Actually, Germany did cause quite a bit of the problem. Without Germany, the Euro would have devalued much faster, much earlier, which would have easied some problems.
A Germany going it alone would also have a much more expensive currency. This is one reason Germany doesn't want the Euro to collapse I suspect (along with the massive disorganisation)
Changes in currency only have short time effets. The prices tend to new equillibirum. Your imports get cheaper and after a while it reaches a new equillibirum (balance) between the two.
Deflation(Inflation can only grant a short term benefits and that is without calculating in the distortionary effects
Switzerland has the same problem now, Germany would have after the Euro. In the Switzerland case it has been a much strong effect then it normal would have been, since people used the CHF as saving.
Most of Germany's trading partners are within the Eurozone. If Germany left the euro, then their currency would skyrocket relative to the rest of the Eurozone, making their exports much more expensive, and it would absolutely devastate the German economy.
Germany needs the Euro as much as the Euro needs them.
The entire situation is a disaster, because the only solution really is for Germany to support the rest of the EU through the issuance of Eurobonds. This will never happen. So the entire Eurozone is locked in this death grip.
How do you know? I'm German and I follow the German economic development for several decades now.
> If Germany left the euro, then their currency would skyrocket relative to the rest of the Eurozone
You mean to the level we had before in West Germany?
Check out the economic 'failure' of West Germany some time.
> The entire situation is a disaster because the only solution really is for Germany to support the rest of the EU through the issuance of Eurobonds. This will never happen. So the entire Eurozone is locked in this death grip.
Now it seems that you don't understand European economy.
If Germany left the euro, then their currency would skyrocket relative to the rest of the Eurozone, making their exports much more expensive, and it would absolutely devastate the German economy.
Huh? According to you, Germans currently work hard building products that will be enjoyed by others in the Eurozone.
Why would it be bad for them if that situation reversed, and suddenly they were able to purchase the fruits of other's labor? That's like saying it would be bad for me if my stock portfolio suddenly increased in value, and I were able to hire a cook rather than cooking for myself.
The answer: the exporters adapt to every exchange rate. What they really prefer is a STABLE exchange rate - high or low. What they prefer even more: no exchange rate. Trade in a large market with a single currency is even easier.
@lispm: imports would be cheap, and German labor would be very expensive. Germany (like most of Europe) imports raw materials, adds value with labor, and exports finished goods. BMW could not export made in Germany cars with a profit anymore; this could still be good for BMW (just like Apple, they could build everything in China), but it would be bad for the Germans.
We still have factories in Germany and outside of Germany.
Each BMW uses a lot of materials and energy for production. That would get a lot cheaper. Plus BMW imports lots of parts from other countries.
We really had that discussion years ago. When the West German Deutsche Mark was getting stronger all the time. BMW expanded in Europe and outside of Europe. Still it kept its factories in Germany. The quality of its workforce is extremely high.
@lispm: "the raw materials would get cheaper" doesn't mean anything for export. Raw materials for export get in, and they get out inside the finished goods - at the same exchange rate. The exchange rate is neutral for raw materials that get reexported.
Instead, relative labor cost would change. That labor is high quality? Yes, it is. But importers wouldn't buy it "at any cost". Higher price, same value -> less demand.
As for the DM getting stronger all the time: It did so in time, while German relative productivity was rising. On the contrary, this would create an incredible shock. I wish you not to see your dream come true. You could find out it's a nightmare.
The German manufacturing industry does not export raw materials. It exports cars, machines, tools, power plants, .... For building these things it needs all kinds of materials. Much of that is imported.
> relative labor cost would change
German has already a much higher labor cost than most comparable countries. Still we have industry here and Germany is the second largest exporter in the world.
Changes in currency only have short time effets. The prices tend to new equillibirum. Your imports get cheaper and after a while it reaches a new equillibirum (balance) between the two.
Deflation(Inflation can only grant a short term benefits and that is without calculating in the distortionary effects.
A Germany going it alone would also have a much more expensive currency. This is one reason Germany doesn't want the Euro to collapse I suspect (along with the massive disorganisation)