Every country for itself as European unity collapses in an attack of jitters

Germany became the latest EU member to put its national interest first by announcing its own guarantee for bank deposits

Roger Boyes for TIMES ONLINE - whole article here

Germany shattered any semblance of European unity on the global credit crisis last night by announcing that it was ready to guarantee €568 billion of personal savings in domestic accounts.

The move – which came as Berlin announced a new rescue package for an ailing mortgage bank – is sure to anger France which, holding the European Union presidency, tried to create the illusion of a common front at a weekend summit in Paris. Instead, the message coming loud and clear from Berlin is that it is every man for himself. Or as President Nicolas Sarkozy would prefer not to say: sauve qui peut.

The massive liquidity crisis in the banking system has already nudged the Irish Republic and Greece into unilateral – and probably illegal under EU law – action to guarantee the deposits in national banks. Faced with a choice between the possible collapse of their banking systems and violating EU competition rules, the two countries opted for what they saw as the lesser evil. Now Germany, which at the weekend rejected French plans for an EU lifeboat fund, has taken the decisive protective step, and it is said to be plain that other European states will have to follow suit.

Those critics of Euro (€) of which one of the strongest has always been TEAM’s long-time member The Bruges Group who have based much of their convictions on the rather hidden cracks within the “Optimum currency area theory” have also kept clear mind about the long term prospects of the Euro-zone.
Here is one of their excellent papers titled Is Europe Ready for EMU? Theory, Evidence and Consequences.
One of the basic structural criterions of OCA theory which at first has not been emphasized enough has later been graded as more relevant. Here is a short .pdf presentation from the year 2005 (this one not from The Bruges Group but much more favourable towards Euro) from which we’ll quote some interesting details:

The “New” OCA Theory

Focuses primarily on political issues of forming a currency union:

• Fiscal Transfers
• Homogenous Preferences
• Solidarity

Homogeneity of Preferences Criterion

• Common view on how the ECB reacts to (symmetric) shocks
• Problem:
  – Every country wants to put its interests before those of the member states, jeopardizing the CU

Solidarity Criterion

• Solidarity among the member states has to outweigh national interests
• Problem:
  – Solidarity is only easy in “golden years”

Even though the authors of this presentation have predicted bright future for the Euro the word “Solidarity” or rather the lack of it in these days discloses much more than it should for the Europhile political elites.