I had expected a sharply worded, highly controversial treatise on the euro and the eurozone. In a fast 120 pages, I expected new directions, new insights, and harsh accusations. But that's not what Europe's Deadlock is. It is instead a very competent, very quick history of the euro and what ails it.
We all see the headlines and the stories daily. We know southern countries suffer because they can't devalue. But while it is easy to say being in a common currency removes flexibility to act for your country, Marsh rightly points out the chaos created by weaker countries devaluing at will, bankrupting vendors in other nations. An example is the Italian lira, already nearly worthless, added more zeros after the decimal point when it devalued by 30% in the early 90s. The euro crisis is reminiscent of the gold standard, where individual countries could not bend the situation to their own advantage.
Nor is it any secret that instead of using their admission to the euro as the opportunity to rationalise their institutions and regulations, Ireland and the southern countries brandished it as proof of their merit. Their narcissistic selfishness is costing everyone in Europe today. Marsh barely glances off that image.
The recommendations at the end are futile - things like full political union. Forgetaboutit. These are enormously proud countries, many of the postage stamp variety. They will give up nothing. Nor would any other in the world. Marsh acknowledges his recommendations are "demanding."
So we are left with is a competent history, right up to the Cyprus banking disaster, but really not much else. If you haven't been following the rise and fall of the euro since inception, this book is a fine refresher.
on 16 September 2013
This book is a good read and short at around five hours reading. As the title suggests, this book is not a polemic putting forward a particular criticism or solution, but more like an exasperated insiders view of the messy reality. The book reflects in a very realistic and believable way, almost to the point of being jaded, the fudge and compromise nature of the way the Euro zone is holding together. The author reveals how the reality is very messy, with political imperatives impinging upon economic decisions. A strength of this book is that Germany's role is put firmly centre stage, which makes David Marsh well placed to tell the story. His snippets on what certain key actors in the drama have said and thought adds atmosphere to the dry bones of the story.
He describes very well what seems to be the central knot of the matter; that, in being inside the Euro zone, Germany benefits from a weaker currency than its own imports and exports would dictate, therefore exaggerating its creditor position. The opposite is true of the southern European states experiencing difficulties. Overlaying an American United States model would suggest that the surplus countries should allow strong wage and price inflation at home and also send out transfer payments, to diffuse this disequilibrium. But Germany's history and understandable reluctance to subsidise spendthrift foreigners further makes this unattractive. So the disequilibrium remains and a series of fudges and incremental crisis solutions keep kicking the can down the road. The book hints at how this disequilibrium is instead dissipated (as well as from the more obvious official rescue packages) through German banks buying assets and bonds in the southern countries. This was one area where I would have liked more detail.
An important dimension to the Euro zone story the author discusses is the behaviour of Germany in the early period of the Euro. During this time Germany was battling through her own issues of reunification and a drive to improve the flexibility of her labour markets. The author alleges that the German establishment neglected to challenge the profligacy (which partly took the form of buying German cars etc.) of southern Euro countries while it was happening. The conflict between the moral tone Germans are prone to take towards their less prudent and industrious neighbours, and the benefits Germany gains, through obvious and less obvious devices, from her neighbours imprudence, is a theme which comes across well in this book.
All in all the title and the book provide a depressingly believable account of what is likely to happen and not happen in the Euro zone. For those well up to date with the subject, this book will be little more than revision. For the rest of us it is an efficient guide to an important subject.
on 8 November 2014
A short, readable, polemic, which argues that five years of continuous crisis management have not only failed to resolve the Eurozone’s problems, but actually made them worse. ‘Constructive dialogue has collapsed and the potential paths out of the impasse are blocked by indecision and incompetence at the top.’ Strong stuff, and the programme outlined (p118-119) may be ‘unrealisable’, but more movement in the general direction outlined is taking place than the author recognises. Pity not more statistics and graphs of trends (including euro/$ exchange rate changes over the past 20 years) would have helped. It is an open question whether the ‘euro crisis’ is largely a media generated storm, although the nightmare of national and international debt mountains (much of it ‘mis-sold’?), and the over dependence on the largely parasitic financial sector certainly needed correcting. And this is, essentially, a global issue.