Tripoli’s thankfully deposed leader was a great advocate of forging African Monetary Union (AMU) by 2021 — a goal that was recently reaffirmed by African central bankers meeting in secret in a bomb-disturbed conclave in the Libyan capital.
Many African leaders have resolutely ignored the lessons of Europe’s misbegotten monetary adventure. Now, with the toppling of the North African dictator, the African currency dream — like many other Gadhafi fancies — has (with any luck) been consigned to the scrapbooks of history.
At the monetary gathering a few weeks ago in Tripoli, Gadhafi’s henchmen apparently locked the doors and declared the airport closed in a bid to force through agreement that the ill-conceived date of 2021 for introducing the Afro (with the headquarters of the African central bank to be based in Nigeria) was still valid. Desperate times, desperate measures.
Things have not got quite to that stage in Germany, the heartland of the euro EURUSD -0.19% . The airports are still open, and Angela Merkel has not yet resorted to encaging deputies in Bundestag committee rooms to cajole agreement on funding for Greece. But maybe we are not too far away.
The Bundesbank, the Germans’ final repository of financial orthodoxy, is maintaining a staccato throb of opposition to purchases of weaker country bonds by the European central banks. An unusually vehement article in the bank’s August monthly report, together with a speech last week by Jens Weidmann, the new president, spelled out the risks for parliamentary democracies if bailouts for weaker countries progressively bypass the normal mechanisms of democratic control. German lawmakers have taken the warnings to heart, demanding full scrutiny of new legislation to increase the powers and the scope of Europe’s EFSF rescue fund.
Thorough parliamentary control over euro bailouts is likely to be a minimum condition for the German Constitutional Court, which gives a preliminary judgment on Wednesday on lawsuits brought against assistance for struggling euro states from Europe’s creditor nations. With countries like Finland and Slovakia lining up to demand collateral from the errant Greeks, and the German press speculating about a euro-induced downfall of Chancellor Angela Merkel’s coalition government, the single currency’s woes have brought a touch of Gadhafi-style Götterdämmerung to Berlin.
Old alliances and long-established traditions are starting to buckle.
Germany’s leading business daily, Handelsblatt (a newspaper for which — to declare an interest — I have written a regular column for several years) is normally a staunch supporter of the euro. Shortly after the ECB started buying Greek bonds in May 2010, the newspaper launched a campaign to persuade readers (and several hapless journalists on the staff unfortunate to be in the office on the day that the editor hit on this particular wheeze) to purchase Greek sovereign debt to show European solidarity. All that has now come to an end. On Friday, the paper published what it called a “Titanic scenario” to illustrate a “worst case” outcome for monetary union, with Greece leaving the euro in April 2012, the German parliament turning down eurobonds and the euro splitting into southern and northern components in August.
What supreme flexibility! In Germany, previously outrageous predictions have now been recast as perfectly conceivable outcomes — entertained by people who, a year ago, would have scorned such projections as the height of lunacy. Just as with the Northern African despot’s collapse, under the pressure of circumstances, the unthinkable can, sometimes, actually happen.
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