Why is the euro the instrument of the German domination ?

As it is known, early elections will take place in Greece on September 20. Two of the competing parties are the weakened Syriza (its Secretary General, Thanassos Koronakis, resigned, many militants step down) and a split of the latter, Popular Unity. This group - directed by the former minister Lafazanis – openly advocates for the idea of a Greek exit from the eurozone - a Grexit - if it turns out that the price to pay to remain in the common currency is necessarily austerity. 

After the appalling agreement settled between Greece and its creditors on July 13 and the coming into effect of the 3rd memorandum, some could not but draw such conclusions. In this respect, Alexis Tsipras' surrender had at least the virtue of awakening people's consciences. Several "alternative" left-wing actors all across the continent, from Podemos in Spain to Die Linke in Germany, from Melenchon to Montebourg in the French case, try to find a way to break, at last, with the euro-austerity. 

The answers they come-up with remain varied. At this stage, the idea of putting to an end to the common currency is far less popular than that of uniting at a paneuropean scale to attempt to reverse Germany's uncompromising "right-wing" economic policy. 

The proponents in favour of the second option, who usually come-up with federalist proposals, seem to forget rather quickly what Germany owes – and not only right-wing Germany, as Merkel rules in coalition with the Social Democrat –  to the euro. Not only do they omit that the Federal Republic has become the main beneficiary of the common currency, but also that the euro places de facto the country in a center position. And allows it to consolidate its domination... even though Germany never aimed at it in the first place. Therefore, questioning Germany's hegemony within the eurozone means questioning the euro itself. 

This text, which is the translation of an article published here in July, aims at clarifying this. 

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Why is the euro the instrument of the German domination ? 

-Text initially published on July 17- 

In Greece, Alexis Tsipras' first project of associating the revival of democracy, the end of austerity and the continuation of the inclusion in the eurozone was akin to that of squaring the circle. By refusing to consider the Grexit, the Greek Prime Minister doomed his two other projects to fail. 

First, he doomed his project of reviving the Greek democracy to fail. This was clear : the result of the July 5 referendum, though triumphal (62% no), has not brought major changes. In fact, nothing can successfully set Europe on the path of a better integration of the will of the peoples. The reason of this lies in the roots of the EU. Being a transnational project, the EU aims by definition at reducing the power of the nations if is composed of. But getting over with the nations doesn't necessarily imply getting over with nationalisms, in spite of what Jean Monnet's successors –  whose minds are still stuck in the 50's – still hammer stubbornly. It does not take a genius to realize that Germany, Finland, and Baltic States were subject to an acute nationalist crisis, which peaked during the weekend of July 13, resulting in a merciless score-settling targeting Greece. However, wrecking the nations means wrecking democracy, because the first is the basis of the second, the framework in which it develops. There is not and there will never be a revival of democracy as long a the EU keeps its supranational impulse. But there will be nationalism. A great deal. 

Then, as one could easily foretell, Greece failed to achieve a "good euro", an anti-austerity euro. But this objective is as unreachable as the first. For the euro is a currency that was shaped for savers. By construction, it can only serve the best interests of the capital, at the expense of workers. The top priorities apportioned to the European Central Bank by the treaties – maintaining currency stability, containing inflation –  epitomize the phenomenon. The passion for low inflation rates is, as a matter of fact, far from being disinterested. Inflation is, indeed, a powerful redistributive mechanism : it reduces the value of the debt (in which the rich invest some of their savings) as well as the monetary value of savings, and stimulates wage and price increase. For that matter, it is quite astonishing that a "radical left-wing" party like Syriza didn't see the irreversible incompatibility between the inclusion to the eurozone and its political agenda targeting social justice. As the existence of the euro forbids to implement a proper monetary policy and deprives the states of their budgetary autonomy, only one economic policy instrument remains at their disposal : the cost of labour. When the grasp on currency and the grasp on budget are lost, the only remaining freedom is that of driving wages down. Endlessly. 

Finally, these events acutely revealed the hegemonic grasp Germany has acquired on the European edifice. But considering the distribution of powers within the Community institutions suffices to glimpse it. The eastward and northward shift of the Union's centre of gravity, directed by the Federal Republic, is spectacular. Germany itself rules over quite a few institutions. For instance, it has been apportioned the presidency of the European Bank of Investment (EBI) and the directorate general of the European Stability Mechanism (ESM). Most importantly, it rules over the European Parliament : its President, cabinet director and Secretary General are German. And Martin Schulz, as his recent Anti-Greek sallies have highlighted, defends more the interests of his country than the interests of the institutions he is in charge of and his own social-democrat principles. 

As for other institutions of the Union, they are almost all led by officials from Germany's tightest zone of influence : the German-speaking Polish Donald Dusk is President of the Council, while the Luxembourger Jean-Claude Juncker was imposed as President of the Commission. As regards the Eurogroup, it is presided by the Dutchman Jeroen Dijsselbloem. The latter has just been rewarded with a new mandate for the torments he inflicted on Greece for weeks and his flawless support of the German viewpoint. Dijsselbloem was preferred to a Spanish candidate, as it is true that North-East eurocrats mistrust their latin homologues. The evidence : when France hardly succeeded in imposing Pierre Moscovici, no matter how docile, he was cautiously gifted with two chaperons from Western Europe (Vladis Dombrovskis, Latvia) and Northern Europe (Jyrki Katainen, Finland). Finally, only the ECB is led by an Italian. But his actions during the last two weeks basically consisted in purposefully bankrupting the Greek banking system by freezing the ceiling of the emergency liquidity expected to fund it. This foreshadows that « super Mario » deserves the spiked helmet he was awarded with a couple of years ago by the German tabloid Bild Zeitung. 

So, in a nutshell, an austerity euro and an omnipotent Germany : these are the pieces of data of the equation. Only one task remains : identifying the link between the two, by showing how much the common currency helped Germany to develop its hegemony over the Union. 

Two events of the early 90's gave this country the disproportionate influence it now has within Europe. The first was reunification, costly process characterized by the fact that it was partly paid by Germany's European neighbours. This reunification produced the double effect of setting the country at the centre of the continent and improving its competitivity, its exporting industry and its  trade balance  by re-opening its hinterland. 

The second event took place when France attempted to limit the consequences of the first … but produced the opposite effect. This event is the creation of the euro, which was supposed to confiscate the Mark to reunified Germany and ground the country into the euro. Alas, in lieu of the expected containment, we provided our big neighbour with a weapon it now uses to tame others. 

In fact, the confiscation of the Deutschemark was an epic failure. On the contrary, the euro was at once a German currency. A renamed Mark, in short. This is the condition which was necessary for the Federal Republic to use the euro. Still, the euro had to remain, as has been noted, a steady and strong currency, a currency for old savers savers to maintain their retirement capital. Actually, the root principles of the euro are precisely the ones allowing to tackle the great German problem : the demographic problem. One can hardly imagine the extent to which the economic choices of this country - choices imposed to all users of the same currency - are determined by constraints linked to depopulation. The obsession for debt defeasement? This is to make sure that the capital invested in the public debts is never eaten away by a default. The obsession for budgetary rigour? This is to guarantee that the debt remains sustainable even if the working population decreases. Germany's use of the euro to achieve huge trade surpluses at the expense of its partners? This is hoarding used as a means to pay the German retirement pensions of tomorrow. And all is in the same vein. 

This is exactly where the problem lies. Obviously so strongly orthodox a conception of the currency policy can't be suitable to all countries. Thus, if the common currency is maintained, Germany will keep increasing its surplus and Greece its deficit. 

Besides, it is now clear that there will not be any massive transfer in the future. In any case, not gracefully. It's precisely to postpone the use of this expedient some more that Merkel keeps – by imposing inapplicable agreements – funding Greece even though everyone knows that it is insolvent. By maintaining the illusion that Greece will pay its debts, Germany continues convincing itself that it won't have to pay. Since the beginning of the Greek crisis German leaders have kept repeating to their taxpayers that the rescue of Greece would be painless to them. But this cannot work, and the lie is about to be discolsed. If Greece if being financially tormented this way, it's only to maintain the illusion some weeks more, maybe some months more. Hardly more. 

This is the crux of the problem : even by imposing austerity and the ordoliberal order all over Europe, by using the common currency as a tool of oppression, by striving to build a "disciplinary eurozone" around it, Germany won't be able to avoid making concessions. It won't be able to maintain for much longer the privilege of a euro designed for Germany while refusing to embrace its drawbacks, that is, to pay for others. The extreme nervosity palpable on the other side of the Rhine, the incredible aggressiveness of some leaders and of the press all suggest that the Germans are starting to realize this. For the time being and by opposition to a deeply rooted legend, Germany's integration to the eurozone has brought more benefits than costs to the country. But now, the IMF asks for a 30-years moratorium on the repayment of the Greek debt. As for the ECB, even if it has lastly turned into an executor of the dirty work of the Eurogroup. The latter, feverish, now admits the "unquestionable" necessity of debt relief. In the foreseeable future, it is almost sure that, as it is put in a well-known expression and for the first time since the common currency exists, "Germany will pay". France, too, for that matter, and several other countries after them. But on no account will we pay for Greece. Actually, we will pay for the euro. 

At all events, it is hardly useful to wait meekly for Germany to turn into a "more solidary" country. Or to beg it with a silky voice to give up its "national egotism". Germany will not do so. However, the moment has maybe come to inform Germany that its beloved euro is now beginning to work against its national interests. Many have already understood this. That's the case of Wolfgang Schäuble, who declares he rather likes a Grexit to a restructuration of the Greek debt, and seems ready to venture to put an end to the myth of the irreversibility of the euro rather than stretching out his hand –  and the German chequebook –  to the "lazy Greeks" and other olives chewers. 

Others had already come up with similar ideas before him. Some had even developed a more thorough analysis than his own. In 2013 the economist Konrad Kai, advisor of the German minister of finance (called Wolfgang Schäuble: well, well!), declared in the newspapers Die Welt that "Greece [was] a bottomless well, as no one has ever predefined a limit of what Greece can swallow. The debt ratio increases because, among other things, the economy of the country shrinks woefully". Then he went on adding : "Germany cannot save the Eurozone (...) if we want to get over with the monetary Union, the Northern countries are the ones we should begin with. And if it comes to that, then Germany must leave the euro". 

Clearly, if this happened, if Germany did leave the euro, the whole zone would dissolve itself. "How awful!" would be the answer of those endoctrinated, and that of other euroreligious, but first and foremost of the caciques of the main French political parties. "Luck!" would be the sigh of relief of all others, those who voted "no" in France in 2005, and those who did the same in Greece in 2015. 

So please, distinguished Germans, keep doing what you are good at : being harsh, egoistic and self-centered. And, in this line, be the first to leave !