Everyone knows that the single currency allowed profligate Southern European countries to borrow at very favorable exchange rates. The Germans are miffed because they (rightly) expect that everyone is looking to them to bail out all this spending. But all this currency experiment did was to temporarily deform the financial structure of Europe - once the lid started slipping off, rates are (surprise!) right back to where they were.
Hey, thanks for all the implied backing of the spending spree, deutsche volk! No wonder Frau Merkel is miffed.
Act the Second: Buddy, can you spare a dime?
What isn't getting much play at all is what the Eurozone did to the economies of the periphery:
This is all you need to know to understand why Germany made out like a bandit from the single currency. The Euro's strength was pegged to the needs of the German economy, and so German manufacturing exports simply soared. While production across Europe struggled, things were humming in the Bundesrepiblik.
Add in the property bubble (Greece, Italy, Spain, Portugal), and the average Joe was left outside in the cold, with his nose up against the window pane, watching his northern European neighbors feast. No wonder that Yannis, Marco, Filipe, and João are miffed.
Epilog: The unbearable lightness of being in the Eurozone
There's simply no squaring this circle. If Germany wants to keep its manufacturing exports, it will have to pay southern Europe. They won't. If southern Europe wants low borrowing rates, they have to accept ruinous monetary policy that is destroying their economies. They won't.
Stick a fork in it.
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