Will Germany Return To the Deutsche Mark?

One Deutsche Mark

The latest developments in Greece and the grim prospect of other countries entering the same economic decline as Greece has fueled a lot of rumors recently as to what Europe will become as a result of this instability.

In the Parliament of Greece, while people were fighting the riot police in the streets of Athens, protesting the austerity package that would make their daily life a lot harder, the lawmakers and the ministers outlined the fact that a collapse of Greek economy would not only affect Greece itself but it would send a shock wave that would be felt throughout the European Community.

Economic experts consider that one of the possible means to avoid a serious jolt of the entire European establishment would be for Greece to pull out of the Euro-zone and revert to its national currency, drachma, which would probably bring Greece back to the life standard of its Balkan neighbors, but would take the pressure of the common European currency.

Euro bank Notes

If Greece does not return to the national drachma, then the developed countries in Europe will have to bare the brunt of seeing it through the crisis, which in turn would make a lot of people in the Western Europe skeptical toward Euro, as they would feel the support for Greece, and possibly for Spain, Portugal, Ireland, or Italy in their personal life standard.

This situation prompted the famous German newspaper Der Spiegel to advance two possible scenarios resulting of the difficulty Europe faces now, and of those yet to come.

The first scenario, issued for the Spiegel by the German Institute for International and Security Affairs, takes into account the idea of creating a “hard-Euro-zone” of the countries that can support Euro, such as Austria or the Netherlands.

That would create two euro-blocs: a northern bloc, with countries that can control inflation, and can implement budget discipline, and a southern bloc with countries that devalue their currency whenever they seem fit.

Euro-zone Map

The second scenario is of Germany actually returning to the deutsche mark. Der Spiegel quotes the same source as saying that by this the Euro-zone would be de facto dismantled and would trigger the return of all the other nations to their national currencies.

If that were to happen, the national economy of Germany would be deeply damaged, and the cost of issuing the new currency would be very high, the study warns.

Another consequence would be that the German exports would have to suffer, too, since the German goods would be more expensive abroad than they are now.

The damaging of the export policies would probably cause a high rate of unemployment for the German workers.

The return to German mark would be a return to the situation before 2004, when Euro became common currency, with the American dollar dominating the markets, but with the difference that a new competitor is on the market now: China. Without a common economic policy, the European countries stand no chance against the Asian contender.

So, whether they like it or not, it seems, from the Spiegel analysis that the Germans are stuck with the Euro, and so are the rest of EU people, in spite of the fact that polls show a more than 50% distrust for the common currency.

The Spiegel’s analysis seems quite reassuring for those who want the Euro to stay in business, so to speak, but is this the end of discussion?

There are press reports in the British media that say that the German national bank of Germany has already been ordered to print deutsche mark bank notes.

Euro Skeptical Prediction

Express.co.uk quotes the Frankfurt Algemeine Zeitung to say that more than 70% of the Germans consider that Euro has no future, and that the effort to bring Greece’s economy back to life will sink the European currency. And such dire predictions are not only made by Germans, as we can see in the Telegraph’s headline above.

The same Express.co.uk says that “rumors are rife in Germany” that the Bundesbank has been order to print back the national currency, as a contingency plan.

In December 2010, a Deutsche Welle report was less alarmed than the one published by Der Spiegel by the prospect of Germany exiting the Euro-zone.

In the event Germany would return to the mark, it said, there are many specialists working for the Bundesbank who introduced the deutsche mark in the Democrat Germany in the 1990s and then the Euro in the united country, and who would know what to expect, and how to get the job done.

Greek Protests

Not to mention that there are some 14 billion marks still in use in Germany, which would make the costs of reprinting less painful.

As for the German citizens, they would be very glad to see the products coming from the other countries of the EU (if EU can survive such blow) almost half less expensive than they are now.

It would seem that the opinions of the economist are divided in the matter, some predicting a possible larger catastrophe if Euro falls, others being more confident in the capacity of Germany to survive the shock.

In the end, the decision will be based more on political than economical grounds. For renouncing Euro would practically bring into question the necessity of the European Union altogether.

Will the German nation choose scenario #2 over scenario #1? We’ll have to wait and see.