Euro exit could benefit Germany says Hans-Werner Sinn
Interview with Hans-Werner Sinn, Irish Times online, 07.05.2013
Influential economist says ‘Germany can exist without the euro’
Economist Hans-Werner Sinn said Germany should help struggling countries leave the euro
Germany would have nothing to fear and much to gain from exiting the euro area, according to influential economist Hans-Werner Sinn.
That claim by the outspoken Prof Sinn, head of Munich’s Ifo institute, is likely to put wind in the sails of Germany’s burgeoning anti-euro political party, Alternative for Germany (AfD).
“Naturally Germany can exist without the euro. The exit horror stories painted are all overblown,” Prof Sinn told Die Welt yesterday.
“In particular, it’s not true that the export industry would collapse.”
The economics professor said it was important to challenge mainstream thinking in Germany that, cut loose from the euro, a new deutschmark would rapidly increase in value, prompting a drop in sales of more expensive German products and a rapid economic slowdown in Europe’s largest economy.
“A bit of an increase in (currency) value would do Germany good because the cheap imports would more than balance up the worse export business,” he said.
The Munich economics professor suggested the Bundesbank might mimic the Swiss central bank, which intervened on currency markets to ease exchange rate pressures by swapping foreign sovereign bonds for Swiss francs.
But anyone who thought Germany’s most outspoken economist was, with his remarks, joining the ranks of the new AfD was in for a disappointment.
Prof Sinn indicated that he was arguing only hypothetically that a German exit was possible. He suggested instead that other countries should depart the bloc – with Berlin helping them out the door.
“Germany shouldn’t leave the euro for political reasons because the euro is a central European integration project. If a country can’t deal with the euro because it is no longer competitive then it should leave . . . and Germany should stop keeping them in the euro with loans that will never be repaid,” he said.
“Greece would already be over the hill if it had gone bankrupt and departed,” he added. “It would have been relieved of its debt burden and, with a devalued drachma, have regained its competitiveness.
Meanwhile, former German finance minister Oskar Lafontaine has said the euro is “leading Europe to disaster” and criticised German “hegemony” in Europe.
Mr Lafontaine, friend- turned-foe of ex-chancellor Gerhard Schröder and former head of the euro-critical Left Party, said the worsening euro zone economic situation was “putting democratic structures ever more in doubt”.
“The Germans have not yet realised that southern Europe, including France, will be forced by their current misery to fight back against German hegemony sooner or later,” said Mr Lafontaine in remarks on his Left Party’s website.
He criticised the austerity policies of Chancellor Angela Merkel, whom he said would “awake from her self-righteous slumber” only after Germany itself became a victim of the crisis.
The 69-year-old political veteran stood down as Left Party leader for health reasons and announced last week that he would not be a front-runner in next September’s general election.