Greece may fail, but the euro won't

Make no mistake about it: The way things look, the European monetary union will have one less member in a few days. True, this member is of marginal economic importance, but it is also of great symbolic value for European integration. Is this the beginning of the end of the euro?

The statement that "if the euro fails, then Europe fails" is dramatic, exaggerated and factually wrong - even if it came from the mouth of German Chancellor Angela Merkel. The euro cannot fail as long as anyone still recognizes it as a valid means of payment. And Americans, Asians, Russians, Brazilians and the rest of the world will continue to do so, with or without Greece.

But one can certainly ask the question whether the euro has a flawed design that is almost inevitably bound to drive economically weaker member countries into ruin. "We say yes to the euro!" the German Federation of Trade Unions and the most powerful trade union IG Metall declared in the mid-90s, long before it was introduced.

Back then, I rubbed my eyes in disbelief. Have the unions no economists? Don't they know that when you give up your national currency, you also surrender the tried and tested tool known as devaluation? Don't they know that in the absence of a national currency, you can only achieve devaluation by pushing down wages, cutting jobs, and make those who still have a job work longer?

A small interjection, economics 101, so to speak: When a country with its own currency gets into trouble economically, it has the option of making the exchange rate of its currency cheaper. This has numerous advantages: Imports become more expensive, which leads to a certain discipline, while at the same time exports become cheaper on the world market, and so the country becomes more competitive. Also, it's often forgotten in the relevant literature that this makes the country more attractive for direct investment, because this can be done more cheaply in the national currency.

Back in the mid-90s, my fear was that the countries on the southern periphery of the monetary union would wind up in hot water, because they, with their traditionally weak economic power, would no longer have the tool of devaluation to fall back on.

But at first, it was completely different. Since 1995, when it became clear which countries would join the prestigious European currency club, the financial markets gave these countries advance laurels in the form of lower interest rates for government bonds. This was an invitation to run up even more debt at cheap interest rates.

So the party was on in the south, while quite the opposite was happening in Germany. Trade unions in this country settled for lower pay rises - job security was the priority. Economists will tell you quite soberly that Germany depreciated internally for around 10 years - and evolved from the sick man of Europe to its motor, which the Americans, French and Italians hold against it, even though it would have been better if other states had done the same.

Make no mistake about it: The way things look, the European Monetary Union will have one less member in a few days. A member of marginal economic importance, but this will have no bearing on the success of the monetary union. And that's that, as bitter as that will be for the citizens of Greece.

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