthias. Deal with it.

Both the U.S. and Europe had weak banking sectors after the financial collapse. The U.S. government went with TARP and QE, i.e. direct intervention of the government to save the banking sector. In the process, we engendered resentment against our own government in the form of the Tea Party. Europe recapitalized its banks too, but also crucially had its governments assume worthless bank debt. This was politically motivated because of the awkwardness of having its banks write-off Greek debt and receive more of a bailout. In the end, this lets the Germans pretend they are bailing out Greece when in fact this was a two-step process of bailing out their own banks. The result is that resentment towards their banking sector is redirected externally towards Greece. Only time will tell which form of bailout will prove more politically destructive--resentment is a nasty thing with a very long half-life.

In this country, banks lured poor African-American families into taking out liar loans so they could become homeowners and then took their houses from them when they could no longer make their payments. The money lost on the securities created out of the loans was passed onto the public.
In Europe, banks lured a corrupt Greek government into taking out liar loans so they could gain entry into the Eurozone and then took their country when they could no longer make payments. The money lost on the bad loans was passed on to the general public in Greece and Europe.
In both cases, racism has been part of the picture.

France did have a romantic view. They thought some states, primarily France, could forgive other states, primarily Germany, and put cooperation above score settling. It took France three generations to build the Euro. It took Germany half a decade to destroy it.

Actually around 90% of that €300 bln. never went to the Greek leaders and companies but directly to creditors. Directly, so without even being deposited on a Greek bank account. So although I would agree a criminal investigation surrounding the Greek crisis is def. in order, I would not focus on the Greek leaders or companies (corrupt and incompetent they may be). I would look in the direction of certain key EU "leaders" and maybe some financial parties who have been severely lobbying for the whole ordeal. Their close to criminal blundering seems mostly responsible for turning the Greek Crisis into a real European one.

It seems to me that you can hear the bells ringing, but you don't know where they are hanging. (Free after a dutch saying)

Please wake up and smell the coffee! Your writing about the French wanting to spend German money only shows a very peculiar, limited understanding of what makes the economy work and what money actually is. Money is an expression of debt and therefore an expression of a relationship with society. Money is not just a commodity to be owned, because money is intrinsically a social construct. People who think they own money place themselves above society. Those are the people who think they own their succes, that society has no part in all the achievements. And this is a delusion.

In the Eurozone the surplus nation's attitude (mainly Germany) is that of this person who think's his succes is his own. But in truth the Euro has been exceptionally benificial for surplus economies because it did not just provide them with a big market of defecit nations buying up their products, but more importantly the Euro's rel. low level, thanks to defecit nations, made their export products cheaper than they would have been with f.i. the DM.

The question within the Eurozone is not just what to do about debt (either private or sovereign), but what to do with the record accumulation of wealth in the surplus nations. This wealth is right now being pumped in the financial sector, further inflating this bubble, where it would be a lot smarter to take this money and spend it on the real economy throughout the Eurozone.

Either way in or out the Euro it's going to cost the surplus nations money.

This fascinating analysis reveals the true tensions that are driving Europe apart today. They are caused by the opposing forces of cooperation versus capitalism. The key phrase that reveals this division is "German....belief that federalism by exception... is in order".

Capitalism is based upon exceptionalism. It is an adversarial process where the successful eliminate the unsuccessful. Exceptionalism is then gauged by how much eliminating takes place.

The exceptional believe that they deserve special authority and privileges. We see this in corporate America and from the 0.1%. More to the point, capitalistic exceptionalism breeds nationalism. When that happens, cooperation vanishes and is replaced by domination.

Greece is non exceptional. They have created problems that must be managed, but adversarial exceptionalism, fueled by growing nationalism, is attempting to crush them, not manage them. France wishes to manage the situation through cooperation. Not happening. As such, the entire system is in jeopardy of breaking apart.

Germany has a sordid history of exceptionalism going out of control. We all know how that played out.

European integration may have reached its peak and is in indecline. Its easy to cooperate when all is good. But when times get hard, the adversarial process takes over. That's what happening in Europe and it threatens their union. The global financial crises of 2008 released these demons.

Some things are true in this article, many things are false. First of all, it was Greece that pretended that their democracy was more equal than others, after all, they voted to keep on spending other peoples' money. Had other nations had a similar vote, Greece would have run out of cash a long time ago.

Secondly, it wasn't Germany that stood alone, it was France. Only Italy was on the fence. Everyone else firmly supported Germany, some were even a lot tougher. For instance, it remains to be seen if Finland will agree to more money being incinerated in Greece.

Also, to frame the Maastricht treaty as ambiguous shows the frame of mind of this particular Frenchman. Everybody who reads them clearly understands what it says and it's a lot harsher than anything Germany did. The ambiguity only comes in after lawyers dug through it and found every hole possible when it comes to the specific phrasing of things.

It is true though that the Euro as it was designed cannot work. Germany should in fact just leave and let France have it's Keynsian fantasy world. The irony is that the failiure of the latter is exactly why France pressured Germany into a currency union in the first place. Reading Shahin, it is obvious that at least he thinks that the purpose of the Euro is for France et al to spend German money.

The Euro is what the Germans meant it to be since day one, and this is written in the rules governing it. No ambiguity at all at any level. The goal of the ECB is first and foremost to preserve the value of the currency. Some French or Italian politicians pretend they don't understand what is clearly set in stone. It's no coincidence the ECB is in Frankfurt. The Euro IS the Deutch Mark. Countries which don't like having that kind of currency should not have adhered to the Euro, or can leave in an orderly way.
This entire article is written on an assumption which simply does not stand.

So now Germany, lacking political legitimacy for its view of Eurozone in France and in many of member, must insist on a contract theory that the Eurozone is a contract to accept Germany rules for governing the Eurozone, while France et al. insist that the Eurozone is something else other than just a single currency with rules but is a federal union with a federal budget and with a supreme executive and legislature but of certain limited jurisdiction, where the member states reserve a certain degree of jurisdiction and, thus, sovereignty to govern their affairs. Yet, the French are unsure of what the constitution of this federal Europe should be. And this they thought that they could paper over? Well, the first crisis has ripped this paper to shreds.

Yet why are the French so incapable of producing a vision about for federated Europe and countering Germany's vision. Stiglitz, Krugman, et al. easily prove that, based on economic theory and experience, Germany's Eurozone is pernicious and unstable for many, if not most, of its members. The U.S. presents a model of federal government. Can't the French fashion a federate Europe from these materials. Of course they can, but they won't, because the French don't want to concede their sovereignty to a federate Europe any more than Germany does, unless they control and dominate that federated Europe. The French can't justify that, and there is no consensus for that anywhere, apparently not even in France.

It is ironic that a US newspaper publishes this, because this is the kind of discussion that is lacking in Europe.
Vallee has written a great piece, although it may not have been his intention to prove without a doubt that the euro will never work. Indeed, it is the French-German axis that is the critical issue. Seeing what this French bureaucrat writes about the way he wants to spend German money is the best illustration that this alliance will eventually fail. However, that could easily drag on for another 10 years.

The economic reality is that it is highly unlikely that Greece will ever pay its debt and start growing again, with the terms and conditions laid down by its creditors, certainly in the short or even medium term. I see a lot of DUALITY and catch 22 situation, kind of, you dammed if your stay and dammed if you leave.

Within its 450 pages or so, The EU Treaty says that the EU is "founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities” One would therefore conclude that the driving force creating the Union was the VISION that many countries sharing so many of the laws, including a common currency, together, in the FULLNESS OF TIME can only bring harmony and friendship of the individual nations.

Article 1-5 says that “The Member States shall facilitate the achievement of the Union's tasks and REFRAIN FROM ANY MEASURE WHICH COULD JEOPARDIZE THE ATTAINMENT OF THE UNION’S OBJECTIVES”.
If the signatories to those laws were truthful to the words and spirit of the EU, surely you cannot just discard like waste, a member country or worse still, as it seems is happening now, give it the rope to hang itself. After all, Ludwig Van Beethoven’s “Ode to Joy” was surely chosen by the EU as their signature tune for what it exactly means-Joy.

There is a difference between holding individuals and countries accountable; not all individuals are equally sophisticated on financial matters and we need to have consumer protection policies in place to prevent such individuals from being lured into making risky investments. Counties, on the other hand, have to be held to a different standard if their sovereignty means anything. The real tragedy is not Germany and other norther European countries' stance against Greece, but the polity of Greece that has been so far corrupt. So the idea that Greece crisis is similar to the racism that African Americans face in their daily life is really offensive.

The headline " How the Greek Deal Could Destroy the Euro" is attention grabbing but too weak on the analytical side.

The fundamental question to be asked on the Greek debt crisis is: what are the alternatives presented to policy makers at this point? in fact, there are only three.

First, give up the euro and return to their original currencies. For sure, Germans would love to bring back their loved Deutschmark. Unthinkable to return to the status quo ante.

Second, accept a debt write off of Greece's debt. Unthinkable under current common currency Maastricht treaties. Politically impossible to sell to the German Parliament by Chancellor Merkel. A non start proposition.

Third, muddle through. This is the present course of action; sort of economic attrition. The idea is to impose harsh austerity measures that will lead, eventually, the Greek population to pressure the political leadership to leave the eurozone voluntarily.

The question is how long the Greek people will endure an austerity program that changes radically local customs, culture and a special way of doing politics. Germany's Ministry of Finance hope it won't take too long.  

" ... it will encourage political posturing, especially in France, where there is an undercurrent of Germanophobia that is easy to rekindle." This can as easily be said of Germany with respect to France, especially among the older generation.

Greece has to be thrown out of the EU.


Have you read their newspapers? Have you read the statements of their elected officials? Have you familiar with the results of their recent referendum?

The Greeks have not yet learned their lessons. They still blame Europe for all their problems.

No, it wasn’t Europe’s fault at all. The Greeks have to look inward and blame exclusively self for all the troubles. The Greeks could have used the loans in the same way Poland did to develop and reinvigorate their country. It means Athens had the identical chance and assistance like Warsaw but failed to use it properly because of their local corruption, tardiness and irresponsibility.

No adult is willing to accept personal responsibility for the mistakes they made chronically. If they saw anything wrong, they would have changed the course long ago.

As long as you are next to them, they will continue to blame you for all their problems.

Greece has to be left alone to hit a wall several times to sober up and finally learn extremely important lessons.

Greece has been looted and mismanaged by the Greek leaders for at least a few decades. Nobody is arrested for robbing their country, nobody is arrested for nepotism, nobody is arrested for corruption, nobody is arrested for stealing the money, and no personal property gained in such an illegal way has been confiscated.

If there is no change of heart, there cannot be a change of direction either...

Mark Thomason is basically correct. But it's really impossible to separate '...who this writer is and what his opinion tells us..."

This very clear and accurate opinion is also critically important PRECISELY because of who this writer is. Things we may have suspected are now in the open and solidly confirmed.

Germany has pushed this crisis to the edge of the cliff and possibly over the edge. The euro zone is like the cartoon character who runs off the cliff but remains suspended in the air until he looks down and notices where he is. Then he falls.

Can Germany back down or is it already too late? I suspect it's too late, far too late and I suspect Germany cannot back down because, well because it's Germany.

Do the French really think that the purpose of the euro is to "enhance the effectiveness of Keynesian economic policy?" Because if it is so, then you are saying that France joined the euro in order spend as much as it wants without worrying about its current account balance. In other words, France joined the euro so that it could spend German savings. Is it not obvious that no one, certainly not the Germans, would ever find such an arrangement acceptable?

But then there is also quite a lot of confusion about what Keynesian economic policy really is. Whilst there is no doubt that government has a role in smoothing out economic cycles, John Maynard Keynes would have been appalled by the sort of Greek government deficit spending which is intended to provide for the electorate of Greece a lifestyle that is far above what their levels of productivity can sustain. In this sense, the debate over Greece and the euro is not some ideological battle between the Keynesian Left and Neo-Liberal Right, but it is instead about the appropriateness of living so much beyond one's means and borrowing money in order to do so.

You are right, the euro in its current form cannot survive because it is clear that some members have very different ideas of what the currency union ought to be. But it is my contention that neither France, Italy nor Spain will choose to leave because they would still be hitched to the euro bandwagon if they did. Get ready for treaty renegotiation.

While this little morality play has emotional appeal, it simply isn't they way fiat currency macroeconomics works.

Currency comes from somewhere, and the larger the economy the more currency is needed. Guess who has the printing press? The monetary sovereign. Guess who doesn't have a printing press? Households, businesses, state and local governments.

Sometimes I think things would be clearer to people if monetary sovereigns like the USA and the EU stopped collecting taxes entirely and just paid for gov't services with freshly printed money. The consequential diminishment of monetary policy flexibility would mean that inflation would be more frequently at rates people don't like, but at least people wouldn't continue conflating households with monetary sovereigns.

One man alone in German made sure that Greece would be punished and humiliated and that its people would be force to starve. That man is the finance minister, Dr. Wolfgang Schauble in collusion with Chancellor Merkel - although Merkel is the weaker of the two.

I agree the Euro is dead - Greece would be wise to leave now. The magic of the Euro has vanished and has turned into handcuffs for any nation in financial trouble.

I remember we helped German banks during the financial collapse of 2008. Maybe that was a mistake, and I hope we never help German banks again.

We must do all we can to help Greece and let Germany know we do NOT approve of what they have done. We must convince Greece that they will be better off if they leave the Euro and we must help them to do so. Greece and its people will be destroyed if they stay with the Euro and that really is Germany's goal.

From the beginning Germany saw the Euro as a way to lock in their export superiority - and that part of the Euro must be broken. We must put some pressure on German to behave better with Greece. We want to rule the world, well here is the first place we can actually do some good. Help Greece out of the clutches of Germany.

Taking your point Doug, we should have encouraged the South to secede again.

Germany doesn't need a weak Euro to be an export nation. Germany was the largest exporter in the world long before the Euro was introduced and it was the largest exporter when the Euro exchange rate was very high. The Euro was a French project, designed to replace the weak Franc with a currency that is backed by the economic power of northern Europe.

While largely just the latest propagandistic diatribe against Germany ("prepared to amputate and obliterate" Eurozone members), Mr. Vallée's article also adverts subtly to the real dilemma: While the German political elite, and probably the German people, are indeed willing to create a European federal state (to quote Mr. Vallée: "real European executive power ... legitimized by the European Parliament"), the French political elite is not and never has been.

In the words of Yanis Varoufakis, "the German people ... have always yearned to embed their nation-state, to lose themselves in an important sense, within a united Europe" (from "Dr Schäuble’s Plan for Europe," available on Mr. Varoufakis' website).

France is the architect of the current Eurozone: a cool-headed and rather selfish architect, not a "romantic and somewhat naïve" one, as Mr. Vallée would have one believe.

The author resorts to hyperbole (“the threat of a “temporary exit” from the euro … has shaken the foundation of the euro”) and gratuitous Europe-bashing.

The Euro has been in practical existence for just 15 years. In this period it has accounted for over 20 % of global foreign currency reserves. The Dollar amounts to triple that figure, but it has been in existence for 200 years, not less than 20. As for macroeconomic statistics, the E.U. out-exports the United States and has the world’s largest GDP. It is only a matter of time before the currency catches up with the E.U.’s enormous human wealth and potential.

A major step towards fulfilling that potential was the decision to take a stand against Greece, a message not lost on other European nations enticed by their own Marxist parties’ promises of free lunches in the shape of serial debt forgiveness, less work and early retirement.

The E.U. was established to prevent subsequent wars. Monetary and fiscal union is a natural progression. In another 15 years the global macroeconomic map will look entirely different.

In any minimally functioning monetary union, the union would come to the aid of a member in trouble. In a minimally functioning union, Greece would be getting all the financial aid it needs and more in order to get back on its feet as fast as possible. Money would be pouring into Greece, with the understanding that the first thing that needs to be done is to revive the patient. That means getting unemployment back down under 5%. Only after that has been achieved would you address other problems.

In the Euro, on the other hand, instead of helping a member in trouble, the union has worked against it, making it even more difficult for a member to get back on its feet.

The Euro is essentially the very opposite of what a currency union should be. It is a mechanism to ensure that the weakest country be crushed entirely.

The euro was always a fair weather currency, because there was no European tax base and collection system to support money transfer from developed areas, like prosperous cities, to backward areas, like Greece. Can you imagine the United States yelling at Mississippi to pull its socks up and practice austerity.

If the currency union was the first step to move towards achieving the larger goal of political union of Europe in near future , such goal lies in tatters after the Germany directed tough bailout for Greece. The threatening German suggestion for a temporary exit of Greece from the Eurozone has perhaps served a notice to the other weaker members of the currency union, rather sown the seeds of demise for the larger politico-economic integration of Europe.

Getting Germany to agree to Monetary Union without fiscal union as the French price for German reunification was indeed a giant mistake.

Underlying this lack of fiscal union is not this or that country's differing philosophies, but within each country itself, the lack of agreement of the size, cost and magnitude of the public sector in a given jurisdiction, including delusions about the true cost of its pensions. This is a problem that many of us have brought upon ourselves, by voting for politicians of all persuasions against ever growing handouts.

Putting the cart before the horse, i.e., introducing monetary union before fiscal union, instead of the other way around, has however made it prohibilively expensive to break up the Euro, and it's getting more expensive by the day. Hence, I fear the 'unhappy marriage' , encouraged by Washington, is set to continue, thus eventually 'forcing' fiscal union and the European Super-State with unsustainable costly public sectors and 0 incentive to make amends. I wonder if this was not the intention in the first place.

Instead, an orderly dismantling of the Euro would finally bring economics back in line with politics and appears to be the more pragmatic route. For countries, forced marriage is no good, just being friends, especially with separate bank accounts, is not a bad thing.

They say, that the euro is the price Germany had to pay for unification; the rest of the EU countries were afraid that unified Germany would be too powerful. And look what we got instead!

Shahin Vallée writes "Germany could undoubtedly build a very successful monetary union with the Baltic countries, the Netherlands and a few other nations…" A new monetary union with Germany at the center, but without any of the other big European economies, would even more dysfunctional and lopsided.

Either we should form a political and fiscal union, or dismantle EZ. It doesn't work as it is.

Much ado about nothing.

Greece is bankrupt. Greek debt must be written down - banks and central banks holding Greek debt - must take losses.

Otherwise the Greek economy will never recover. It is the economy that matters, not the currency.  

On face value these are Mr. Vallee's personal comments, but coming from an elite economic policy adviser who is well placed within the top circles of the French government, the meaning is clear: this is the officially unofficial evaluation of Germany by France.

This and Professor Stiglitz's recent op-ed, together provide some of the clearest top-level, and harshest critique of German policy.

This goes beyond Greece, which has problems it must face, but if you adopt the view that the Greeks must pay- for how long? For 30 years? 50? 100? Austerity politics by Germany and a few other nations set goals for Greece that not only do not offer a path for growth, they guarantee to stifle any chance of growth, and, in fact, increase Greece's debt burden. Such policies only make sense either as magical thinking or as a cruel scheme to keep on punishing the country and the people; or some combination of the two. Mr. Schauble's op-ed to the NYT a few months ago lends credence to this theory: it was a nonsensical piece, full of financial magical thinking invoking the 'confidence fairy', and it could only be understood on its own terms as such or as some sort of propaganda piece masked to offer platitudes to mask Mr. Schauble's true thoughts.

I am deeply saddened by all this. I believe that Greece will face 1 1/2 lost generations - the 40s + mid-40s professionals who've lost their jobs and the young generation who's coming into the market now. There never was a reason for all that.

The degree of your misunderstanding of my comment, as well as the blaming of the Greek people and defense of the broken, predatory banking system is what is really offensive.

Are the Greeks beggars demanding conditions before they will accept additional money as loans from the German taxpayer's Treasury?

Why should taxpayers in Germany and other wealth creating nations work hard and then have their taxes pay for Greek Government employees, Greek Government Pensioners, and other Greek Government financial beneficiaries to live better than the taxpayers in other nations that are loaning their money to Greece to support Greek Government employees, pensioners, contractors, and etc.!

Austerity only requires that governments reduce government spending as required to have tax collections be greater than government spending. I say that this is the same way that a family manages their family finances. Reductions in government spending only hurts those people and those contractors that are being supported by tax collections. There are real limits to how many wealth consuming people paid by any government that the taxable wealth creating people in that nation can afford to support without bankrupting the in that nation!

Families can temporarily live off of credit card charges, and this is the same as governments printing and selling freshly printed US Sovereign Treasury Bonds and using the sale proceeds to pay for government services and activities!

Families have to honor and repay their debts or they lose their creditability and become financial pariahs in their community when they declare bankruptcy and then fail to honor their debts.  

Brian, you do not have to be of your age to know the truth of which you are speaking. Much of this is cultural-- a German feeling of superiority over all others. We have this too-- american exceptionalism ad nauseum. But at least in our brightest days we are willing to cede and compromise for the long term good, as the heroes of the Marshall Plan did just 65 short years ago. I am not sure the Germans have it in them to do the same, and that is the tragedy. Thank you for your wisdom.

When you read the language of many of the commentators with their sweeping generalizations, it's easy to see where wars come from:

" The Germans…."
"We Germans…want"
"The French Left…"
" the French have a longstanding envy and resentment of the Germans,"
" the poisonously ungrateful Greeks"
" Do the French really think …?"

The two World Wars both began in Europe essentially within the last hundred years. True union requires more than just declaring it between all these nations.
THe arguments about ideas about how to do it quickly devolves into national stereotype - laden finger-pointing.

And that's in a forum of so-called informed parties who read articles like this in newspapers like this.

Are you aware that North Caroline receives more federal tax dollars that it pays?
Please campaign for you state to accept responsibility for this and stop receiving this money. Perhaps you can sell some state assets.
The real trouble is the same in the US: the banking corporate rulers.The money Greece pays went to the EU banks, just as we US citizens were forced to bail out our banks for reckless lending.

The article and many reader comments focus on the money instead of the people of the euro zone is striking.

My sense is that money should serve the needs of people, Rather than people serving the "needs" of money.

From this vantage point, a common currency has to be joined to a realistic policy of redistribution from the wealthy to the poor.

Of course, if corruption and greed rule, then the weak will suffer no matter what policies are implemented.

The NYTs has gotten quite Orwellian in its coverage of Greece. Just one example: the EU "used what amounted to an economic embargo — far more brutal than the sanctions regime imposed on Russia." What nonsense. Refusing to loan money that you know will never be paid back is NOT the same as refusing to sell or buy products from a country like Russia.

Hello New York times - No, the Euro will not collapse and neither will the European Union. Actually the Greek agreement is a victory for the Euro and Europe. The reports of the death of the Euro/ European Union is exaggerated. Can we have a pro- Euro and pro Europe opinion? Euro bashing is a la mode. There has to be a pro Euro/ European Union scholar out there somewhere.

As an American business professor, long teaching in Germany but often in France, the comments from America inform so much as well. Americans seem generally not to support enormous political power for unions or the near perpetual ability to remain unemployed as we see in France, for example. Germany, through former Chancellor Schroeder, cut a deal with union leaders to bring them on board the management team. The result for Germany is that their products are price competitive throughout the EU & beyond. And German unemployment is close to America's. In Fulda where I live, we are at about 2.5%.
I happen to side with the Germans on the need to struggle for a "normal" government in Greece, to support business at the same time that taxes are collected. Otherwise the economic elites run roughshod over government & the economically fragile population. However, I find nothing moral about repaying debts--it just keeps one's credit clean. Gee, I must still be an American. We are comparing alternate realities, it seems....

As one who is almost 79 years old, I might add to my previous comment that most elderly are not stupid. Like Hamlet, we " know a hawk from a handsaw." We know that politicians praising inflation and devaluation of our currency as the cure for what ails us are really trying to rob us. I apologize for being so explicit, but old age has its privileges.

"Germany could undoubtedly build a very successful monetary union with the Baltic countries, the Netherlands and a few other nations, but it must understand that it will never build an economically successful and politically stable monetary union with France and the rest of Europe on these terms.

Over the long run, France, Italy and Spain, to name just a few, would not take part in such a union, not because they can’t, but because they wouldn’t want to. "

Meaning they dont want to be as fiscally prudent as the Germans, and DO want to be able to run larger budget deficits than Eurozone rules currently allow...

Sorry, but they cant have their cake, and eat it too.

France, on its own, without the constraints of the Eurozone, would run higher budget deficits, be at a higher risk of "default", AND will pay significantly higher interest rates than it currently pays.

France cannot have the benefits of being in the Eurozone, with lower interest rates for all its citizens, without the "co-signer" effectively being Germany.

The Germans were ONLY willing to give up their beloved Deutsh Mark, because they were sold on the vision that the EU would require countrieds to stick to the agreed on rules.

AGAIN, it’s NOT the Germans that dont want to play be the agreed to rules of "The Club".

Anyone (country) that doesnt want to follow the rules, should be allowed to "leave", and pay the price accordingly.

I have to ask for you to dig a little deeper in your notion of discipline. What is it? Germans telling others what to do (sorry YELLING others) and them complying. Thank you I think the world needs to pass on that, it reminds us to much of the way of the SS...
It is very worrisome that the Germans want to impose their own ways to everybody around them. The world doesn't work that way. It needs variety and innovation, letting new forms of expressions to surface. Germans should be smarter and learn how to deal with that variety, instead of rejecting it and accusing it of being responsible for all their problems...

The euro was a mistake from the beginning... a political union of Europe was, and is, unrealistic. Different languages, different cultures,, different financial perspectives. If you look at Italy and France, in each countyr towns that are 50km apart barely trust eack other. The idea of a "United States of Europe" is a nonstarter.

The Euro is being tested today and what is being tested is the ability to survive crises that are inevitable in any attempt to unify differing traditions, economic circumstances and economic cycles.

The problem with rules based systems is that they do not allow for the latitude needed in difficult times. One size never really fits all and the idea of the Euro was not to have every member state walk in lock step but rather to have a new monitory resilience based on the assumption that the weakness in one economy would be counter balanced in other economies and in this way buffer the economic cycles.

But No…Germany has chosen instead to turn a blind eye to the original project and has instead entered into a rules based technocracy that like all dogmatic systems cannot adapt to reality but can instead go a long way to generating tensions between member states as they begin to define themselves as the sinners and the virtuous.

The Euro should not be treated as an economic religion with excommunication as the means of resolving crises, yet this is exactly what is happening today!

Bad or poor ideas sometimes lead to better ones. Mistakes can be the best teachers we have, if we are paying attention.

One of the basic problems in Europe is the vast inequality of circumstances between the northern states that have been highly industrialized for more than a century and a half versus the southern tier which lack such long term economic development. One can argue endlessly about who is to blame, but the fact is that there a fundamental, undeniable source of friction between the north and south in Europe. (This clash of economies is seen here, too, in north/south, left/right political arguments.)

Why not have a union with the "haves" and a separate one with the "have nots"? In that case, each collection of states would know where their interest lies and would formulate the means to pursue it. Each would search assiduously for the means to advance or continue their existing status and could work to realize their dreams for their nation and people. In time, a full union of all could be considered, if individual interests went in that direction.

What exists now is an asynchronous mess with various parts of the system working diametrically opposed to the others. It seems blindingly obvious that this cannot stand. The Greek people can vote, but it means nothing compared to a few words of Germany's finance minister. Something more practical & reasonable needs to be pursued. A decade or two from now, practicality will be sought amid the rotting ruins of the Euro.

Remarkably absent from your analysis is the assistance Germany received,in recent years, from the ECB in helping to bail out a failed German Bank that contributed 216 bn to German debt in just 1 year.That gov owned bank received a loan of 175 bn. I bank, not a nation!
Also absent is any comment about what by any standard must be regarded as somewhat questionable accounting when an 'accounting error' suddenly turns up an extra 55 bn.
The Euro was a mistake from the first.It was contrary to the principles of the EU.It removed a fundamental cultural identity from each participating nation.The sooner it fails, the better for all.
But please, do not lecture Greece on poor financial management, that's a pot calling the kettle black scenario.

The essential question always has been, and still is, do the Europeans want a stable currency, favoring savers, investors, retirees, pensioners and all others living on fixed incomes, or do they want currencies subject to inflation and devaluation as and when needed by their politicians, but financial death to savers and people living on fixed incomes. Blame the Germans all you want, but European demographics are going to have the last word.

The article itself is long on pseudo behind-the-scenes psychology and who did what to whom and when.
The simple facts are that Germany (rightly in my opinion) refuses to be the paymaster of the European "loser" states.
France on the other hand can see itself on the losing side and is pretty anxious to try and force Germany into a half-union, in which Germany pays the bills, but has minority status when it comes to economic probity.

i read this article twice, trying to pierce the glaze of political economic abstraction in the language that, like a good absinthe, divorces clear reasoning from the operative facts.

it seems evident that the premises here are based on circular reasoning that belie the fundamentally political nature of the judgments. and while the politics is clear enough, politics is never a clarification of facts.

on the one hand, ambiguity is necessary; on the other hand, rules are necessary. on the one hand, the euro is meant as a tool of political integration; on the other hand, the eurozone shouldn't coerce a country such as greece that refuses by deception, election and referendum to integrate (modernize) its economic system.

how exactly does one have "constructive ambiguity" in loan contracts, policy agreements, and repayment schedules? isn't that premise the root of the problem in "self-confidence" and "romantic and naive" attitudes of the french themselves?

the problem with ambiguity is that it always eventually runs into situations of enforced clarification. the problem with rules is that they always eventually are very inconvenient to obey. the problem vexing mr. vallee, apparently, is his distress that inconvenient rules and enforced clarification can happen in the same place at the same time.

Great Mack, your plan is to reconstruct a german empire and a french coalition so we can have a new world war in Europe. Congrats on your brilliant plan.

Amanda they did not demand reform they demanded their money back with the interest. They knew that this will never happen. This whole exercise had more to do abut politics and geopolitical games than democratic rights.

This phrase from the article should bather you if you are a rational person.
In practice, it used what amounted to an economic embargo — far more brutal than the sanctions regime imposed on Russia since its annexation of Crimea — to provoke either regime change or capitulation in Greece.

Oh my! Finally somebody had the courage to write what all this, so called Greek crisis, is about. The future of Europe. Until Ordoliberal policies are in place in Germany the Euro is doomed. Seems that the Germans until they become more open to other's suggestions and opinions and leave their insular thinking on matters of Economy and further Europe integration, they will inflict more damage. Maybe we will see new alignments in Europe, Germany and all the second war world collaborationist states Holland, Finland, Baltic states together. As for the rest of the European states will be interesting to see their behavior. German economic hegemony needs to be stopped at all costs. Even with Germany exiting Euro. They know how to inflict damage. Starting with Germanic tribes marauding western Europe starting with last years of the Roman empire to the 2015.

This is an amazing piece. Is the demand that governments pay their debt and those with unsustainable debts stop taking up new debt "an economic embargo far more brutal than the sanctions imposed on Russia?" Perhaps this phrasing can be explained by the significant probability that France might follow Greece. The euro was predicated on goivernments keeping their own finances in order and on labor market organizations confining their wage raises to the limits set by productvity. The alternative is the well-trodden path of inflationary adjustments. Countries preferring that solution should certainly be allowed that "privilege", but they have no business demanding that others should subsidize them with now loans or debt forgiveness.

Most of the Euro-area states have bigger majorities against making unending subsidies to Greece, than does Germany. Germany alone did nothing here that wasn't wanted by most of the Eurozone. What could be more democratic? What is undemocratic is giving a single small state the right to drain revenue from the rest of the union, without end, to pay for pensions more generous that in much more productive places. Germany's joining with Finland, Estonia, Latvia, Lithuania, Austria, the Netherlands, and Slovakia to demand reform, was as democratic as can be.

It seems that you are contradicting self.

Firstly you claimed that the money is just a measure of the available goods and services.

It means that Greece, Spain and Italy don't create enough goods and services. If they had them, they would have the money too.

It means those Mediterranean countries would like somebody else to provide them with those goods and service and enough money that they could afford those goods and services.

That's not a realistic plan at all.

By the way, do you know what all those three countries have in common?

They are the European and world champions in soccer, basketball, handball, water polo, the homelands of the sport superpowers like Real, Barcelona, Inter, Milan, Olimpiakos, PAOK, and the nations that pay their athletes imported from all over the world up to 100 million euros...

Those are the people who never accept any advice because they never make any mistake.

Watching the sports all day along and arguing with the neighbors who is the best is not an economically viable option.

They keep voting for the same corruption politicians and parties for decades...

How do I know all of this?

I am from a Mediterranean country too...

Historically, there have been two kinds of successful currency unions: 1) those based on a gold or silver standard, such as the German currency union of the mid-19th century, 2) those that exist within a federal state, such as that of the United States. In effect, Germany wants the euro to function like a precious-metal standard.

The gold standard can function, generally at the expense of workers, in a relatively closed economy with minimal debt. However, modern economies rely more than ever on debt and trade. The gold standard was completely discredited for its inflexibility and counterproductive role in the financial crisis and depression of the 1930s. Germany and other countries were forced to abandon it, but only after it had damaged the world economy and ruined lives.

European political elites and their electorates are clearly not ready to cede sovereignty and revenue to a European federal state. Therefore, to escape from the economic, financial, and increasingly social crisis that has beset most of Europe since 2008, the nations of Europe need a carefully planned and executed breakup of the euro zone.

How can the NYTs continue to run these doom pieces on the Euro and the EU with such small substance? The July 13 tentative agreement did not offer or refuse huge debt relief to Greece. The EU said (all of that political entity, not just Germany) that there could be no discussion of debt relief until the Greek gov't promised and passed legislation to do the serious structural reform that they had promised for over 30 years!

Greece and the EU do not want anyone leaving the euro. The Greeks especially know that would be an even harsher form of austerity than any compromise to stay in. Furthermore, the too biggest creditors,IMF's Lagarde and ECB's Drahci, have very clearly said the debt burden is untenable and must be softened considerably. So why all this hue and cry from American and British economic commentators BEFORE the final pact is issued? One reason is that big investment entities are still feeding all the "news" to our economic reporters. I note that the author of this piece earns a living as a private investment management. These essentially Anglo investors and banks are the ones that have been making big money off Greece for years and years. Still this makes more sense than the Times' vacuous lead editorial yesterday.

The European Union actually practices another option. It is a Regional Policy, Economic and Social Cohesion, financed by the Structural and Cohesion Funds. These provide non-repayable grants to co-finance development in regions that are lagging behind to even out differences between standards of living within the Union. All regions within the Union benefit to varying degrees. It is a very enlightened policy approach and quite at odds with the neo-liberal philosophy (albeit increasingly infected by that ideology.

Unfortunately the Financial Crisis and subsequent socialisation of private debt has completely swamped the longer term positive trends under Economic and Social Cohesion.

One of the fundamental problems of the Euro was always the refusal of France to give up national sovereignty in favour of democratic European institutions. It worked for France as long as France decided in Europe and Germany paid. That has now somewhat changed.

Ah, but the reality is that the euro was the weak imposing their will on the strong. Germany was forced to give up its paramount position in order to get consent to re-unification. What the weak didn't count on was that Germany would not necessarily throw caution to the wind once it was inside the euro. Nor did they count on not being united on the not so small matter of what kind of fiscal policy they wanted.

Mistakes were made, but there can be no mistake Germany has been on the defensive from the get-go.

Rest assured there is no such divide. The author is biased.

This author is affected by his left of center orientation and since most of the left in Europe is now clearly against the European Project, he argues for breaking up the Union. Characterizing as regressive the policy directions of the European Commission; the author shows his bias.

As for France clashing with Germany because it wants more Keynesian policies he author fails to mention that both Hollande amd Renzi have adopted and are implementing free market business friendly policies with as a major part the reform of labor laws. This is something the syndicate dominated left has fought for years.

But the more pragmatic socialist leaders mentioned above have understood that such changes are a matter of life and death for European economies in their effort to survive in the world of globalization. The UK and other northern nations have gotten the message and have changed their economies. A market consensus has emerged which calls for sharply shrinking bloated bureaucracies and privatizations.

You must mean "disapprove"and I don't blame them. But it's politically much easier, isn't it, to blame whole countries, i.e. Southern "deadbeats", instead of their own banks that lent to them, at great profit, until 2008....That's who the original bailout bailed out, at great expense to both Greeks and Germans.

Fabrizio, i hope you're not complaining about this. This has been the great success of the euro. Close to zero inflation. The euro in my pocket is pretty much as powerful as the euro i had in my pocket 10 years ago, if not more so.

Brussels is now roundly despised in Greece, feared in the other southern-tier countries and. at best, unloved in France. In the current crisis (it is hardly yet over), there is plenty of blame to go around. When all core member countries are, in their unique ways, culpable, very little hope remains for the continuing viability of the EU, let alone its further integration into the 21st Century.

Come 2017, Britain will likely have powerful incentive to leave the Union. Then Ireland. After that, the house of cards crumbles to the ground.

Thank you SamIAm. The concept that household management and national economic management are two different beasts, as different as an ant and an elephant, as different as chalk and cheese, with many similarities but certain significant and meaningful differences, is a concept that is apparently very difficult to grasp...

You may not appreciate this but you sound like a spoiled child who doesn't recognize he has been supported by his parents and the community to grow up and become successful. You' re saying "I’ve done it all by myself and deserve everything I got, you guys are losers and are slowing me down!". It is unfortunately how Germany is perceived now, as a country with limited awareness who is ungrateful and unable to appreciate the good things it received from its association with other countries. Those good things are not very difficult to find though, who do you export to? Not Germany I suppose? Where are your largest markets? Don't they have a role to play in your success? Which country pulled Germany out of its misery after WW2? In addition, you sound inconsistent. One one hand you're implying Germans are good and smart, and on the other, you're saying: we have been misled. How? Why not take responsibility for letting yourselves be fooled and assume the consequences instead of playing the role of a victim? I can easily see a way that Germany made those loans with the intention of muscling their way into a repayment if anything else failed. That part, my dear German friends, is not something that is impossible, and you may want to think about it before claiming that you've been robbed, because it looks like you wanted to be robbed just to punish the robber...

"Germany appears to believe that the single currency ought to be a fixed exchange-rate regime or not exist at all in its current form, even if this means abandoning the underlying project of political integration that it was always meant to serve."

A small point, but I am not convinced that the the project of union in Europe, if you go all the way back to the first forms of European integration with the Coal and Steel Community, had this "underlying project of political integration." Union in Europe was meant to build a functioning postwar economy; national politics were to remain separate. Indeed this is one of the foundational issues with the current form of union. To claim that the European project always had hopes of an international political integration is to be blind to Europe's perennial, but existentially defining, problem with nationalisms. We know what Europe can turn into; we can never go back.

How is it that in 21st century one country not at war with another can do so much damage without regard for the consequences? So much of the debate about the Greek debt is visceral morality. They deserve their situation and not one dime will be forgiven them. PM Merkel comes off like a Victorian scold.

Money is a claim on goods and services available now, and in the future, in the market. It's not a measure of the goods or services available now. People value money based upon what they perceive they can get with it, now and in the future, but since money is the only feasible medium of exchange, it's pointless to question its inevitability. Just accept it.

Money is needed in Greece for the Greeks to buy and sell goods and services among Greeks. Absent money, they will stand around all day and talk sports with the neighbors, because it is inefficient to work for barter. As a result, less goods and services are produced by Greeks. Greeks are unemployed, and the wealth that could have been produced, had they been working, is simply not produced.

This is why we have money; to facilitate efficient economic production. We don't have it so that some party can hoard it all and declare victory.

If you have a moral objection to Greeks sending money to Germany for BMW's, the solution is for Germany and Greece to have different currencies and let the exchange rate float. Otherwise you have to stop whining about it.

A laughably anti-German piece of "analysis" by a petulant former government mandarin turned private sector drone and part time shill.

I should be angry or crying. But I'm laughing so hard my eyes are watering. The NYT has done itself and its readers a true disservice with this sincere sounding tripe.

The only thing useful in it is the serious notion that the southern countries will, in time, have to leave the Euro. They don't have the discipline to remain within it and should be encouraged to leave for the sake of the northern countries that get it and operate in fiscally sound fashion, in good times and bad.

But France will not leave the Euro. Indeed, its banks rather skillfully dumped its Greek debt onto Spanish and Italian banks (who see profit in false promises because that is how they operate in their own countries). German banks should learn from the French banks, but it's too late to do as the French banks have done.

The German decision is relatively straightforward;does the benefit to exports of a cheaper Deutchmark (the Euro) outweigh the cost of bailouts and potential losses in the credit markets.For the French is much more complicated since it involves geopolitical and social considerations.For those reasons,this marriage of convenience we last longer than most of us think.

Well, Germany built an empire to sell to and used some of the Euro profits to pay for reunification. What now? Take the money and run: isn't state-supported capitalism fun? Create the Euro and drop it when things get too clear to your partners. Run, Germany, run. Look at Germany run.

Boston Renter -- "Greece, and by the implication of this article, France, wants to be able to "leech" off the stronger economies of Europe, led by Germany. All this under the "guise" of "an ever closer Union"."

Germany wanted reunification. Thatcher for Britain was opposed. The French did not like it, but imposed a price. They'd support reunification if the resulting powerhouse of Germany was tied into that ever closer union with the Euro and EU amendments.

Germany agreed to that price. It got reunification with French help over British objections.

Now Germany wants to keep what it got, and take back what it paid.

That doesn't look so much like Germany being put upon, does it?

Are you aware that we are 18 trillion in debt?

It means every state in the Union receives far more federal dollars than it pays into the federal budget...

Germany is playing a dangerous game that could rupture the EMU and slow the political integration of Europe. Perhaps Germany and other European nations should start thinking about a global vision that would transcend their continental worries, even in these hard economic times and do far better than they did at the Addis Ababa Conference of Financing for Development.

One way for this regional transcendent global thinking is to focus on the world’s dire need to come to terms with looming climate catastrophe; and to be proactive for the Paris Conference realizing that as a predominant secular Christian continent the values of encyclical “Care for Our Home” are important guides.

The 2012 “The Tierra Solution: Resolving the climate crisis through monetary transformation” ( presents the conceptual, institutional, ethical and strategic dimensions of one possible global governance scenario that could be considered in the pursuit of just, sustainable, and therefore, stable global system.

Driving their Mercedes defensively to the bank to pile up the trading gains enabled by the effective undervaluation of German currency, perhaps? Most macro-economists argue that Germany's industry benefited enormously from the Euro, abetted by German banks that could loan to Greeks, Portuguese, Spaniards etc. to spend Euros buying German industrial products they actually couldn't afford, then having the EU taxpayers bail out the German (and French) banks when that game inevitably collapsed.

The Greeks and Italians can switch to electric bicycles and do just fine. Pollution creating gas guzzling image mongering German machinery will go the way of the horse. Germany, as in the past will have to get subsidize by the US, or perhaps in the future by China.

There are great swatches in eastern Germany where industry did not survive reunification and unemployment is high. Young people leave eastern Germany where life is subsidized in a way analogous to the distribution of support among states in the US of A.

The point is that Ms Merkel must know it is hypocrisy to support the collapsed economy of eastern Germany and not do the same for that of Greece (or Spain and Portugal for that matter).

So ... what's been happening has been more about the founders' disparate visions for the euro and denial of inherent flaws in the so-called union than it has about "saving" Greece. The tectonic plates of Germany and France continue to grind, with the pitiable Hellenes trapped in the middle.

Unless and until Greece exits the euro, they will be a whipped dependency, not a free country. With the return of the drachma, they'll have a chance to rebuild their agrarian, tourism-centric economy and national pride. It will be a long, arduous slog, but they will be masters of their own fate. Not Brussels.

At last count, quantitative easing globally has surpassed $8 trillion in debt-free assistance to bailout reckless lenders and investors. But, of course, it's debit interest for everyone else. Finance is a club. And you and Greece are not invited.

The economists have it wrong: Given a choice between wealth and full production over personal liberty, I choose liberty every time. It's what my family has done for generations, some of whom are still serving liberty from an unmarked grave in Europe.

For the Greek government, though, wealth is more important than democracy because the Greek people appear to have purchased the best, corrupt government EU money can buy.

The Euro was doomed the day it was conceived. You can't kill something twice.

Regrettably, the question people in Europe are asking themselves now is not whether the Euro was a mistake - that is clear to everyone now; rather, it is whether the reunification of Germany was a mistake.

The Germans do not compete on price, despite what you read in the nytimes. When the euro was immensely strong, approaching $1.60, Germany still managed to export over a trillion euro worth of goods. The nytimes writers and commentators just cant get their head around the fact that consumers the world over covet German goods for their quality.

It's not clear the German public knew that was the price of reunification and it's not clear the former West Germans knew what the cost of reunification would turn out to be.

That latter, very high cost, is a big part of why the Germans are so against paying for European unification too.

Like so many things, it's easier to see the costs than to see the benefits.

I think the Germans really should leave the Euro Zone which is more likely to work without them. Maybe they should take a five year break... (Sorry, I just could not resist that!)

It was indeed, for all of us. German companies are making huge piles of money from the euro, but the German taxpayer has seen little of the wealth generated - thanks to its governments' 'labour-market reforms'- and has also been stuck with loans originally made by banks, and now owed it by states. This is not a tenable situation for anyone, and the latest so-called 'deal 'in Brussels just avoids an inevitable confrontation.

The issue is not that " some democracies are more equal than others ". This is an intentional mis-direction. All democracies are equal; Greek, German, et al. The German public heavily approved ( perhaps ~ 65% ) of the austerity programs imposed on Greece. Quite understandable since German tax payers are on the hook for deadbeats in Greece. And really, so what if the euro zone crumbles. It was a stupid idea to begin with; i.e. similar to a return to the gold standard.

Greece, and by the implication of this article, France, wants to be able to "leech" off the stronger economies of Europe, led by Germany.

All this under the "guise" of "an ever closer Union".

The Euro-Zone is a Club with rules to join, and STAY, in the Club.

IF the French want to leave, and be able to spend beyond their means, good luck to them.

At the same interest rates, who would you rather loan $$$/Euro's to, France or Germany?

Good luck, France, if you want to go join the Drachma-Zone....