“Marsh exposes the basic problem of the euro: no one’s in charge Monetary union was a colossally risky experiment launched without adequate crisis management precautions and without centralised political oversight Unlike the other countries, Britain properly analysed the risks and decided, rightly, to stay out It’s a pity that other Europeans didn’t show similar caution.” —Lord ( John) McFall, member of House of Lords Economic Affairs committee, former chairman, House of Commons Treasury Committee “An admirably lucid analysis Marsh weaves together the politics as well as the economics of the euro In Europe (very properly) politics is about democracy If the euro area is to become more integrated, as it must in order to survive, then the democratic deficit, which is already bad enough, would become intolerable This is a hugely important issue.” —Lord (Nigel) Lawson, former Chancellor of the Exchequer “David Marsh has once again placed his finger on the gaping wounds that continue to afflict the European Monetary Union While not everyone will agree with his conclusions – and a great many more will hope that he is wrong – he has built a cogent case for being very worried about the future of the single currency.” —Prof Michael Burda, School of Business and Economics, Humboldt University of Berlin “Europe is brilliantly right because it has achieved zero prospect of war, an achievement no other region can match Yet it’s also brilliantly wrong because it has tried to achieve an impossible dream: monetary union without fiscal union Marsh explains well the European mess and even suggests a solution His book is a must read for European policy-makers Even Asians may learn a lesson or two.” —Prof Kishore Mahbubani, Dean, Lee Kuan Yew School of Public Policy, National University of Singapore “A brilliant and incisive analysis of the intractable practical and political problems facing the euro and why the hopes of its founders have been disappointed.” —Lord (Christopher) Tugendhat, chairman, House of Lords EU External Affairs committee, former European Commissioner “The fate of the euro area is the most momentous public issue of our times and there is no better guide than this gripping, well-informed study by the leading expert on its genesis and development.” —Prof William Paterson, Honorary Professor of German and European Politics, Aston Centre for Europe, University of Aston “This book deserves wide discussion among harried and frustrated policy-makers I am happy that Marsh has taken up the challenge of discussing a plan to make the euro survive for the longer term Even though he exaggerates some of the difficulties, this book will have an important impact.” —Prof Niels Thygesen, Emeritus Professor of Economics, University of Copenhagen, member of the Delors Committee on Monetary Union “This precise, elegant, and humorous depiction of Germany’s unique role in the euro drama brings the reader to the central argument: without political union, monetary union is left weak or even unviable A single central bank needs a single political counterparty Marsh argues that the euro crisis will linger to the point of becoming chronic but rejects the notion of a rapid, dramatic disintegration It is difficult to imagine a pathway back to national currencies that would not entail even greater catastrophe.” —Prof Maria Antonieta Del Tedesco Lins, Professor of International Relations, University of São Paulo “A lucid and well-informed, if somewhat German-centric, account of the development of the euro crisis, in which Marsh explains, with admirable clarity, why the crisis has been so difficult to resolve Although he charts a way out, he makes clear his scepticism that Europe’s leaders can deliver on their many promises to reform Even if he is only half right, pro-Europeans should heed his analysis and warnings, and ask themselves whether the governance changes adopted to date go far enough.” —Prof Iain Begg, European Institute, London School of Economics and Political Science “This book is right to question how the EU can sort out the economic and social mess created by the euro It is a case of having a bank account with the neighbours before they have worked out who pays all the bills David Marsh tries to pilot a way through these troubles.” —John Redwood MP, Chairman, Conservative Party Economic Policy Committee “An excellent analysis of the crisis in the euro area The comprehensive diagnosis of the causes of the crisis is accompanied by a sobering prognosis regarding the prospects for its resolution anytime soon.” —Prof Simon Bulmer, Professor of European Politics, University of Sheffield EUROPE’S DEADLOCK David Marsh is Europe’s foremost chronicler of post-war monetary affairs Chairman and co-founder of the Official Monetary and Financial Institutions Forum (OMFIF), he wrote for the Financial Times between 1978 and 1995, including in France and Germany, becoming European editor, and subsequently worked in City financial institutions He is the author of four acclaimed books on European politics and money, including The Euro: The Battle for the New Global Currency (2009 and 2011) How the Euro Crisis Could Be Solved – and Why It Won’t Happen YALE UNIVERSIT Y PRESS NEW HAVEN AND LONDON Copyright © 2013 David Marsh The right of David Marsh to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988 All rights reserved This book may not be reproduced in whole or in part, in any form (beyond that copying permitted by Sections 107 and 108 of the U.S Copyright Law and except by reviewers for the public press) without written permission from the publishers For information about this and other Yale University Press publications, please contact: U.S Office: sales.press@yale.edu yalebooks.com Europe Office: sales@yaleup.co.uk www.yalebooks.co.uk Set in Arno Pro by Yale University Press Printed in Great Britain by Hobbs the Printers Ltd, Totton, Hampshire Library of Congress Control Number: 2013942358 ISBN 978-0-300-20120-8 A catalogue record for this book is available from the British Library 10 2017 2016 2015 2014 2013 Contents Preface 10 11 12 13 14 15 16 17 18 19 20 xi Introduction Unhappy family Dashed illusions The German question revisited Winners and losers A dangerous vacuum Irreparable errors The technocrats stumble A bank unlike the others The Cyprus cauldron Sovereignty – the tipping point Fear holds the key Germany’s limits The French connection The Bundesbank strikes back In Italy, more showdowns The chimera of banking union The IMF’s European conundrum Anglo-Saxon ambivalence Asia’s star rises War and peace 13 20 26 31 36 42 48 53 58 64 69 74 79 85 90 96 102 108 113 Notes Index 121 123 e u r o p e ’s d e a d l o c k president accountable to the European Parliament Voting strength would be in proportion to each country’s economic weight, and an appropriate degree of power-sharing would be introduced in a federal system with national governments, in a bid to convince citizens that power was not being transferred too far away from national democratic control Impose centralised European control of all member states’ budgets and general economic policy, including the establishment of a Brussels- or Luxembourg-based Independent Budget and Debt Authority (linked to a European finance ministry and treasury) to set binding rules for euro bloc government spending and revenues and to check private sector credit growth Transform the structure of the European Central Bank, so that it is owned by the governments – not the central banks – of countries that agree permanently to remain members of the euro; change the names of national central banks and turn them into branches of the European Central Bank in different countries; and transform the ECB into a lender of last resort for European governments, with voting power on decisions that is proportionate to individual states’ gross domestic product or net creditor positions Introduce a direct revenue-raising mechanism for European Union organisations as part of an initiative to increase the centralised euro bloc budget Lay down clear, multi-year procedures for leaving and joining monetary union; bring in new arrangements 118 wa r a n d p e a c e for European states outside monetary union (or those that choose to leave it) to allow them to remain part of the European single market and a wider European Community Introduce eurobonds for bloc-wide public sector borrowing under joint governmental credit guarantees Delay any new membership of monetary union until the above procedures have been agreed and a full independent analysis of the euro bloc’s past developments and setbacks hitherto has been made; this could be linked to a public inquiry along the lines of a ‘Truth and Reconciliation Commission’ to shed light on what has gone wrong and how matters can be rectified Improve burden-sharing, so that the current account surplus countries agree to stimulate their economies and increase inflation rates to raise demand for exports from nations under stress Enact Marshall Plan-type aid flows for countries that fall seriously behind general euro bloc living standards – provided they fully meet centrally decided economic reform programmes 10 Decide on a full-scale banking union for euro members, with supervision, resolution and deposit insurance secured by centralised European institutions underpinned by taxpayers This is a demanding list And for the reasons made clear in this book, the plan is unrealisable – at least within the next ten years Even a watered-down version of this master plan 119 e u r o p e ’s d e a d l o c k would be possible only for a smaller number of member states than there are at present, and they would need economic and political structures similar to those of Germany A smaller monetary union would be much more stable than the existing design, but progress to this objective is hazardous, since no one knows whether the risks of contagion for other euro countries are manageable So breaking through to a more settled system will be fraught with danger and difficulty Past negligence, present shortcomings, and failure to agree future responsibilities make a grand new beginning highly unlikely in the next few years The euro will continue to exist: in the coming period of an internationalising renminbi and yen, it may no longer be a truly global currency, but it will be more than merely a regional one Because the consequences are universally feared, the nightmare of a total euro collapse will be avoided, yet deadlock and discord will linger on In the course of time, and after some hardships, the euro may even become more stable: intact, but narrower and less ambitious Intoxicated by the dream of combining money and power, Europe expected to bestride the world stage In fact, as the curtain rises on a new age of western humility, it is stepping aside to make room for others 120 Notes George Orwell, Nineteen Eighty-Four, Secker & Warburg, London, 1949 J.A Schumpeter, Das Wesen des Geldes, Vandenhoeck u Ruprecht, Göttingen, 1970, p.1 Helmut Kohl, speech, Jouy-en-Josas, December 1991 Gerhard Schröder, conversation with author, Berlin, 26 April 2007 Michael Stürmer, Das ruhelose Reich, Deutschland 1866–1918, Severin und Siedler, Berlin, 1983 Heinrich Heine, Englische Fragmente, 1828 Hans Tietmeyer, speech, Aachen, November 1997 Wilhelm Nölling, Unser Geld – Der Kampf um die Stabilität der Währungen in Europa, Ullstein, Berlin/Frankfurt, 1993, pp 161–2 Jean-Claude Trichet, speech, Frankfurt, June 2008 10 Guillermo de la Dehesa, A Self-Inflicted Crisis? Design and management failures leading to the eurozone crisis, Occasional Paper 86, Group of Thirty, Washington, D.C., 2012, available at: http://www.group30.org/images/PDF/ReportPDFs/ OP86.pdf 11 ‘Strong euro hid crisis, says EU chief ’, Financial Times, 14 June 2010 12 Mario Draghi speech, Rome, May 2013 13 André Szász, conversation with author, December 2010 14 Otmar Issing, Der Euro: Geburt – Erfolg – Zukunft, Vahlen, Munich, 2008, pp 185–6 15 European Commission, EMU@10: Successes and challenges after ten years of Economic and Monetary Union, 2008, available at: http://ec.europa.eu/economy _finance/publications/publication12682_en.pdf 16 European Commission, Economic and Financial Affairs, ‘Myths and facts: Is it true…?’, 30 April 2009, available at: http://ec.europa.eu/economy_ finance/emu10/myths_en.htm 17 European Commission, Economic and Financial Affairs, ‘Myths and facts’, 30 April 2009, available at: http://ec.europa.eu/economy_finance/emu10/ facts8_en.htm 18 Jacques Delors, speech, Brussels, 28 March 2012 19 See, for example, Jean-Claude Trichet speeches in Hamburg, 13 May 2004; Amsterdam, 10 October 2004; Zurich, 30 March 2006; London, 29 November 2006; Frankfurt, 15 April 2008; Brussels, 16 May 2008; Munich, 10 July 2008 121 notes 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Peter Praet, speech, Frankfurt, 15 June 2012 Vítor Constâncio, speech, Athens, 23 May 2013 Mario Draghi, speech, London, 26 July 2012 Mario Draghi, speech, Shanghai, June 2013 Karl Otto Pöhl, conversation with author, Frankfurt, 29 June 1989 ECB analysis on household wealth, April 2013 Jeroen Dijsselbloem, interview, Reuters, 25 March 2013, available at: http://uk.reuters.com/article/2013/03/25/uk-eurogroup-cyprusdijsselbloem-idUKBRE92O0IL20130325 Edouard Balladur, Le Monde, 21 August 1992 Ottmar Issing, remarks at conference, Hamburg, November 2007 George Soros, ‘Germany’s choice’, Project Syndicate website, April 2013, available at: http://www.project-syndicate.org/commentary/a-simplesolution-to-the-euro-crisis-by-george-soros Laurent Fabius, conversation with author, Paris, December 2010 Otmar Emminger, Letter to Johann-Baptist Schöllhorn, Frankfurt, 23 December 1970 Karl Otto Pöhl, remarks to Bundesbank council, Frankfurt, May 1981 Elisabeth Guigou, Une femme au cœur de l’Etat, Fayard, Paris, 2000, p 77 Fabrizio Saccomanni, conversation with author, Rome, 26 June 2007 See Harold James, Making the European Monetary Union, Belknap Press, Cambridge, Mass., 2012 Jean Pisani-Ferry, André Sapir and Guntram Wolff, EU-IMF Assistance to Euro-Area Countries: An early assessment, Bruegel, Brussels, 2013, available at: http://www.bruegel.org/publications/publication-detail/publication/779-euimf-assistance-to-euro-area-countries-an-early-assessment/ International Monetary Fund, Greece: Ex post evaluation of exceptional access under the 2010 stand-by arrangement, IMF Country Report No 13/156, June 2013, available at: http://www.imf.org/external/pubs/ft/scr/2013/cr13156.pdf This new framework for European cooperation was proposed by a former UK foreign secretary, David Owen, in his book Europe Restructured: The Eurozone crisis and its aftermath, Methuen, York, 2012 122 Index Acheson, Dean 22 Adenauer, Konrad 75, 116 Anastasiades, Nicos 57 Andreotti, Giulio 13 Anna Karenina (Tolstoy) Argentina 98 Asia commonality of views with US on euro rescues 113 Europeans as role model 109 financial centres 112 financial crisis 108–9 savings 112 view of euro crisis 108–12 Attali, Jacques 81 austerity accompaniment to bailout actions 24, 26, 30 conditionality of OMT 51 effects of French attitude to 77 Greek attitude to 67 Italian attitude to 85, 87 loosening of possible alliance between France, Italy and Spain 78, 88 unpopularity of 65, 77 Austria 23 balance of payments 1, 28, 43, 73, 98 Balladur, Edouard 66 Bank of England 14, 33, 50 Bank of Italy 37, 87, 89 Bank of Japan 33, 50 Bank of Spain 34, 45 banking supervision 92, 94 banking union 90–5, 119 Banque de France 60 Berlusconi, Silvio 86–8 Bersani, Pier Luigi 86 Bismarck, Otto von 116 Brandt, Willy 73 Brazil 69, 97 Bretton Woods institutions 96 Bundesbank 1, 14, 27, 30, 38, 54–5, 66, 88, 94 minority position in ECB 81–2 model for monetary union 77 new role 79–84 past skirmishes 79 replacement by European Central Bank 17, 31, 32 views on bond purchases 49, 51 views on France 76 views on monetary union 54–5, 59–60 index Cameron, David 103, 104 capital controls 56–7 capital market interest rates 27, 46, 89 Central Bank of Ireland 45 central banks independence of role of 32, 33 China 57, 69, 97 Asian crisis 108–9 commonality of policy with US and Japan on euro rescues 113 economic position 108 economic structure 110–11 payments imbalances in 43 relationship with IMF 100 reserve holdings 108, 112 trade position with euro bloc 103 views on euro 57, 113 Chirac, Jacques 75 Chrysostomos II, Archbishop 56 Churchill, Winston 106 Cold War competitiveness in China 110 distortions in 39 in Germany 18, 68 in Italy 86, 89 linkage with solidarity 30, 86 opening north–south gap 28, 29, 39 in UK 104 Connally, John 106 Constâncio, Vítor 46 convergence of interest rates 46 credit crisis 40 creditor countries 55, 59, 92 conspiracy theories 26 description by Draghi 37, 80 differences with debtor countries 1–3, 10–11, 18 gaps within euro area 29, 39, 70 possibilities of leaving euro 23, 25 triple-A credit rating 73 current account imbalances 40, 70, 73, 101, 119 ECB’s neglect of 43–4 Cyprus 30, 53–7, 61, 100 Dahrendorf, Ralf 26 de Gaulle, Charles 75, 106 de la Dehesa, Guillermo 34 debtor countries 114 Asian views on 111 description by Draghi 37, 80 differences with creditor countries 1–3, 10–11, 18, 22, 26, 30, 37, 39, 46, 57, 62, 67 default 29, 30, 34, 80, 91 deflation 9, 10, 23, 39 Delors, Jacques 15, 45, 66, 82 Denmark 105 deposit insurance 91, 93, 119 Deutsche Bundesbank see Bundesbank devaluation 9, 29, 39, 61 Dijsselbloem, Jeroen 57 disinflation 18 D-Mark 1, 14, 17, 29, 60, 65, 81, 111, 115 dollar monopoly 16, 38, 108 Draghi, Mario letter to Berlusconi (with Trichet) 87–8 operational partnership with Weidmann 83 relationship with Bundesbank 79–80, 83 replacement of Trichet 37 statement on amnesia 37 statement on debtors and creditors 37, 80 statement on euro support 48–52 Duisenberg, Wim 116 Economic and Monetary Union (EMU) see monetary union 124 index emerging market economies 96, 97, 112 Emminger, Otmar 76 Erhard, Ludwig 83 euro 42 creation of 1–2 effect of problems on US and Britain 102–4 methods for solving crisis 5, 113 steering of 32 technical experts in charge of 42 true nature as a foreign currency 32–3 euro area capital attracted into 16 divisions within 3, 22 economic performance 4–5, 10–11, 28 economic policy coordination 44 foreign trade patterns 103 Franco-German differences within 77 IMF view of balance of payments crisis 98 support for 36, 59 vicious circle linking banking and sovereign debts 91 voting rights of central banks 82 eurobonds 11, 61–2, 73, 119 Eurogroup (finance ministers) criticism by Delors 45 criticism by Draghi 37 role in Cyprus rescue 57 European Central Bank (ECB) 1, 43, 45, 48, 56, 60 Asia view on 111 bond purchases 62 development phases 116 differences with conventional central banks 48–52 French views on 76, interest rates 71, 87, 89, 92 lack of political counterparty 12 limits on 31–2, 34–4, 52 links with EU and IMF in troika 97 policies in euro bloc 28 possible transformation of 118 replacement of Bundesbank 17, 79, 81 responsibilities for banking supervision 94 role as lender of last resort 118 voting powers on council 82 European Commission powers over fiscal policies 15, 59 support packages 49 tenth anniversary euro report 44 European Council 56 European exchange rate mechanism (ERM) 35 European finance ministry and treasury, plan for 117–18 European Monetary Fund (EMF) 98 European Monetary System (EMS) 76, 81 European Parliament 118 European Stability Mechanism (ESM) 59, 61, 73, 91–2, 115 European treaty 13, 33 European Union (EU) bureaucracy 42 support measures 30 exchange rate crises in EMS 81 distortions in 10, 61, 72 effects of euro on 23, 24, 27–30, 39 effects on IMF assistance 98 influence on trade 16 Italian central bank’s view on 89 outcome of Germany returning to D-Mark 67 problems from fixing 35, 37, 39 exports 10, 15, 20, 28, 70, 80, 104, 110–11, 119 expropriation of savings 54, 93 125 index Fabius, Laurent 67 Fazio, Antonio 89 Federal Reserve 33, 50, 103 Feldstein, Martin 27 financial crisis in Asia 111 trans-Atlantic 4, 10, 29, 36, 38, 40, 46, 81, 97 First World War foreign trade Asia 109, 111–12 balances 37, 45 Britain 103, 106 German trade 64, 66, 72, 103 internal euro area 15–16, 27, 64 France diversification of trade 16 economic performance 5, 18, 77 inferiority complex 77 institutional renewal of euro bloc 77–8 leadership of euro bloc 6, 15 relationship with Germany 20, 23, 74–8 traditional policies of 32 views on German monetary policy 60 Freud, Sigmund 13 German constitutional court 51, 61, 114 Germany anti-euro party (Alternative für Deutschland) 24, 65 anti-German sentiment 11, 86 benefits from euro 10, 29 claims on foreign countries 18 convergence of interest rates with Greece 46 creation of euro 21 diversification of trade 15–16, 72 economic performance 4, 10, 21, 29, 39 exposure to perceived euro blackmail 24 fears over revaluation 64–8 household wealth 55 leadership of euro bloc 6, 15 measures to alleviate crisis 11, 39–40, 69–73 neighbours’ hesitancy towards 23 opposition to bond purchases 51 parliamentary elections 62 payments surplus 1, 44 relationship with France 20, 23, 74–8 reunification 17, 73, 75, 116 savings deposits 93 Stability and Growth Pact 40 tax cuts 71 views on inflation 51 Giscard d’Estaing, Valéry 75 Gold Standard 35 Goldman Sachs 37 Gonzalez, Felipé 60 governance 1, 10, 37, 54, 78, 90, 105 International Monetary Fund (IMF) 96 Greece austerity 30 bond markets 51 convergence of interest rates with Germany 46 current account deficits 44, 45 economic performance 4, 8, 29 effective revaluation 29 entry into euro 36 national independence and economic policy 61 Grillo, Beppe 867 Heine, Heinrich 21 Hollande, Franỗois 67, 748 Huis clos (Sartre) 114 Independent Budget and Debt Authority, plan for 118 India 69, 97, 100 126 index Indonesia 69, 112 inflation 7, 38, 39, 40, 73, 119 International Monetary Fund (IMF) 96–102 Asian safety nets 110 dissatisfaction over commitment to Europe 96 growth measures initial European resistance to involvement 97–8 past surveillance work 98 relationship with Brazil, China, India and Russia 97 report on Greece 99–100 support measures in Europe 30, 49, 51, 57, 61, 97 tensions over troika 97 Ireland account deficits 44, 45 austerity 30 budget surpluses before crisis 40, 55 economic performance 4, 5, effective revaluation 29 national independence and economic policy 61 rescue measures 53, 97 role of banks 55, 92 Issing, Otmar 44, 66–7 Italy 13, 117 bond market 49, 51 current account deficits 29 diversification of trade 16 economic performance 4, 5, 7, financing needs 59 household wealth in 55 inclusion in euro 66 links with Spain and France 78 motivations to join euro 74 parliamentary elections 85 savings deposits 93 showdowns ahead 85–9 Japan central bank operations 50, 51 commonality of policy with US and China on euro rescues 113 payments imbalances 43 reserve holdings 108 view on euro crisis 108–9 Keitel, Hans–Peter 67 Kiesinger, Kurt Georg 83 Kohl, Helmut description of ‘war and peace’ 114 German strategic interests 20 mistakes over reunification 116 relationship with Bundesbank 83 relationship with Mitterrand 75–6 role in euro creation 13–14 shortcomings on reforms 18 Lagarde, Christine 100–1 Lancaster House 48 Laiki Bank 56–7 Lautenschläger, Sabine 94 Lebanon 54 Letta, Enrico 86 Luxembourg 23 Maastricht Treaty clause on banking supervision 92 German view on 54, 61–2 no-bailout clause in treaty 26, 61, 63 politicians’ perceived failure to understand treaty 43 referendum in France 66 sacrifice of D-Mark 81 summit 13–14, 17 Macbeth (Shakespeare) 113 Major, John 13, 104 Malaysia 112 Malta 82 Marshall Plan 103 Medvedev, Dmitry 56 127 index Monti, Mario 51, 86–8 moral hazard 56, 63, 94 Napoleon III 115 Netherlands current account surplus 44 diversification of trade 16 economic performance 4–5, 29 status in euro 23, 65 Nineteen Eighty-Four (Orwell) Nixon, Richard 106 Nölling, Wilhelm 30 Merkel, Angela 17 ability to remain in power 65, 115 domestic popularity 54 Law of Permanent Disappointment policies on euro 7, 13, 24, 54 relationship with Berlusconi 87 relationship with France 74–5, 77 relationship with Weidmann 80, 83 reminder to foreigners over German strength 71 Mexico 98 Mitterrand, Franỗois admission of euro miscalculation 17 death 17 links with Hollande 77 relationship with Kohl 75–6 role in euro creation 13 views on European Central Bank 76 views on Germany 18, 60, 115 monetary union 1, 7, Asia view on 108–12 banking union 94 Bundesbank position 79–84 conditions for creation of 13, 64–5, 81 debate on member states’ sovereignty 58–63 divisions within 20, 23 effects of 27–8, 30–5, 37–8, 40 effects of ECB limitations 50 fears of break-up 67–8 Franco-German differences 74–8 imbalances in 4, 11, 12 IMF role 96–7 implications of Cyprus rescue 53–5 Italy effects 85–9 measures for euro support 48–52, 72–3 motivations for 14–18 optimism on 44 plan for long-term support 117–20 Trichet doctrine on 46 Obama, Barack 103 Ottoman Empire Outright Monetary Transactions 50–2 People’s Daily 111 peripheral countries 2, 8, 11, 30, 44, 59, 91 Pöhl, Karl Otto 14, 54, 76, 83 Poland 105 political stability 67 political union 60, 70, 103, 117 effects of lack of 35 requirement for 2, 14–15, 22, 27 Portugal austerity 30 bond market 53 current account deficits 44 Delors comments on trade deficits 45 economic performance 4, 5, 8, 29 effective revaluation 29 IMF salvage mission 97 national independence and economic policy 61 rescue packages 53 savings deposits 93 pound, British 104 Praet, Peter 46 Prussia 115 public finances 9, 27, 91 128 index quantitative easing 33 regulation 90, 93 renminbi 110, 112, 120 rescue packages 9, 53–7, 58–9, 62 Cyprus 53, 56–7 procedures 30, 36 see also European Stability Mechanism; International Monetary Fund Russia 54, 56, 69, 97 payments imbalances in 43 Rutte, Mark 65 Saccomanni, Fabrizio 89 Sarkozy, Nicolas 66, 75 Saudi Arabia, payments imbalances in 43 Schäuble, Wolfgang 94, 98 Schmidt, Helmut 21, 75, 83 Schröder, Gerhard reforms 70, 77, 116 relationship with Chirac 75 views on France 17–18 Schumpeter, Joseph 14 Second World War 11, 21, 22, 23, 108, 114, 115 Singapore 108, 112 Soros, George 67 South Korea 98, 112 Spain 78, 88, 91–2, 117 austerity 30 bond markets 49, 51 budget surpluses before crisis 40 current account deficits 44, 45 diversification of trade 16 economic performance 4, 5, 8, 29 effective revaluation 29 household wealth in 55 national independence and economic policy 61 realisation of euro drawbacks 34 rescue measures 53, 97 savings deposits 93 strains on public finance 91 Stability and Growth Pact 40, 59 Stark, Jürgen 83 Steinbrück, Peer 87 stimulus 39, 71–2 Stoltenberg, Gerhard 14 Strauss-Kahn, Dominique 100–1 Stürmer, Michael 14 Sweden 105 Szász, André 43 tax revenues 9, 58 Thailand 112 Thatcher, Margaret 15, 115 Tietmeyer, Hans 27, 60 Trichet, Jean-Claude accusation against euro critics 117 background 32 demand for austerity in Italy 87 eulogising over monetary union 46 moment of hubris 33 replacement by Draghi 37 self-description as ‘Mr Euro’ 32, 117 supporting the Maastricht referendum 66 troika 30, 97–8 Truth and Reconciliation Commission 42, 117 unemployment 5, 9, 27, 70, 99 United Kingdom 48, 87, 103–6 anti-European UK Independence Party (UKIP) 104 benefits from euro crisis 104–7 coalition dissent 105 competitiveness 104 Conservative party, Europe wrangling 104 Labour party 103 leading trade partner of euro bloc 103 129 index United Kingdon (cont.) Liberal Democratic party 105 monetary mistakes by 38 opt-out from euro 13 post-Second World War status 22 referendum on EU membership 104 referendum on Scotland’s membership of UK 106 Royal Air Force 56 traditional policies of 22 view on future UK euro membership 105 United States 16, 102–7 adhesion to ‘exorbitant privilege’ 16, 102 commonality of policy with China and Japan on euro rescues 113 crisis management 102 economic policies 106 monetary mistakes by 38 payments imbalances in 43 trade position with euro bloc 103 Van Rompuy, Herman 37 Weber, Axel 82–3 Weidmann, Jens 79, 82–4 Weimar republic 115 Welteke, Ernst 83 World Bank 96 yen 112, 120 Yugoslavia (former) 54 130 ... is the author of four acclaimed books on European politics and money, including The Euro: The Battle for the New Global Currency (2009 and 2011) How the Euro Crisis Could Be Solved – and Why It. .. system being inseparable from the society behind it. 2 Both before and after the Maastricht summit, the Bundesbank and other central banks in Europe, such as the Bank of England, subjected the single... University of São Paulo “A lucid and well-informed, if somewhat German-centric, account of the development of the euro crisis, in which Marsh explains, with admirable clarity, why the crisis has been