The editorial in the Wall Street Journal, “Bring Back The D-Mark” by Holman W Jenkins, Jr., suggests that the “euro was a noble idea” for two reasons. It would help poor countries and elevate them. And it would solve what became known in the twentieth century as “the German problem” by keeping Germany so occupied that the country could not get into trouble.
But what the Anglo-American victors of World War II fail to realize is that they have set an impossible task for Germany to perform. They want it to head a loose confederation of states with one currency but multiple conflicting governments. In America we got rid of that kind of loose confederation in the eighteenth century and then fought the Civil War to get rid of the remnants of states rights and establish a central control in Washington, D.C.
Germany has no central control of the member states of the EU. It’s just another member, though the most well-off member in financial terms whose currency, the D-Mark, was the envy of Europe. But unless all the states have a common government with a Fed-like body, the ECB, that has the right to make rules for all the member banks instead of just set interest rates, it won’t work.
Germany keeps on insisting upon austerity for Greece, Spain, and Italy. But it can’t enforce such measures. In fact, if Jean-Claude Trichet buys Spanish and Italian bonds, along with Greek, Irish, and Portuguese, it’s the equivalent of printing money. He’s risking inflation. And he’s giving such sttates a motive NOT to pass austerity measures. They will assume that Germany will foot the bill.
So it’s paradoxical. In the modern age you can’t have a successful currency without some sort of central control. If nothing else, maybe the ECB should be given authority over all the banks of Europe. That would be a good start towards maintaining the euro.