Back to the Deutschmark

The staunchly anti-European Martin Feldstein, a Harvard economist, wrote prophetically in 1997 that the introduction of the euro would exacerbate economic cycles by aggravating unemployment in certain member-states. Whose economic problems would contribute to a crisis in confidence in the Union. In fact, those who were convinced that the Union had been suffering a crisis since 2009, which would not be a one-off or a passer-by, had to go back to the drawing board to realise now that this crisis was written into the very genes of the euro. It was a tardy realisation of a common currency that naturally needed a common monetary policy – a common interest rate, that is – for a zone with disparate, even antinomic, cycles of activity. The many structural deficiencies and chronic problems were swept under the rug during the birth of the euro which is now presented – not without evidence – as guilty of the major crisis that is spreading throughout our Union. And for good reason because, in its actual form, the common currency has been reduced to a vector for economic delirium and a machine that churns out deflation, unemployment, and, as a consequence, inequalities. This means that the only course that would now authorise the implementation of a policy of active economic stimulation in the countries that have been hit hard by unemployment and recession, without simultaneously harming German interests, would be the reintroduction of the Deutschmark!

It is indeed a matter of waking up to the fact that this squaring the circle which consists of implementing vital structural reforms in peripheral Europe without making its population suffer more at the hands of a counterproductive austerity programme, all the while avoiding an inflationist sweep in Germany, will only be resolved by the return of the Germany currency. Because, contrary to the reintroduction of the Greek drachma (or of the Spanish peseta or the Portuguese escudo, etc.), the return of the Deutschmark wouldn’t provoke any phenomena of financial contamination or systemic crisis. It would, on the contrary, very gently – stylishly, even – relieve the burden of debt for the peripheral nations while promoting a euro which would see a significant erosion of its value. They would no longer have to go through the pain and unpredictability of complete or partial bankruptcy of certain nations, or of the seizure of certain assets and other confiscatory taxation. The only pitfall – and a sizeable one at that! – to overcome would be the Deutschmark’s inevitable sudden take-off which would damage German exports at their core, and which would favour imports for this country…in short, it would bring about a recession due to a global rush for a German currency which would then serve as a refuge value for the rest of the world. In such a climate, the country’s central bank, the Bundesbank, would be unable to weaken the currency because interest rates would already be at zero – except if it was reintroduced in very specific conditions, which would allow the Bundesbank to maintain control over its valuation all the while inducing a paradigm shift on the whole global monetary system.

It would, as it happens, involve reintroducing the Deutschmark only in electronic form, all the while conserving the euro but strictly for internal fiduciary transactions, within Germany only. A bracket to allow for fluctuation between the electronic Deutschmark and the paper euro would then be set. After that, a gradual appreciation of the Deutschmark – without negatively affecting the country’s commercial exchanges – would be tolerated and even arranged. There would be no rush for Deutschmark banknotes for the simple reason that they wouldn’t exist, knowing that the Bundesbank would from then on be in a position to make unlimited use of its strike force of electronic monetary creation in order to stop in its tracks any attempt to pillage the solely electronic Deutschmark, whose valuation it would have easy control over. The consequence: while interest rates given in euros would stay close to zero, they would be strongly negative in Deutschmarks, with naturally positive repercussions for all activity involving the rekindled Germany currency. At the same time, the sharp fall in the euro would immediately boost the competitiveness of European goods and services. Furthermore, the scheduled increase in value for German goods, due to the implementation of a well-defined calendar for the electronic Deutschmark, would encourage buyers not to go back to importing German goods too much. These foresights would serve as a stimulus package, neutralising the harmful effects of the electronic Deutschmark’s appreciation.

The reintroduction of the Deutschmark – in electronic form – would therefore signal the return of this flexibility which the Union now so badly needs, in terms of both monetary policy and the orchestrated weakening of its currency. What then is stopping Europe from outlining a monetary policy that is nuanced and that can adapt to the different economic cycles of its so different nations? In this respect, the electronic currency – perhaps even the European electronic currencies – under the guidance of the ECB would without doubt be the ideal instrument to temper the fundamentals for whichever country or whichever group of countries, all the while authorising the central bank to maintain strict control over it. May the euro – which is now decidedly no longer the symbol of European unity – be undone! The Founding Fathers undoubtedly committed a very grave mistake by opting for currency – and therefore money! – as the symbol of the European Union.