Euro Crisis: The German Approach Is at Least Partially Correct

Structural Reform in Europe is Key for the Euro's Survival

Germany has received scathing criticism from many experts for its approach to resolving the euro crisis. Germany has been trying to: limit/reduce government budget deficits and promote large-scale structural reform (e.g., improved international competitiveness in the European periphery, create a central authority to manage Europe-wide finances with real enforcement powers against national governments, etc).

A common and vehement criticism is that, to avoid a 1930s-scale economic collapse, Germany and the core euro countries (e.g., Finland, Netherlands, etc.) must shift from an austerity approach to aggressive pro-growth policies. They're urged to: recapitalize weak European banks, create a European bank deposit insurance system, promote fiscal stimulus in place of austerity (implying a mechanism for periphery countries to borrow with a German guarantee), weaken the euro against foreign currencies, and accept some euro inflation. Structural reform (which the Germans view as a top priority) is considered of secondary importance by Germany's critics, to be addressed only after the current crisis is averted.

The hour is late. Unemployment in some euro countries is at Depression levels (in Greece and Spain, unemployment now exceeds 20 percent). The collapse of the euro and the European common market -- which would be economic catastrophes -- are being openly discussed. Further, a 1930s-style Depression could also lead to political disasters. The 1930s weren't just an economic disaster -- they set the stage for WWII.