The single market is looking wobbly
economist.com
economist.com
I live in slovenia, and with some minor modifications we have enough electricity for our country (two factories shift to half-production, and we're there). We also don't use a lot of russian gas, but mostly rely on hydro, some coal (we even have a coal mine) and nuclear... so, no problem for us, we're safe for the winter.
But, we've joined a single market for electricity, and (to very very simplify it), all the power goes into a single "pool", and countries buy it "at an auction"). ... this means, that we will produce enough power for us, but that power will be on the market for foreign buyers, especially the ones who earn 2-3x as much as we do (monthly wages) and whose governments will add aditional taxpayer money to offset individuals prices... one of those countries is germany.
So the result will be, that instead of keeping our own, and let 'the big ones play politics, they're the ones who started this whole mess', we'll be fucked with reductions in power too.
I guess after the Nord Stream sabotage they need another issue. The whole of Europe took gas from Russia, but Nord Stream was the incarnation of evil. The press was full of Nord Stream articles and never mentioned the other pipelines.
Poland took gas well into May 2022, and only stopped after Russia demanded payment in rubles. The Yamal pipeline is still standing. Europe still gets Russian gas via the Ukraine transit pipelines.
So apparently the issue is that there must not be a direct connection between Germany and Russia, so the transit states have leverage.
What does Poland do itself? It routes the new pipeline from Norway via Denmark and the sea, avoiding transit via Germany.
Perhaps Germany should leave the EU like Britain if it is so horrible.
True, but Germany did the opposite and started buying the gas with rubles. It's no surprise that this caused some animosity.
All good things come to an end.
Also it feels like if the weather will suck tomorrow it will be blamed on germany. Where are the other countries in all this? Taking a nap?
(Ironically, it was the German economists who used to be very skeptical against the common currency and were loud about it.)
At the end of the day, the single market will only be popular if growth and prosperity are shared across the continent. If the economic periphery plagued by anemic growth and high debt burden expands, so will populist sentiments. And the economic periphery of the EU is already rather sizeable - even the former GDR could be counted in it, at least when looking at the structural unemployment and migration patterns of young qualified people.
In the US, Trump won his mandate riding on a wave of such populist sentiments from the Rust Belt. In Europe, ethno-national differences run much deeper than interstate differences in America, so the end result may be a fatal split in the Union.
The periphery is poor because it has been ruled by embarrassing governments for decades.
By the way they didn’t just join for that, so obviously saying “don’t complain! You got what you asked for” doesn’t really make sense as an argument.
The only thing I said regarding intentions is that the “Latin block” intentions portrayed above were overly simplistic.
The mechanism by which german exports sharing a currency with weaker economies makes german currency appreciate less than otherwise is not a conspiracy theory but simple, generally accepted and well understood economics.
Spain as such may not be exactly poor, but quite a lot of people are living in very subpar conditions. Andalusia in particular has a lot of visibly poor natives. Even African migrants do not want to stay there and if they manage to cross the Strait of Gibraltar, they immediately travel north to France/Britain/Germany.
Comparisons to the rest of the world are misleading. Being better off than Algeria or Brazil isn't that much of a result. Spanish people naturally compare themselves to other Europeans and the gap between the relative riches of Spain and, say, (West) Germany or Switzerland, is pretty visible. So is the fact that the gap does not seem to be closing, rather the other way round.
I agree that mismanagement is a huge part of the problem, and that it is mostly domestic. For one, the political parties seem to be enormously corrupt, on par with the Balkans.
Also most germans dont own the properties they live in and their savings would last enough for maybe a month.
Anyway the idea is that there are issues everywhere in europe you just need keep your eyes wide open. The solution is policies that benefit everyone.
Also i doubt spanish politicians are that corrupt. Or indeed any within the eu. There is corruption in the eu and even germany but nowhere near that level.
And remember that many German motorways still have no speed limit. Hitting a pothole at 250kph is not fun and as such they need to be maintained to high standards.
And when there's a fair rental system with restricted prices there is no need to own property. Not sure if Germany has this but I know Austria does and Vienna is thriving on it.
If germany would build them right and with quality in mind the first time they wouldnt break so often.
Not sure where you can reach 250kph if most of the autobahn is under repairs.
But speaking of driving in germany i found the constant tailgating and the general aggressiveness and flashing similar to east europe 10 years ago. Horrible driving culture.
But yes we can all agree belgian roads are in a league of their own. Suppose that makes belgium poor?
I am new to this game but from what i gather is that any country that has a visible issue is poor.
Maybe germany is poor because it cant afford gas? A german minister was complaining that american lng is too expensive for germany. Also renting and the government stepping in to keep rents at a low price sounds like poverty and socialism to me. Not a good sign.
Yes they do. In the Netherlands there's a lot of maintenance going on. Once on a trip to my workplace at the time (75km away) I counted 12 individual speed restrictions due to roadwork. I constantly had to switch between 120, 100 and 70kph. Most of it happens during the night though. I guess Germany doesn't always do this.
> Also renting and the government stepping in to keep rents at a low price sounds like poverty and socialism to me. Not a good sign.
I personally like socialism and many in Europe do. The richest countries have the best welfare systems in general (like Scandinavia). Holland itself is an unfortunate exception with its Anglo-Saxon liberal model.
It's becoming more important as the housing market is out of control and buying a house is near impossible now on a modal salary. Regulation keeps pricing fair to those who need it. It's not a sign of poverty but of the systemic choices we make.
> But speaking of driving in germany i found the constant tailgating and the general aggressiveness and flashing similar to east europe 10 years ago. Horrible driving culture.
This is something we do agree on :) I try to avoid driving in Germany.
Very annoying when stoned!
Which cultural problems exists that keeps the periphery poor? I would like to argue that the cultures of the periphery are what will attract people and customers and what will allow the periphery to develop.
The main cultural issues that keep the periphery poor are those stemming from the “core”. Always shitting on the south and east is what keeps those regions stagnating. What upsets me is that they turn the other cheek instead of slapping right back.
Of course the Italians can’t take their responsibilities because of… pizza? Super Mario? The godfather?
I don't understand how the shitting, and slapping right back is economically relevant. How is it preventing a country or a region from picking a market and becoming a global leader and thus earning high margins? E.g. people have been dissing China's product quality for ages and yet that hasn't prevented China from improving.
As a side note, it shouldn't be an economic disadvantage that Germany exports 30% to the European periphery. Cars are a competitive market with French, Korean, Japanese and American offers. The periphery should be able to make back much more if they specialize in products of a high-margin market. E.g. if I were a politician, I would go all-in on medical research and try to develop some world-leading equipment or cures.
People governed by politicians with suboptimal characteristics don't necessarily get to make decisions with perfect information, or to enjoy a voting system where votes have equal weight and reflect popular sentiment.
A sufficiently corrupt system can self-sustain for many years. With enough indirection and few votes, people have correspondingly increasingly limited input into their political decisions (or the indirect decisions of their representants).
I still remember visiting the country in 2000, and even though the lira was weak, the overall atmosphere was much more lively, optimistic and vibrant. Contemporary Italy feels worn down and without hope. Too many young people with diplomas have simply fled.
I get the same vibe in Spain, by the way, and in many cities of the former GDR, which is actually part of Germany. Dresden is fine, but Hoyerswerda, Chemnitz or Zittau are semi-deserted and feel distinctly "over": no future for them, only slow decay. The local political scene reflects that: the anti-system AfD gets plurality of votes, just to stick it to the "elites".
Then it took 40 years of obscene governments to bring it where it is now.
This only follows from the first phrase if you assume that one and only one thing can slow Italy.
Spanish economy may be nominally big, but random folk in the streets do not seem well off. The contrast to, say, Austria or Denmark, where most of the population seems to live just fine, is big.
My friend, a nurse in Madrid, makes less than 1000 euro net. She and her son live in a small Franco era apartment where one of the tiny rooms does not even have a window.
That would be unthinkable some 20-25 years ago. Spain back then was, relatively taken, much richer than any post-Communist country and your living standard would have gone measurably down if you moved from Spain to Czechia.
But that still doesnt mean Spain is poor. It just means other countries progressed. And many times its the progress and growth that matters as opposed to stagnation which feels bad. The reason i mentioned that eu countries are richer than others is to put things into perspective.
Europeans are used to growth and thats the issue, there isnt any as of recently. Its just germany flouting its economic dick in everyone’s face while the rest of the eu has to follow rules that dont benefit them.
IDK what do you mean by "natural state". There are too many counterexamples. Ireland or Norway used to be comparably poor countries in the early 1900s, Slovakia was seriously underdeveloped etc. What is the "natural state" of Spain in your opinion? An Arab colony, a center of a huge empire, or a military dictatorship? The country has gone through so many iterations during its existence.
"Poor" is a word that has two meanings. No one in their sane mind would call Spain absolutely poor, like Niger or Afghanistan is. But relative poverty is psychologically damaging too. If other countries progress faster than you, you are slowly moving towards the end of the wealth distribution in your common club. And people don't like that.
But in the common market with a shared currency they are able to keep the cost of their goods artificially low due to other countries absorbing the demand for the currency.
So where Germany wins, you can guess that other countries lose.
Note that the Economist is British.
Most of the european resentment comes from that fact. Most southern european countries were taken for a ride during those negotiations, and have paid (and continue to) a steep price.
I was a strong believer in the common currency but after reading about it for a while I'm not convinced it was a good idea anymore - if you're anyone except Germany or France.
Paul Krugman wrote at length about why that was a mistake, and he was 100% right about it.
Edit: cheap Russian gas + high productivity + political stability + undervalued currency (the Deutsche mark would have been way stronger than the euro) is what fueled German dominance in Europe. Italy/France/Spain/Greece/Portugal all struggled with varying degrees with low productivity, political instability (apart from France) and a currency that was too strong for their macro-economic fundamentals.
Ultimately, Germany succeeded better because they acted better and more productively.
>President François Mitterrand argued for the single currency because he hoped to bolster French influence in an EU that would otherwise fall under the sway of a unified Germany
https://www.economist.com/leaders/2012/11/17/the-time-bomb-a...
The Economist in the 90s was pro single market: https://www.economist.com/leaders/1997/03/13/single-market-s...
So if the UK had joined at the inception, it would have started as a common currency, but when the UK decided not to join, it reverted to the preferred form of some of the other members, namely the "single currency".
I imagine that the rules would have been different with a common currency, possibly with the national currencies not replaced, and still operating in tightly tracked bands; but I guess the UK fate there was written when it dropped out of the ERM as part of "Black Wednesday", caused by it entry peg being overvalued.
So a common currency may well have allowed for more north vs south flexibility...
Most voted for it.
If you're in a vacuum chamber that's your problem.
Of those who voted, a very small majority voted for it. By no means most British voters voted for it.
A reprise of the vote now would not secure the same outcome.
Hmmm....
That just means factual things are being reported and people don't want to confront reality.
It is actually amazing that it is still relatively in the same shape despite of all the polarization in the world.
HN has a strict bias for attacking Economist because they tend to take positions on things HN doesn't want to confront (anti-EU in this article). My honest view of this place. So you see attacking Economist rather than actually debating the talking points, quite a pattern.
[1] https://www.economist.com/leaders/2004/05/06/resign-rumsfeld
Geopolitics doesn't unfold at the pace of the 24 hour news cycle. Correct theories can play out in days, decades, or centuries. 10 years is a flash for these types of topics. Gloating that someone else was wrong on that time frame for Geopolitical events is not nearly as clever as it seems.
"The European Union, on the verge of breaking up since 1993"
After improverishing other European countries by pushing to them the IMF-style neoliberal loans after forcing them to bail out PRIVATE German banks in those countries back in 2008 and then blaming the people of those countres for 'being lazy', they will be scarcely motivated to help Germany that way.
Especially considering how German industry's competitiveness hangs on other countries' industries being weaker, bringing the Euro down to keep German exports competitive.
This is a chance for all the other European countries in recovering their industries back - German industry shutting down means that domestic and foreign markets that those industries were dominating will now be open to other European countries. Couple this with the Euro going down and making European products more competitive, you can understand that why other countries are not so enthusiastic in bailing out Germany.
I find this kind of insulting to Germans actually, since the energy prices were already high to begin with in Germany and the personal wealth of the lower 90% is actually so low that it is not hard to imagine how quickly society can collapse after the government has set so much money on fire just because they can.
The problem with this "protective shield" is not that the intent is unjustified, but it comes way too late and I don't think it is going to help for long. I am honestly not sure there is a solution at this point anymore. They print money to dampen the price hikes, therefore increasing prices/devalue currency, therefore they need to print money.
Peter Zeihan also has quite a different perspective.
> those in Europe’s biggest economy will be able to behave as if not much is going on
It seems like the shut down of the Nord Stream will have a big impact on German manufacturing. I'm not sure how they'll be able to "behave as it not much is going on".
> ... Thus, as the pandemic raged, a novel form of European solidarity was agreed in the form of a €750bn bail-out fund, Next Generation eu (ngeu). The money is a form of redistribution: it is borrowed by the eu, but will in effect be paid back by its richest members while being doled out to its poorest. This gave fiscal capacity for southern Europeans to stimulate their own economies in the recovery.
I can't imagine something like this is on the table now. Germany's balance of trade, peaking at 2.5 trillion euro in 2015 is now almost zero. That's fine for a country that issues its own currency, but not one like Germany that doesn't. The days of German largesse are in the rear-view-mirror now. Europe will need to find a way to cope without its economic Willy Wonka.
https://tradingeconomics.com/germany/balance-of-trade
Also, the title in the article is:
> A German aid package revives calls for solidarity with poorer EU countries
which is not as sensational as the HN title.
The imbalances between the rich provinces and poor ones are much more than in the EU.
Except it's not a like foodbank; it's literally a market and this is the cost of markets and the reason many socialists oppose them.
This is anything but a free market, and the consequences thereof. Actually a very good analogy for NGEU program.