And here he describes in economists' terms what is a very real problem in the eurozone:
This is true both for fiscal issues and for balance of payments issues. Debtors are forced into draconian austerity, while creditors face no pressure to reflate; economic crisis, which should be met with expansionary policy, instead leads to contraction because of this asymmetry. Meanwhile, countries that find themselves overvalued are forced to deflate in an effort to regain competitiveness, while undervalued counties face no pressure to help out with a higher inflation rate — so at times of major misalignment, when moderate inflation can help, the overall effect is declining inflation and maybe even deflation.
Arthur Goldhammer addresses the political implication of this latest turn in Endgame in Europe The American Prospect 07/13/2015:
Germany’s implacable finance minister, Wolfgang Schäuble, saw weakness in his opponent and went for the jugular. He insisted on “guarantees” that Greece would keep its word, including sequestration of Greek assets in a fund under his control. No such guarantees had been demanded previously, but now Chancellor Angela Merkel, who had previously seemed less exigent than Schäuble, declared that Greece had forfeited the “trust” of its European partners. In the end she proved to be a good German but not a good European.Goldhammer notes of the last few days, "France and Italy at long last found the courage to put up mild resistance."
France and Italy envisioned the euro originally as a way of restraining a reunified Germany. But instead of limiting German power, the euro has multiplied it. Currency union has deprived member states of budgetary autonomy. The European Union was conceived after World War II to moderate nationalist tensions and animosities, but the German insistence on austerity has exacerbated them instead. Resistance to this loss of sovereignty has triggered nationalist and populist reactions across the continent, and the remarkable intransigence that Germany displayed this weekend will do nothing to quell fears of its renewed assertiveness. The gloves have come off. Even within Germany there has been shock at the absence of compassion. Sigmar Gabriel, the leader of the social-democratic opposition party SPD, fully embraced the line of his coalition partners Schäuble and Merkel, triggering a reaction by his own party’s left wing that the Frankfurter Allgemeine Zeitung described as a “shitstorm against ‘dear Sigmar.’” [my emphasis in bold]
But the leaders of both countries have made such noises before. So far, it hasn't come to any "resistance" really worth the name.
Goldhammer's piece links to this article: Christian Salmon, 'We underestimated their power': Greek government insider lifts the lid on five months of 'humiliation' and 'blackmail' Mediapart 07/08/2015.
The New York Times' Roger Cohen is also writing about the political implications of the latest deal and what it revealed about the ugly nature of Merkel's "roach motel economics." (The German Question Redux 07/13/2015) But he has a lazy version that relies on dumb ethnic stereotypes that Merkel and her party have encouraged:
... the euro was a poisoned chalice. Conceived to bind Germany to Europe, it instead bound far-weaker European countries to Germany, in what for some, notably Greece, proved an unsustainable straitjacket. It turbo-charged German economic dominance as Berlin’s export machine went to work. It wed countries of far laxer and more flexible Mediterranean culture to German diktats of discipline, predictability and austerity. It produced growing pressure to surrender sovereignty — for a currency union without political union is problematic — and this yielding was inevitably to German power. [my emphasis]
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