North Euro and South Euro

from Wikipedia, the free encyclopedia
A possible split in the eurozone:
  • "Northern Euro"
  • "South Euro"

    • The North Euro and the South Euro was a concept behind which the demand was to split the Euro into two currencies. This concept was discussed for the first time in 2010 in the course of the euro crisis in order to alleviate the consequences of the euro crisis and to lay the foundation for a new currency system in the European Union . Well-known representatives of the concept were the publicist and politician Hans-Olaf Henkel and the Hamburg economics professor Dirk Meyer . The idea was later also taken up by the AfD , but from the second half of the 2010s it did not play a significant role in the political discussion.

    thesis

    The basic thesis of Hans-Olaf Henkel and Dirk Meyer is that a common currency of different countries with a similar economic and financial structure is definitely advantageous for all participating countries, but this is not the case with the euro, because the euro countries have too different economies. For some, protection against inflation would take precedence over price level stability , while others would have to use the possibilities of monetary devaluation to increase their exports and stimulate their economy. As a result, both types of economies could not share a common currency area.

    concept

    This leads to the proposal to split the euro into a north euro and a south euro. The northern euro area is to include Germany, the Netherlands, Belgium, Austria, Finland and Luxembourg - the countries that are currently given top credit ratings by the US rating agencies . The Czech Republic and Denmark could then also introduce the northern euro, according to Henkel and Meyer. The southern euro area should include France, Spain, Italy, Greece and Portugal. The exchange rate between the south and north euro would fluctuate freely.

    First, according to Meyer, the governments should announce the introduction of a northern euro in their states. A few days later, the banks are to start marking the banknotes in circulation with a “forgery-proof magnetic ink”. These euro notes are to be temporarily accepted as the new currency. In order to prevent citizens of other euro countries from exchanging their euros for the new, higher-valued currency, “re-stamping” should be limited to a maximum of two days, according to Meyer. The actual changeover to new banknotes and coins should take about a year. A recapitalization and nationalization of various banks would also be necessary, according to Henkel.

    Advantages and disadvantages

    advantages

    • Proponents expect that the South Euro countries will be able to increase their international competitiveness and thus their exports by devaluing the South Euro . In addition, imports would become more expensive and therefore decrease, which would lead to a more balanced trade balance (difference between exports and imports). According to some economists, Germany already has an export quota that is too high; a strong northern euro would make imports cheaper and exports more expensive, and the German trade balance would be more balanced.
    • According to the proponents, transfer payments within the monetary union to support southern states would no longer be necessary. The existing obligations from the EFSF and the European Stability Mechanism (ESM) were retained, however.
    • The monetary union (s) could become more homogeneous and cohesive. This would mean that the central bank's monetary policy would be more in favor of the individual member states.

    disadvantage

    Disadvantages for south euro countries

    • In the opinion of many economists, it is doubtful and highly dependent on the reaction of market participants whether the competitiveness of the soft currency countries would actually improve through devaluation. It is to be expected that lenders will anticipate higher inflation in exit countries or the southern euro and therefore demand higher interest rates. Currency devaluation and higher inflation could also trigger a wage-price spiral . In any case, a devaluation of the currency causes a real appreciation (increase) of private and state foreign currency and euro debts. For these reasons, the benefits of leaving the euro might not be particularly great.
    • According to many economists and the Advisory Council on the Assessment of Macroeconomic Development , a collapse of the euro zone could lead to capital shifts, which would put a considerable strain on the financial systems of the soft currency countries. It is clear to every market participant that the devaluation is the main purpose of the split. In order to avoid the devaluation of their own financial assets, financial institutions, companies and private households would in the worst case move their money abroad in a system-wide bank run . Since the split-up countries already have problems with refinancing anyway, they could not support the banking system. The result would be the mother of all financial crises, which is very likely to have an impact on economic growth and employment. The reference to the silent dissolution of the currency unions of the former USSR, the former Czechoslovakia and the former Yugoslavia is wrong according to Barry Eichengreen. In these former communist states, the financial and banking sectors were underdeveloped at the time of the split. There were also extensive capital controls from the outset . In contrast to the case of the euro zone, the legal and technical-actual possibilities of capital flight when the former Eastern bloc states collapsed were small. Historical cases have shown that sealing off borders, preventing foreign travel, disrupting foreign trade and draconian capital controls were necessary to prevent capital flight. It is doubtful that such measures could be implemented today, especially in the case of an ongoing EU economic union .

    Disadvantages for north euro countries

    • A mirror image of the flight of capital from exiting countries would lead to a massive inflow of capital into the northern euro countries. In Eichengreen's view, this would e.g. B. in Germany increase inflation and trigger or intensify price bubbles on the stock exchange and the real estate market.
    • A north euro would inevitably appreciate significantly and also against the dollar, which would make German products more expensive abroad and impair the international competitiveness of north euro countries. Since this would be a persistent, structural problem, exporters from these countries would reduce their domestic costs or move their production abroad. This would have a negative impact on economic growth and unemployment. Journalists also do not rule out a collapse of the entire European economy.
    • At least partial debt relief would still be necessary, since the debts of Greece and other countries would not vanish into thin air even with a southern euro.

    Disadvantages from a specifically German point of view

    • From a German point of view, according to a report in the newspaper Die Welt, all the competitive advantages that Germany has gained over the past 15 years are in vain.
    • According to the Council of Economic Experts, German foreign claims against the euro area (as of 2012) amount to € 2.8 trillion plus € 530 billion in Target-2 claims by the Deutsche Bundesbank. Some of these debts would become irrecoverable. The dissolution of the monetary union could result in considerable losses for German investors; According to the Konrad-Adenauer-Stiftung, if the northern euro were to appreciate, for example, by 20%, these systems would suffer a total loss of 160 billion euros.

    General disadvantages

    • Critics fear that a split in the euro currency could also split and weaken political Europe. The economist Jacob Kirkegaard and Daniel Gros, director of the Brussels Center for European Policy Studies , even assume that the split would mean the end of the European Union and European integration as a whole.
    • According to Stefan Homburg , a northern euro would not change the basic problem of intergovernmental currency unions, which historically have all broken apart. Because the problem of the "commons", which everyone uses for their own interests, but nobody wants to look after, is not solved by this. The struggle to be observed for a “common fund”, for example in the form of the ECB seigniorage , would continue.

    Costs and consequences

    The advocate of the model, Dirk Meyer, estimates the cost of the currency conversion to be around 20 billion euros, which corresponds to around one percent of Germany's gross domestic product and roughly the costs incurred when the euro was introduced. Meyer expects the northern euro to appreciate by 25 to 30 percent as a result. In return, German assets abroad would be devalued accordingly. Most of the devaluation would hit banks and insurance companies. More expensive exports are offset by cheaper imports. In addition, costs for the German exit from the European Central Bank and for the aid that has already been given would be expected. Meyer estimated the macroeconomic costs for Germany in 2011 at 250 to 340 billion euros, which corresponds to around 10 to 15% of the gross domestic product. He estimated the costs for Germany if it stayed in the euro zone at 65 to 115 billion euros annually. Thus, the variant of the northern euro would be cheaper in the long term.

    According to a report by the courier , the economist Lars Feld predicts a massive economic crisis with a collapse of the gross domestic product by up to ten percent if the euro breaks up.

    Michael Hüther from the Institute of German Economy expects a deflationary shock, an appreciation that could destroy up to half of all jobs in the export industry, and 2.5 to 3 million additional unemployed in the short term if a northern euro is introduced .

    According to a scientific study by the Austrian Institute for Economic Research in 2012, an economic crisis similar to that of 2009 could be expected for Austria and would last for two years. It would take about five years for the deficits in the gross domestic product to be made good. Unemployment would temporarily increase by around 180,000 people. The Institute for Higher Studies expects a drop of 7.5% for Austria with the introduction of a northern euro by 2016 and an increase in the unemployed by 80,000 people. The growth rate of the Austrian gross domestic product would be negative for two years, but then increase again to around 2%. This scenario was calculated in relation to what, according to the authors, is an “optimistic” reference scenario, assuming that the eurozone will remain in its current form. It was also assumed that the crisis countries will politically get through their difficult reforms, lower their unit labor costs through internal devaluation, recapitalize their banks and repay their loans. In addition, the euro countries would have to be prepared to accept further haircuts and, if necessary, to recapitalize further banks and, if necessary, to top up the ESM . Nevertheless, economic growth, especially in the southern countries, would be very small for many years, which would make it difficult to repay the loans.

    Advocates

    In Germany, the concept was considered politically by the Alternative for Germany (AfD). In Austria, the Freedom Party (FPÖ) represented the demand for a northern euro.

    In 2015, Allan Meltzer , economics professor in Pittsburgh, called for the monetary union to be temporarily split into two parts with a “hard” and “soft” euro, flanked by aid for weak banks. That makes the reforms that are still necessary less painful. If the economic balance of power had shifted, reunification would be possible to the common euro.

    Alternatives

    The stockbroker Dirk Müller sees another possibility in introducing just one northern euro. The southern European countries should reintroduce their previous currencies. However, Müller would prefer the creation of the United States of Europe with a single currency and common budget policy to a North Euro.

    A similar proposal by Markus C. Kerber , Professor of Public Finance and Economic Policy at the Technical University of Berlin , provides for the introduction of a so-called “ Guldenmark ” as a parallel currency to the euro. This should be borne by countries with a current account surplus - specifically Germany, the Netherlands, Finland, Austria and Luxembourg. A Guldenmark could help balance out differences in competition between north and south.

    Alternatively, it was suggested that ailing countries like Greece should introduce parallel currencies in addition to the euro. The "GEURO" contribution by Thomas Mayer , which was received in media such as ZEIT and Spiegel, received greater attention . Markus C. Kerber, however, expressed doubts about these proposals, since a parallel currency had never been formed or even held that was weaker against the actual currency. However, this is the case with a "GEURO" or "New Drachma".

    In 2013, the Federal Association of Small and Medium-Sized Businesses published an anthology, The Parallel Currency: Options, Opportunities, Risks, which gives an overview of the proposals.

    See also

    literature

    • Hans-Olaf Henkel: Save our money !: Germany is being sold out - How the euro fraud threatens our prosperity . Heyne Verlag (2010). ISBN 3-453-18284-7
    • Dirk Meyer: Stability through the North-South division of the monetary union , in: Orientations for economic and social policy,. Vol. (2011), H. 4, pp. 19-21 ( PDF )
    • Dirk Meyer: The concept of parallel currency for the EURO zone , in: IFO Schnelldienst , 64th year (2011), no. 23, pp. 12-15 ( PDF )
    • Dirk Meyer: Euro crisis: exit as the solution? Lit Verlag (2012). ISBN 3-643-11775-2

    Individual evidence

    1. ↑ z. B. A pseudo solution to the euro's failings. Martin Taylor imagines a north / south split into a 'neuro' and a 'sudo'. "It was in Calabria, on New Year's Day 2004, that it came home to me that southern Europe was set for serious trouble with the ..." , March 21, 2010; Economic experts call for northern euros. , November 27, 2010, accessed June 17, 2015
    2. ↑ ntv: AfD proposes North Euro and South Euro , January 10, 2017, accessed July 2, 2020
    3. ^ Meyer: The concept of parallel currency for the EURO zone (2011), p. 12
    4. ^ Meyer: Stability through the north-south division of the monetary union (2011), p. 20
    5. ↑ Hamburger Abendblatt : "Professor Meyer: Germany should leave the euro" , December 5, 2011
    6. ↑ Focus Money: “End with horror”, January 25, 2012
    7. ↑ RP-Online: “Euro-Crash: What if?” ( Memento from February 25, 2012 in the Internet Archive ), from December 6, 2011
    8. ↑ Hamburger Abendblatt: "Professor Meyer: Germany should leave the euro" , December 5, 2011
    9. ^ Meyer: The concept of parallel currency for the EURO zone (2011), pp. 13-14
    10. ↑ a b Die Welt : Are the D-Mark or the Northern Euro the last resort? , dated August 9, 2011
    11. ↑ Barry Eichengreen, The Breakup of the Euro Area (PDF; 308 kB) in: Alberto Alesina and Francesco Giavazz, Europe and the Euro , National Bureau of Economic Research , p. 48
    12. ↑ Barry Eichengreen, The Breakup of the Euro Area (PDF; 308 kB) in: Alberto Alesina and Francesco Giavazz, Europe and the Euro , National Bureau of Economic Research , p. 16
    13. ↑ a b c d Marcel Fratzscher , Clemens Fuest , Hans Peter Grüner , Michael Hüther and Jörg Rocholl , Plea for the Euro , Süddeutsche.de, June 1, 2013
    14. ↑ a b Advisory Council on the Assessment of Overall Economic Development : After the EU Summit: Using Time for Long-Term Solutions (PDF; 734 kB), July 5, 2012, pp. 8–9
    15. ↑ Barry Eichengreen, The Breakup of the Euro Area (PDF; 308 kB) in: Alberto Alesina and Francesco Giavazz, Europe and the Euro , National Bureau of Economic Research , pp. 22, 23
    16. ↑ Barry Eichengreen, The Breakup of the Euro Area (PDF; 308 kB) in: Alberto Alesina and Francesco Giavazz, Europe and the Euro , National Bureau of Economic Research , pp. 23-26
    17. ↑ Barry Eichengreen, The Breakup of the Euro Area (PDF; 308 kB) in: Alberto Alesina and Francesco Giavazz, Europe and the Euro , National Bureau of Economic Research , p. 26
    18. ↑ a b Konrad Adenauer Foundation : Why do we need the euro? Analyzes & Arguments, Issue 95, August 2011. p. 7
    19. ↑ Westdeutsche Allgemeine Zeitung : North and South Euro as a way out of the Euro crisis , from September 12, 2011
    20. ↑ Die Welt : The end of the euro would be an end in horror , issue of August 14, 2011, No. 33
    21. ↑ Stefan Homburg: North Euro - a good idea? , Economist's vote from April 13, 2013
    22. ^ Meyer: Stability through the north-south division of the monetary union (2011), p. 21
    23. ↑ Berliner Kurier : “10 years of the euro: What happens if the euro breaks?” , From December 22, 2011
    24. ↑ Focus Money: "Should Germany get out of the monetary union ?: Stop shot for the euro extortionists" , from January 17, 2012
    25. ↑ Kurier : Expensive Euro End: Fear of Speculative Attacks , from August 30, 2012
    26. ^ Institute of the German Economy : The euro is being played down ( memento from November 2, 2016 in the Internet Archive ) , from January 16, 2011
    27. ↑ Austrian Institute for Economic Research : Advantages of Participation in the European Monetary Union and Consequences of Redimensioning the Eurozone
    28. ↑ Institute for Advanced Studies : Scenarios for the Eurozone Crisis and Consequences for Austria (PDF; 398 kB)
    29. ↑ Austria Press Agency : FPÖ-Strache: Italy voted against the euro - high time for the separation of the north and south euros , on February 26, 2013
    30. ↑ Sebastian Jost: Top economist Alan Meltzer wants to split the euro zone. In: welt.de . November 13, 2014, accessed October 7, 2018 .
    31. ↑ Münchner Merkur : Mister Dax: "We should introduce the North Euro" , from October 26, 2011
    32. ↑ a mixed word from the former Dutch currencies guilder and the German mark or Finnish markka
    33. ↑ A financial expert recommends the Guldenmark for Germany. Die Welt , August 13, 2013, accessed November 24, 2014 .
    34. ↑ The Geuro: A parallel currency for Greece? (PDF; 618 kB). Deutsche Bank Research, May 23, 2012.
    35. ↑ Deutsche Bank suggests "Geuro" for Greece . In: Die Zeit , May 22, 2012
    36. ↑ Peter Bofinger : Second currency for Greece: Geuro, I dread you! . In: Der Spiegel , May 24, 2012
    37. ↑ A financial expert recommends the Guldenmark for Germany. Die Welt , August 13, 2013, accessed November 24, 2014 .
    38. ↑ Bundesverband Mittelständische Wirtschaft (Ed.): The parallel currency: options, opportunities, risks. ( Memento of July 29, 2013 in the Internet Archive ) (PDF; 1.8 MB), anthology 2013.