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Analysis
Germans start euro retreat

Germans start euro retreat

by David Marsh

Mon 27 Jun 2011

Two years ago, at a semi-official Anglo-German meeting with financial and business figures in London, I asked a well-known German bank chairman how he would react if Greece was one day asked to leave the euro. This was an open question and answer session in front of about 50 people. ‘I would act like Clint Eastwood,’ my banker friend said, good humouredly. ‘I would say, “Go ahead, make my day.”’

In truth, there’s not a great deal of love lost between the Germans at the core of the euro and the outlying states. Highlighting the mood, an opinion poll in the Sunday edition of the Frankfurter Allgemeine newspaper yesterday indicated that 71% of Germans no longer trust the euro – up from 66% in April and less than 50% in 2008.

The Germans are happy enough to pool their currency with a bunch of homogenous states with which they have stable trading links and share similar economic and business characteristics. Countries that leave them alone, don’t make them feel guilty and don’t ask them for money. They are not too happy, though, about extending the relationship to countries which – for whatever reasons – are piling up debts owed to the Germans and other creditor nations that will never be repaid.

German finance and business representatives are a hard-headed lot. For them, the euro was an economic and political project that seemed a good idea at the time. But now a retreat seems to be underway.

One bellwether is the No. 1 news magazine Der Spiegel. Mind you, the magazine, which has never knowingly indulged in positive reporting when a little negativism will make more enthralling reading, has long pointed out that the one-size-fits-all interest rate policy was likely at some stage to come unstuck.

So it was perhaps not all that surprising that Der Spiegel ran a cover story last week with a front page picture of the euro being carried to its grave on a coffin draped with a Greek flag. ‘Sudden and expected,’ was the sardonically Spiegel-esque headline. ‘Obituary for a common currency’

Worries about the euro inspired 50 business leaders from France and Germany, all chairmen and chief executives, to sign prominent advertisements in French and German newspapers last week extolling the single currency’s advantages. The idea was, though, something of a damp squib. ‘The euro is necessary,’ ran the headline, a little underwhelmingly. Significantly, the advertisement was signed by only 20 German businessmen, against 30 French company heads (including a few women). Only 12 of the 30 DAX companies were represented. My friend the German bank chairman was not among the signatories. Perhaps he was too busy studying the obituary notices.

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