1. Heiner Flassbeck, the chief economist at the UN Agency for World Trade and Development and also a former minister of state in the German ministry of finance, was ironically the most vocal critic of Germany’s role in the current euro zone crisis.
Flassbeck, who said he had been supportive of the euro project, contended that much of the current crisis was a result of Germany’s “wage dumping”. He said Germany pursued a policy of restraining the cost of labour, which enabled the country to become extremely competitive against its euro partners.
“Now the Germans are asking others to do what Germany did (to become more competitive by cutting labour costs), but that would be pointless because Germany was only able to become more competitive because the other euro countries behaved the way they did.”
2. Asian Age – To cut a long story short, as the Euro crisis unfolds, global growth will definitely slow down. Trade would shrink and fear will rule the money markets. Emerging markets will look riskier. And money will rush to US dollar government securities, gold and/or other precious metals.
‘The choices are very, very difficult and very painful. They are painful if we take the measures necessary to stabilise the single currency; if the single currency broke up it would be catastrophic.
‘I am not underestimating the difficulties of that or the huge problem that Germany has got in giving such a pledge. But, on the other hand, if the euro breaks up that is a devastating blow for Germany.
‘You’ve got to have the whole system stand behind this.’
Mr Blair said the crisis had ‘exposed the need for reform and accelerated it’ in areas such as welfare and public services across developed economies, but he insisted that need had already been there.
Berlin has even begun looking at contingency plans for a second scenario, in which Italy and Spain are in turn targeted by the markets as their economies tank, said Der Spiegel.
A third ‘doomsday scenario’ was also being studied, the magazine reported, in which Greece defaulted completely – unable to cope with the consequences of a return to its former national currency the drachma – and dragged other vulnerable countries down with it.
The word from the boardrooms and the cabinet in Germany is this – save the euro for all if at all possible, but ultimately sacrifice those countries who cannot, or will not, bend to the diktats of Berlin, Paris, Brussels and the IMF.