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News : EU Economy Last Updated: July 14, 2015 - 7:45 AM

Greece: Germany victim of euro coup again by France?
By Michael Hennigan, Finfacts founder and editor
July 14, 2015 - 7:45 AM

Angela Merkel, German chancellor, and Matteo Renzi, Italian prime minister, at the Federal Chancellery, Berlin, July 02, 2015

Here we present a contrarian view that Germany may have been the victim of a coup by France at the weekend to save the euro by breaking the rules again, in the view of the German people! — terms and conditions apply and this piece shouldn't be read as opposition to helping Greece but as a presentation of a nuanced view to the #ThisIsACoup reaction on Twitter, to the deal on a third bailout for Greece.

Germans tend to be a risk-averse people — yes, that is quite a paradox in the context of two devastating wars in the last century — in the World Values Survey which operates in over 50 countries, for 18 developed countries a question on risk showed that Japan and Germany had the lowest propensity by far to take risks and also come in at the lower end of the fertility scale, together with Russia. The average age of a German women having her first child (30 years old) is one of the highest in the world. The population ratio under 15 years of age is 13% compared with 19% in France and 21% in Ireland.

In a sample of 9 OECD countries, Germany had a share of direct shareholders (shareholder ratio) of less that 6%, compared with a ratio of roughly 25% in the English-speaking countries. The success of Aldi and Lidl discount supermarkets also point to caution as does the €2tn in ordinary savings accounts.

Simon Kuper, The Financial Times columnist, in a piece published in 2013 speculated that Margaret Thatcher’s early opposition to German reunification gave François Mitterrand, French president, an opening to demand the support of Helmut Kohl, German chancellor, for the launch of a single currency. A year before in 1988, Jacques Delors of France, the European Commission president, had set up a committee of central bankers plus himself as chairman, to explore the issue of a common currency.

In an interview conducted for a journalist's PhD thesis, Germany's longest-serving postwar chancellor had said that he would have lost any popular vote on the euro by an overwhelming majority.

"I knew that I could never win a referendum in Germany," he said. "We would have lost a referendum on the introduction of the euro. That's quite clear. I would have lost and by seven to three."

The Daily Telegraph wrote in April 2013 that the interview was conducted by Jens Peter Paul, a German journalist in 2002, the year when the Deutsche Mark was replaced by euro notes and coins, but was only published in 2013.

In it, Kohl describes adopting the euro as an emblem of the European project, which he said had prevented war on the continent. Born in 1930, Kohl's politics were shaped by his country's history in the 1930s and 1940s; his final years in power were focused on promoting European unity.

In the interview, he said: "If a chancellor is trying to push something through, he must be a man of power. And if he's smart, he knows when the time is ripe. In one case — the euro — I was like a dictator ... The euro is a synonym for Europe. Europe, for the first time, has no more war."

As for Mitterrand using the euro as a bargaining chip, a man who could be in both the Résistance and Marshall Pétain’s Vichy government at different times, knew how to play his cards.

To mollify the Germans, the architects modelled the planned European Central Bank on the Deutsche Bundesbank, the publicly respected German central bank.

In addition there would be no bailouts, no financing of governments and no common bonds — which Ireland could hardly support as it opposed tax harmonisation to protect the low corporate tax rate.

The architects hadn't provided for a severe recession but the Euro Area now has a rescue fund and an evolving banking union and on Monday Angela Merkel, German chancellor, agreed to talks going ahead on a third Greek bailout that will cost €86bn or more.

After an epic miscalculation by the Greek government that it would force big concessions from the other Euro Area member countries by leaving the second bailout expire on June 30, last Thursday Greece's new finance minister presented proposals that were mainly in line with what had been rejected in June.

The focus of the weekend marathon talks was to put in place a system to avoid commitments lapsing and a need for a fourth bailout.

Greece will eventually need debt relief but in the short-to-medium term, with low interest costs and long maturities, the priority should be a credible growth plan.

We wrote last week that Greece was Europe's star economic performer in 1950-1973 and like France it has run a deficit every year without fail since 1974 and 1975 respectively.

France didn't want a Grexit (Greece's ejection from the Euro Area) that would strengthen the control of Germany and its prudent allies, including the former communist countries, in the single currency area.

France did contribute to the solution by sending a team to Athens to help draft the reform proposals and presumably talk sense to the Greeks.

Apart from the privatisation fund, Germany provided the realpolitik on how to implement the reforms that France helped draft.

So who launched the coup d'état?  

Greece was star economic performer in 1950-1973; Budget deficits every year since 1974

Irish lessons for Greece on growing exports and investment 

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