September 15, 2011
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JOSEF JOFFE: It's a pleasure.
GREENE: So I think it's safe to say over the last two years we've heard nothing but frustration and bad news coming out of Europe when it comes to talking about the eurozone currency. Can you just step back and remind us, what was the original goal of this common currency? What were the benefits that people were expecting?
JOFFE: The original goal was for Germany, whose currency was an enormous re-evaluation pressure, and so the idea was to spread the pressure, so to speak, and submerge the deutschmark in the euro. For Europe as a whole, it was obviously, you know, it's like think about, you know, 50 states with 50 currencies. And so there was this practicality, and finally it was a kind of a philosophical thing - with a common currency we were going, you know, a long way towards eventually a more perfect union or, you know, United States of Europe.
GREENE: And was that the hope and dream of supporters of the eurozone, to end up with the United States of Europe?
JOFFE: Well, certainly not. We're still in the EU. You know, we are 27 countries in the EU and 17 countries in the eurozone. That just tells you that almost half didn't even want to get into the euro, such as a Britain, for instance, or the Scandinavians. And the Brits are now quite happy not to be in the euro.
GREENE: And you did sort of present in your writing this week of this no man's land in the middle, that the eurozone will have to make a choice whether to sort of separate again or all come together as one if it's going to succeed.
JOFFE: That's the inherent logic. As any economist will tell you, you can't have monetary union without at least a kind of fiscal union. Like the United States, where, you know, taxes and expenditures are set by a common government. That was the birth defect of this construction, where the chickens are now coming home to roost.
GREENE: And one of the other things that I read from you this week was the idea that culture matters, and what we're seeing now is there's a huge cultural gap that is being exposed by these problems.
JOFFE: Yeah, you know, you call it, you know, the northern Protestants versus Catholic Club Med. And these two camps have always obeyed different social contracts. The Germans in particular, and the Dutch, we're pretty tight-fisted and try to maintain fiscal discipline, and the Club Med countries, from Spain to Greece, went on living like they had before, which was a happy-go-lucky, spend more than you take in. And the nice thing was that, you know, why scrounge if you can borrow, because the euro - and that is kind of a perverse effect of the euro - made money much cheaper for the Greeks and Italians, and so now they could borrow at more like German rates. And that, of course, accelerated the march into doom, where we are now.
GREENE: There's the idea out there that more productive northern European economies, like Germany, might split off on their own and form a new bloc, which would end the eurozone as we know it.
JOFFE: The fear is a twin fear. One, you know, once you start unraveling this, then where does the unraveling stop? And then there's a more tangible kind of thing - if Greece goes and defaults and the banks start tottering, where will that end? It will just tear one huge hole into the European and thus the global financial system.
GREENE: Is anyone out there thinking twice about this grand experiment and saying we've got to do something else?
JOFFE: Nobody would attack Europe as such, but the carping is targeted at something else, something below that. It is we can't bail out Greece anymore. We can't just stop this. We can't put countries on the dole forever. That is where the European debate or the thrust of the critics is to be found now.
GREENE: Josef Joffe is editor of the German newspaper Die Zeit and he joined us from his office in Hamburg. Josef, thank you for talking to us.
JOFFE: It was a pleasure.
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