Everybody has heard that Europe and the Euro are in trouble. So why does it take so long to save it? We’ll let you in on a little known secret. First, let’s go to Slovakia. The eurozone’s second poorest member quietly turned into an automotive powerhouse. Ever hear much of the Slovakian auto industry? You won’t. Global automakers such as Volkswagen, Peugeot, Kia have discreetly set up car plants in Slovakia. Parts makers followed. Wages are low – 780 euros a month on the average. Without anyone looking, Slovakia turned into the world’s top auto maker per capita. They want to keep it that way. And that’s why they don’t want to help Greece.
Everything in the EU must be decided unanimously. “One dissenting voice among the 17 countries that use the euro could wreck the latest plan,” writes Reuters.
“It’s a debate the rest of the world is following with concern. No strangers to privations and harsh economic reform, Slovaks are divided over whether their government should agree to increasing the powers of the fund set up to help Greece and other euro zone countries that have lived beyond their means.”
Officially, it’s a question whether a poor country like Slovakia should pay for countries like Greece, which borrowed too much and were fudging their books even before they joined the euro.
Unofficially, there is another matter. A low Euro is fuel for the European export machine. While the Japanese car industry is driven out of the country by its strong yen, a low euro makes exported BMWs, Mercedes or Audi even more attractive.
Germany exported itself out of the crisis in 2010 when the Euro was down to 1.20 to the dollar. When the Euro nearly hit $1.50 last May, exports started to slow down. The crisis in the Mediterranean countries brought the Euro down to more sedate levels, and order books are full. At the same time, imports from Japan, which suffers from a strong yen are being kept in check without anyone raising a stink about level playing fields.
However, with all the trouble the euro supposedly is in, it still fetched a $1.34 on Friday. Which is relatively high for a currency that is supposedly falling apart if you believe the news. A euro in trouble hides the fact that the dollar is weak. Whenever there are rumors about the Mediterranean mess being solved, the euro pops up like a spring that has been under pressure. Germany exports about half of the cars it makes at home. Or in places like Slovakia.
So the little known secret is that despite the chest pounding and the dramatic (but largely unsuccessful) salvage operations, the export dynamos in Europe’s north are not unhappy with a euro that is kept in check. If peace would break out on the euro front, the currency could easily zoom to $1.50 or higher.
It is not unwelcome when people in Slovakia ostensibly ask why a poor country should help bail out the Greek. It prevents people in Berlin, Wolfsburg and Stuttgart from openly discussing whether they should bail out the Greek and lose their jobs to a zooming Euro, or whether they should prolong the southern agony a little more. Riots in Athens are more palatable than riots in Berlin. Especially when you are in Berlin.