Responsibility for flawed design of eurozone rests with Germany
The EU will be led out of the current mess by Germany or it will not be led at all, says Colm McCarthy
Published 06/07/2014 | 02:30
Germany has, by common agreement, had rather a good eurozone crisis. Output in Germany in 2013 was 4.2pc ahead of the figure for the pre-crisis year of 2007, which does not sound too exciting until it is compared with the other two large eurozone economies, France, where output grew just 0.6pc and Italy, where it fell 8.7pc.
For the 18-member eurozone as a whole, output in 2013 was 2pc below the figure six years earlier - the longest downturn since World War II. The debt-ridden peripheral countries have done uniformly badly - in Ireland, output in 2013 was down 8pc on the pre-crisis level; in Spain almost 6pc down; in Portugal almost 7pc and in Greece there has been a horrendous 24pc contraction. Germany's debt and deficit numbers look much better and this relative outperformance has been accompanied by increasing influence in European decision-making.
But the sun has smiled on the Bundesrepublik in other ways too. In the decade before the bust, Germany accumulated a large international creditor position through running big annual balance of payments surpluses, becoming a sizeable net holder of foreign financial assets. A financial bust can be painful for creditors as asset values fall and borrowers default. This time round, the distribution of the losses from the bust has been creditor-friendly, particularly in Europe, as taxpayers in various countries were bailed in to protect domestic and foreign creditors of their failing financial companies.