Meanwhile, German economic policy essentially consists of:

  1) Tight fiscal policy to crush any signs of a recovery.

  2) Tight monetary policy to crush any signs of recovery.

  3) Tie yourself to some profligate countries so that you have a cheap exchange rate
   and can sell s***loads of exports.

  4) When the countries you provided vendor finance to start having trouble paying 
  you back insist that they follow 1) and 2).

  5) Wonder why everyone hates you.

  ..."It's a pulley system - you throw everyone over the cliff and let the rope
  take you higher. But eventually you reach the pulley."

reminds me of Air France 447, the people running the show initially reacted by pushing the stick in the wrong direction, they're still way behind the curve, by the time they react with sufficient force, might be too late, crash of markets, governments defaulting, countries abandoning the Euro.

So in fact it is essential that in eurozone:

1. Germany and France be saved from the worst. 2. Germany and France beat the other juvenile countries into fiscal submission. 3. The new "germanized" europe lifts itself out of ash.

Whatever people think, the whole point of eurozone is "germanization" of Europe. It's not as some people state that Germany is trying to occupy the Europe. The fact is that Europe wants to occupy Germany. Thats the whole point, the whole Europe and its citizenry would like to live in Germany.

And Germans know full well what they're doing - I'd even dare to say that they know what they're doing even better than 'mericans. Don't forget that Germany annexed DDR 20 years ago and that DDR was in much worse shape than any of PIIGS. Alo Angela Merkl along with many people in charge, grew up in DDR.

I hope we can agree that these are horrible numbers for wealthy EU countries and not the result of political choices, but primarily bad management. I mean even countries that really cannot be considered laissez-faire capitalistic like Sweden (14), Germany (19), France (29) are doing much better. Even the former eastern european states, that started at a much lower level have better rankings...

So I wouldn't say that the aim is some "germanization" of Europe, but that the reforms in Italy+Greece are just clearly necessary.

Since Italy+Greece joined the Euro, they had the cheapest access to credit ever and it didn't help them at all. Maybe the harsh reforms and austerity now isn't optimal either because it is killing the economy, but it seems it is the only thing that can work.

That's nonsense. The German welfare and pension system is really bad compared to e.g. The Netherlands and Scandinavian countries (which are doing fine economically, by the way). Besides that, Germany doesn't even have a minimum wage.

To us, Germany means: potentially bad income when you work (no minimum wage), bad income (Harz IV) when you are long-time unemployed, and bad income when you retire (compared to e.g. The Netherlands where you do not only get whatever private pension you build up, but also a decent state pension).

Citizens of EU states are free to move to and work in other EU states. So, if your point were true, we'd see lots of immigration to Germany. Which isn't the case.

And I didn't mean that these peripheral people are all looking to move to Germany and eat Bratwurst and drink Beer, while reciting Goethe and enjoying Shit German Welfare. By the way, calling German welfare bad is absurd and completely a matter of political and personal convictions. Some of our US friends here would call German welfare socialistic and dangerous (?).

There are also other reasons why people don't emigrate - language and cultural barrier is key here. Romanians and Bulgars are migrating to Italy, due to language and cultural similarities. Polish are migrating to UK - since new generations apparently speak better English than German, etc. If more people spoke German, then you would see much more emigration to Germany, hell you don't even need to migrate for the most part. Being able to get business connection with Germany going on a personal level is more than enough for one to get going.

What I mean is that New Europe would want more of Germany (or Old Europe) in their own countries. And by that I mean an judicial systems that work. Government that actually offers some services beyond employment for the unemployable and privileged. And system where hard working people are protected from scores of predators. This is the gist of problems that Europe is facing currently. As far as Greece, Italy and Spain goes - its not the same as the CDS crisis in US. The problems that led to current state of affairs have been well know for a long time, but have not been acted upon due to ignorance and systemic corruption on the part of these weak countries.

I'm sorry, but you sound like all you know about europe is what's been airing in the news for the last year. You call the spanish economy "weak", when in fact it's the 5th largest. Italy is the 4th.

Please check your facts. A few good comments about the judicial systems aren't enough to offset having an argument that stands entirely on stereotype and pulp news.

My division is not geopolitical, it is more of an cultural division. Protestant vs Catholic would be a starting point of two bigger blocks.

I haven't called Italy and Spain economically weak. However they are weak as far as civic virtues go, work and business ethics also leave a lot to be desired. When confronted with these issues people usually go and play the "meiterranean melos" card. When in reality these countries are likely just failing to cultivate a sense of personal responsibility in the citizenry and institutions.

No. The Poles migrated to the UK because only three pre-2004 EU members (the UK, Ireland, and Sweden) would actually let them in. (All other pre-2004 EU members exercised their right to impose temporary immigration restriction on new members for up to seven years), and there had been a fair-sized Polish community there since WW2. http://en.wikipedia.org/wiki/Polish_Resettlement_Act_1947

If you are worried about minimum wage, you are likely looking for work in "unskilled areas", and of course Germany isnt great for that, which the high numbers of long-term unemployment show. It probably doesnt make sense to move between high income EU countries for minimum wage work anyway, since your cost of living etc. will probably increase if you dont have localized knowledge or a social network.

This "no minimum wage" is rather a red herring, since the Harz IV income is rather high there is a de facto minimum wage, since practically nobody would work for 3€ / hour.

  Thats the whole point, the whole Europe and its citizenry would like to live in Germany

Immigration levels among the developed countries in the EU, which are shockingly low despite there being no actual barriers to transit, demonstrate this. This translates to a lack of cooperation and leadership, which many europeans agree is the true cause of all this trouble.

I couldn't understand the worldview of the Greeks, but now I realize that the grasshopper -- by its very nature -- hates the ant and always thinks he cheated.

A big part of the issue is lack of solidarity, no one trusts the government, no one wants to pay taxes, no one wants to make the hard choices. But when the government and leadership is seen as out for itself and dysfunctional and the wealthy are inoculated from pain while the average people suffer, then people think they are unfairly asked to sacrifice.

(if I may digress, some of this, sadly, is increasingly applicable to the US, including adoption of inflammatory ant/grasshopper rhetoric/posturing. There are a lot of dysfunctional poor subcultures, but also a lot of poor people who work a lot harder than middle and upper classes with little to show for it, limited opportunity to join the middle class, limited access to decent education and health care for their kids

When someone is trying to take away what you are accustomed to having, it's quite easy to persuade yourself of their moral degeneracy, whether they are 'dirty hippies', or 'fat cat banksters'. When you have interests to protect, it's quiet easy to find ideologies that make them just and necessary. Politics: A strife of interests masquerading as a contest of principles - Ambrose Bierce)

What is happening now that you object to, and what solution do you propose?

The solution is for the ECB to monetize government debt, and combine that with much tighter fiscal monitoring to ensure it isn't abused; but the ECB is forbidden by treaty from lending to governments and the German public is implacably opposed to changing this.

Greece is a country that can't afford it operations. It has no economic growth and large unemployment. It survives by borrowing money. In a "normal" situation, it would go bankrupt and its money would be devaluated. Then in several troubled years it could experience growth again because with a devaluated money you are in a better economic position to make things and sell them.

In reallity, Greece is part of the Euro zone so its money is the Euro and it has no control over it. Greece's situation is comparable to that of California (although not to the same extent).

While many economist agree that austerity doesn't bring growth, at least it stops the bleeding. Also, we "don't know better" is the general concensus. Not to mention it worked for Iceland.

Government spending isn't "bleeding"; economies are feedback systems, and changes to spending in one location directly reduces income in other areas, which results in lost productivity until the system readjusts. Adjusting the system when productivity is already low is one of the worst times to do it, because there's very little to take up the slack.

On the other hand, Greece probably needed a crisis like this in order for it to face up to its governance problems.

I don't know why you quoted "don't know better"; I didn't say that, nor anything like it, as far as I understand. Iceland is not very relevant, again, since it had its own currency; in sudden devaluation, it reduced the value of monetary wealth of its citizens massively. You could view it has a massive government appropriation of citizen assets.

Hardly; The government got itself into so much debt in the first place because of tax evasion lowering tax revenue and high government expenditure. i.e The government spent too much servicing its own people, now it needs to grab the citizens' assets back to repay it all.

The Greek economy is not fundamentally different than it was when it was accepted into the EU. France and Germany knew that then and know it now. They just want to have their cake and eat it too. They loaned money to a country that had little hope of paying it back. It's fun to say "it's all the debtor's fault" but there are two sides to every debt relationship and in this case, as much fault lies with France and Germany as it does with Greece.

Also, Iceland didn't go through the forced austerity that is being pushed upon the Greeks. The Icelandic government essentially defaulted when it nationalized the banks. There was no "We'll give you a bailout if you crush your economy through austerity programs" from the EU because Iceland is not an EU country.

Austerity only stops the bleeding to foreign creditors at the expense of the country's citizens. It does not stop the bleeding internally in the local economy. The Greek population knows this and that's why they are strongly resisting.

Yes, deflation is dangerous, but here it is the only way to get around the fixed Euro currency to lower prices.

I'm confused. Devaluation is inflation, right? You're saying that lower government spending may lead to inflation?

And you think deflation is the more desirable outcome?

I'm not disagreeing, but I haven't heard that line of reasoning before.

Normally when the government gives a whole stack of money to its citizens, the country's currency inflates. Its exports will then be cheaper to others.

Greece cannot do this; Its currency is fixed with its major trading partners. There is no way to lower prices of its exports... besides deflation.

There's two ways out of it. Quit the Euro (default on debts) and inflate the economy to lower export prices (look where that got the US, I'm starting to be skeptical of this tactic), or cut public spending, start deflation, to lower export prices.

Since in France, Germany, prices are not deflating, deflation in Greece will lower Greece's export prices. While consumers in Greece may stop spending... "Ooo my money goes up in value by simply holding it", importers in France and Germany will not stop spending "Buying from Greece is cheaper than buying from France, Germany. No brainer". They're not going to stop spending because if they stop spending money to import they also stop earning money from selling the imports to their home countries.

Lower export prices -> Increased exports. Eventually, hopefully, it will bring the country back into growth.

I think deflation is more dangerous when your currency isn't fixed with others, because then banks/companies will be able to manipulate your currency to take advantage of the deflation in the country. When the currency is fixed, there is just as much point for an importer to play with currency as US Steel plays with US Dollars. (i.e Not their business).

This is all what I think Germany is trying to make Greece do. I don't have evidence for any of it.

However I don't know if real damage is being done. Greece has import agriculture and tourist industries. Are the fields being left untendered? Is are there hotels being left half constructed?

I agree that unemployment is waste of human capital.

Perhaps the government should have just halved all there employees wages rather than laying them off?

Yes, but this is normal for Greece; leave your building unfinished, even if only cosmetically, and you pay no tax on it. A desperately needed tweak to the law is to start taxing buildings when they are actually used.