My new book officially launches tomorrow. Not that you can’t claim a free copy here now, and start reading today.
That’s probably a good idea given how fast my predictions about Italy’s budget battle came true.
I’ve revealed a chunk of Chapter 11 below. But first, I wanted to set some context for what you’re about to read.
The context being reality. And nothing tells the truth better than a joke.
There’s one such joke going viral on German social media. Sounds improbable, I know, but bear with me.
An African refugee is walking through the streets of Nuremberg – a well preserved medieval walled city. He fronts up to the first person he meets and says, “I would like to thank you for taking me in. For clothing me, feeding me, giving me healthcare and letting me stay.”
“But I’m not German, I’m Albanian,” the pedestrian responds.
The African walks on undeterred, and meets another pedestrian: “I would like to thank you for taking me in, clothing me, feeding me, giving me healthcare and letting me stay.”
“But I’m not German, I’m Turkish…”
The African tries once more, with a third pedestrian. “Thank you for taking me in, clothing me…”
“But I’m not German, I’m Arabic.”
“Then where are all the bloody Germans,” the African refugee asks.
The Arab looks at his watch, shrugs and says, “Probably at work.”
With two extended family members working in the German welfare system, I can tell you this joke badly understates what’s going on in Germany.
The real question now is how much the Germans are willing to put up with. Especially with the Greeks lining up for another bailout and the Italians gambling on the same.
It’s not just refugees and money. Europe wants to integrate ever more on all sorts of things. But with every step of integration, the differences and tensions between countries stand out more.
They completely disagree on things like immigration, welfare, socialism, austerity, foreign policy towards Russia, bailout powers, monetary policy, banking regulation, military power and Brexit. The divisions are not just north/south, but every which way.
The more the EU integrates, the more the tensions inside the EU rise. And because the divisions are not simple, but a jumbled mess, compromise leads to bizarre outcomes.
A friend recently completed a law course with a European lawyer who drafted key treaties and legislative efforts at the EU level. He said he wasn’t surprised Britain would be the first to leave. They’re the only country which actually abides by and enforces EU level law, after all.
It’s all too easy to see the European project as irreversible. It seems to have crept up on us slowly over time. But that is not what happened if you look closely. It is in fact a project that has been tried many times in the 20th century. And like the European currency, it eventually fails each time…
Excerpt from Chapter 11 of How the Euro Dies…
Funk, Werner and the back Delors to a German Europe
I may not be suggesting a conspiracy theory by pointing out that Europe’s loop of crisis and integration is constantly repeating. But I’m not far off given some nasty history on the topic. It turns out that the political project of the euro has a fascinating background.
Italy’s minister for European Affairs, who was rejected by the Italian President when he was nominated to become the Economics Minister, explained it all nicely in 2012. During the height of the sovereign debt crisis, Paolo Savona accused the Germans of trying to implement something called the Funk Plan via the euro. “The Funk Plan provided for national currencies to converge into the German mark’s area and this is what you would like and have partially achieved,” wrote Savona.
Now there is nothing funky about this Funk plan. It is named after Walther Funk, the former Director of the Bank for International Settlements. In 1939, a certain Herr Hitler appointed Funk to lead the German central bank, the Reichsbank. So you can imagine where the Funk Plan was designed to lead Europe. Savona reminded the Germans in his letter:
It also envisaged that industrial development only pertained to yourselves [the Germans] and that you would only be accompanied by France, your ‘historical’ ally, a solution now caused by the common European market and the single currency.
The Plan wanted other countries to devote themselves to agriculture and tourist services, something that will happen out of necessity or because of a natural ‘calling’ and they will lend skilled labour to your leadership project.
As Savona pointed out, the euro seems to be delivering the Funk Plan’s goals rather well. Boris Johnson even wrote about it in the Telegraph. The Greek economy looks to be booming from a tourist’s point of view. Outside of tourist areas, it’s the opposite.
The EU expects the Italians to sign up to the same immolation of their economy in October. Or face bond markets on their own. As the Italians see it, this is an attempt at Teutonic dominance similar to the Funk Plan.
If you’re sceptical of Savona’s accusations, I am too. I don’t think the Germans are quite so nefarious. Then again, I am German by birth and on my mother’s side. So maybe I’m part of the evil scheme.
Regardless, a return to a deutschmark zone, a monetary and economic Fourth Reich as some would call it, would be nothing new. Funk and Hitler may have failed, but it happened in the late 70s anyway.
When the first attempt at the euro fell apart, so many nations had to leave the currency snake that only those with economies similar to Germany stuck around. The problem is, they were mostly small and thus subject to German dominance. The result was known as the deutschmark zone, which you’ve heard plenty about in this book.
The 70s failure is how the so-called Werner Plan for a European monetary union failed. Was the Werner Plan a rerun of the Funk Plan? Well, Werner may be the most German name in history, but the Werner in question was a Prime Minister Pierre Werner from Luxembourg.
His plan was also for the monetary integration of Europe, but with the goal of keeping the peace instead of allowing Germany to dominate Europe. As Werner discovered, it’s not your intentions that matter. It’s where your policies get you.
So Funk and Werner both failed in their mission. Mitterand and Delors came next, with their demands for a euro. For some reason, Europeans believed that the latest euro project wouldn’t fail too. But they’re wrong. And it’s going to be an expensive mistake.
But notice something odd: These days, the euro and the EU are often presented as a way for the rest of Europe to control Germany. This is the French vision. The reason they demanded the euro after the ERM failed.
Now we hear from an Italian minister that Europe has been dragged into a Fourth Reich of a monetary union instead. Herr Funk got his way for a German dominated Europe instead of Werner’s peaceful Europe or Delors’ attempt to cheque German power. It’s odd that the similar policy of a currency and political union can be proposed for opposite goals…
Either way, Europe’s nations now find themselves locked on the Funky side of the lion’s cage with Germany. And they don’t like it.
The British, even more than the other holdouts in Europe, see their national currency and independence from foreign rule as one and the same thing. They also sensed Europe’s plan to encroach on national sovereignty via the currency: “A single currency is about the politics of Europe. It is about a federal Europe by the back door,” Margaret Thatcher said in Parliament in 1990. I’m pretty sure she actually said “the back Delors”, a reference to Europhile Frenchman Jacques Delors who pushed for the euro.
The interesting part is where this leaves the future of Europe. Europhiles are pursuing a united states of Europe to some extent, at some point in the future. They see the currency union as a step on the path towards this.
But the currency union is having the opposite effect of late. Trying to implement a federal Europe via the euro is now putting the EU itself at risk. Italy’s former Prime Minister Mario Monti summarised that the tension during the European sovereign debt crisis “already bears the marks of a psychological dissolution of Europe” and that the euro could become “a factor in this drifting apart” instead of together. The economic effects of the euro are creating those tensions.
Germany is dominating the union in precisely the way they intended under the Funk Plan, the French tried to stop under the euro, and the British warned about since the beginning.
Who will win in the end? Funk, Werner, Delors or Thatcher and the individual and separate nation states of Europe?
Find out by claiming one of the final copies of my hardback first edition of How the Euro Dies here.
Until next time,
Capital & Conflict
Category: The End of Europe