Return to the Deutsche Mark?

Martin Feldstein, an economist at Harvard, premonitarily wrote in 1997 that the introduction of the euro “would exacerbate economic cycles by exacerbating unemployment in some member countries. Which economic setbacks would contribute to a crisis of confidence in the Union “. By Michel Santi, economist

Those who were convinced that the Union had suffered a crisis since 2009 that would only be punctual and temporary had to review their copy to realize today that the crisis was inscribed in the very genes of the euro, this common currency requiring a common monetary policy – that is, a single interest rate – for an area with disparate business cycles. So many structural deficiencies and chronic problems overlooked in the birth of the euro which, in its current form, is reduced to being vector of economic schizophrenia and machine to create deflation, unemployment and inequality. So much so that the only way that today would allow the establishment of an active policy of stimulating economic activity in European nations (such as Italy) hard hit by unemployment and recession would be to reintroduce the deutsche mark!

It is a matter of squaring the circle of putting in place the essential structural reforms in peripheral Europe, without putting the population under the yoke of austerity and avoiding an inflationary surge in Germany. Unlike the reintroduction of the Italian lira (or other European currencies), only the return of the Deutsche Mark would not cause any phenomenon of financial contamination or systemic crisis. On the contrary, it would allow the debt burden of the peripheral nations to be eased smoothly, because a euro relieved of its German weighting would see a sharp erosion of its value, and thus avoid having to go through the painful box of the partial bankruptcy of certain nations. or even the seizure of certain bank assets or confiscatory taxation. The only pitfall to be overcome is the inevitable outburst of the Deutsche Mark, which would fundamentally hinder German exports and precipitate Germany into a recession as a result of a global rush into a national currency (re) that became a global safe haven in a context where its central bank, the Bundesbank, would be unable to weaken it because of interest rates already at zero.

Unless the return of the German currency was achieved under very specific conditions that would allow the Bundesbank to retain control over its valuation, while inducing a paradigm shift across the global monetary system. This return of the Deutsche Mark, only in electronic form and strictly for domestic fiduciary transactions in Germany, would be achieved within a clearly defined range of fluctuation between an all-electronic German currency and the paper euro. In a second step, a gradual appreciation of the Deutsche Mark – without negative impact on the country’s trade – would be tolerated and even framed. No one could rush into Deutsche Mark banknotes for the simple reason that they will not exist, knowing that the Bundesbank would therefore be able to make unlimited use of its electronic money creation break any attempt to rush into a purely electronic deutsche mark whose valuation it can easily control. As a result, while interest rates would remain close to zero on the euro, they would be strongly negative in Deutsche Mark, with naturally positive spin-offs for all economic activity around the recovered German currency. At the same time, the sharp fall of the euro would immediately boost the competitiveness of European goods.

On the other hand, the programmed rise in German goods as a result of a well-defined timetable for the appreciation of the Deutsche Mark would encourage buyers not to over-deliver their German merchandise imports. Anticipations that would serve as stimulus neutralizing the harmful effects of the appreciation of the electronic deutsche mark. The reintroduction of the Deutsche Mark – in electronic form – would therefore signify the return of this flexibility which the European Union needs so much today, both in terms of its monetary policy and the orchestrated weakening of its currency. What opposes in fact to define in Europe a nuanced monetary policy that can adapt to the various economic cycles of its nations so diverse? In this respect, electronic money – even several European electronic currencies – under the aegis of the ECB is undoubtedly an ideal instrument which would make it possible to tame the fundamentals of such a country or group of countries, while allowing the central bank to maintain strict control.

At a time when it is likely Jens Weidmann who will take, after Mario Draghi, the reins of the European Central Bank, he who has just loudly proclaimed to the German the need to “stop any stimulus, because it feels some price pressures “. At a time when it is crucial – for the very survival of the Union – to act in nuance and discernment. That the euro be – not dismantled – but adapted to the various macroeconomic imperatives of the Union and to its technological progress, and this in the sole interest of its citizens who would appreciate to a fair extent the intellectual innovation and flexibility that would thus make proof their new decision makers.

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