Column euroschau: no more muddling through!

After the riot at the opening of the ECB skyscraper in Frankfurt a month ago, the ECB Council will probably discuss monetary policy in a much more peaceful manner today. But even without a rampage: The Euro project is more unpopular than ever before.

By Klaus-Rainer Jackisch, HR

Exceptionally today, the Council of the European Central Bank is having its regular meeting this month. Because on the normal Thursday, the ladies and gentlemen have to jet to the meeting of the International Monetary Fund in Washington.

So you will be discussing monetary policy earlier than usual in the new Euro Tower. I agree that this time it will be more harmonious and peaceful than in mid-March. Back then, rampaging capitalism critics set cars on fire, thrown stones and erected barricades.

Even without a riot: around 16 years after its introduction, the Euro project is unpopular as never before. It is clear to more and more citizens that the euro primarily causes costs and unrest for them. Even the start was associated with a significant loss of purchasing power. Now low interest rates are eating away at the savings. In the future, old-age provision will crumble.

Europe’s politicians have failed miserably. You have not created a basis on which the common currency could develop properly. Currently the entire project is only held together with emergency measures, the consequences of which are difficult to understand. To make matters worse, the euro is now also becoming a soft currency.

The value continues to shrink

Within just six months, the value of the euro against the US dollar has shrunk by a good third. It is only a matter of time before the euro reaches parity with the dollar, that is, until one euro costs one dollar. Many forex experts expect it to fall even further. The low level of interest rates, the ECB’s penalty interest on bank deposits and the glut of money from their bond purchase program keep the course down.

Why should a non-European investor invest in euros? In the end, he gets out less than he invests. So he leaves it.

Just a few years ago, the euro was celebrated highly. He could push the US dollar down from his throne and have the potential to become the world’s leading currency. what a nonsense!

The euro is constantly losing importance

Today the currency is in worse shape than it has been in 13 years. Big investors and central banks are trying to get rid of euros. Before the debt crisis, the euro made up almost 30 percent of global currency reserves. Now it is only around 20 percent, according to data from the International Monetary Fund. The euro is constantly losing importance.

ECB boss Mario Draghi is happy to accept that. For him, a weak euro means competitive advantages on world markets. European exporters can sell their goods cheaper. The aim is to stimulate the economy and drive inflation.

Economy is not really getting going

So far, this strategy has had little success. The economy is running smoothly in some euro countries, such as Germany. In some crisis countries there are also glimmers of hope: for example, the economy in Spain is picking up noticeably, which is only to be hoped for in this battered country. But overall, the economy in the euro area is not really getting going.

A reasonable, robust value of a currency is also important psychologically. The US bank Morgan Stanley, however, paints a bleak picture for the euro: The weakened common currency currently reflects the state of the completely ailing situation in Greece. But is that worth striving for? It makes sense if a common currency is oriented towards the weakest link and the strong pay for it?

Unemployment remains alarmingly high. The extent of youth unemployment is unbearable. But Europe cannot afford any more "lost generations".

A currency that is too weak always has negative consequences for the population, which is in wages: trips to non-European countries that have become more expensive are more of a luxury problem. But a weak euro also means higher prices for imported goods. Should oil prices pick up again – which is likely – energy costs will rise.

The population pays

So the population is paying for the crisis at all levels. The culprits, on the other hand, are the real beneficiaries: the ECB’s monetary policy keeps share prices rising, a wonderful basis for large investors and banks to speculate.

It is high time to stop the muddle! In essence, the question is whether the Euro project makes sense or not. And if it makes sense, how it is put on a solid footing and who pays for it.