In part yes, but yes is too simple an answer. In order to gain French support for unification of the two halves of Germany (the French were very nervous and others including the Brits were none too keen) Germany agreed to the French idea of a single currency and an EU constitution. The constitution failed to gain enough public support, but the currency went ahead. That is how the currency ended up without a government and without a treasury, with only a hesitant and uncertain central bank to underpin it. There was nobody watching what was going on behind the scenes.
First the plan for one single currency at the outset of the project was unworkable. It is just not possible to link a score of diverse economies based on differing financial, social, economic and cultural realities into one, all at once. It might have been possible to reduce down to three. A D. Euro for Germany and its associates, an F. Euro for France, Italy and Spain and an S Euro for the low GDP economies like Greece, with poor tax systems and little industry. Three is not as neat as one but a good deal neater than nineteen at the outset and twenty-one with later joiners. This would have required three central banks and it might have been possible to construct a democratic system of economic governance for each of the smaller groupings.
In the event nothing like this happened and the project went ahead on the terms we all know. These favoured Germany because it essentially provided a devaluation of the deutschmark and boosted German competitiveness as it absorbed and surmounted the problems of unification. Conversely France, Italy and Spain suffered a revaluation upwards, making their industrial output less competitive. Competitiveness was made worse by a Brussels full of regulation junkies. Meanwhile the countries with paper currencies of which tourists found a fistful was necessary to buy a coffee, were left with economies which were dysfunctional. But because they were in the Euro, they could now borrow on the market on terms they could previously only fantasize about, so they did. They went on a binge and went bust.
So whose fault was that? Was it the prolificacy of the Irish, Portuguese, Italians, Spanish and oh dear the Greeks, and their lack of discipline and rigour and in some cases a reliable revenue system, and so now they must be ground down and made to reform and pay? Or could it be that those who lent money in such volume and with such abandon knew full well what the set up was and should never have left the money tap running when any fool could disaster loomed.
Chief among those who benefitted from the euro is Europe’s new power above all others, Germany. Its rise from a divided nation supported by Europe at the end of the cold war to a united power holding Europe together today, is one of history’s most remarkable achievements. But as with the rise of any power, a price is paid by others. Germany could not have done this without the euro. So Germany has a responsibility to accept it is not blameless in this mess up. It must also accept that the social limit of economic policy has now been passed in Greece and is very close to the limit in Italy, Spain and Portugal.
Germany is very good at setting out on a great road forward but far less good at seeing when it has passed the point of excess and needs to change course. I say that as one whose blood is seventy five per cent German, so I can say it with conviction. Germany now has to cut the Greek people, not the bankers and the so called investors or the politicians, but the mass of the people, a deal which stops hunger, homelessness and unemployment and it has to do it fast.
Failure will ensure that the contagion of revolt spreads from country to country. If that happens the one which will lose the most is Germany. One line of thought is this. If Germany sanctioned the ECB authorising the Greek central bank to purchase Greek government bonds, this would ease the pressure on the new government in Athens. Owning your own debt is not the same as writing it off, but the effect is much the same and it has the advantage that the creditors get paid. If not that, then think of something else. But the time for prim declarations from Germany that thrift and obligations demand austerity and through the pain happiness will come has passed.