The letters page of the FT is often pretty interesting. Today's is better than most. Several of the submissions are well worth a read (John Griffiths on the scandal of corporate remuneration, for example) but the most interesting comes from Olaf Dreyer of Hamburg.
We've written here before that one of the reasons we assume the eurozone will hold together for longer than seems possible today is that its main beneficiary is Germany. That's because the euro is a significantly weaker currency than a standalone German currency would be, something that has been a huge driver of Germany's recent export success.
But Dreyer notes that Germany has benefited in several other ways too.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The most obvious point to make is that "because Germany is perceived as safe, the interest rates on German bonds have reached historic lows". So servicing German debt (yes Germany does have debt to the tune of well over 70% of GDP) is "vastly cheaper than it used to be."
Less obvious is how much money Germany has made out of ECB bond-buying. In the first part of this, the ECB bought up €200bn of southern European sovereign bonds, around half of which came from Italy. There has been no default on these bonds and the average interest rate on them has been around 6%.
The result? "Via the detour of the ECB, the German taxpayer received €2bn from Italy alone."
You might think that the knowledge of these vast advantages resulting directly from the existence of very weak states in the eurozone would make the German taxpayer want to do all he can to keep those states happy perhaps meeting Greece half way on debt renegotiation.
You'd be wrong. The problem, says Dreyer, is that "the German press is mute on this point" any discussion of it is met with "disbelief".
When I met with Nobel Prize winning economist Robert Shiller earlier this week, he pointed out that all economics is about the stories people believe: as long as the Germans believe they are paying for Europe rather than being paid by Europe, compromises are going to be tough to find.
-
M&S and Tesco among those warning of a £7bn Budget hitSeventy-nine UK retailers have written to Chancellor Rachel Reeves about possible price rises and job cuts - here is what it means
-
How much does it cost to move home under the Labour government?Home-moving costs are rising and could get more expensive once stamp duty thresholds drop in April 2025
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
