The rates always follow the needs of Germany and sometimes France. The rates are discretionary and set by the president of the ECB.
Borrowing in most countries with a "hot" Real Estate market was unstoppable. Only higher rates like they historically had could have controlled it. The dimension of the damage done by this policy is incalculable.
There was no compromise. If a middle-ground, 5-6% rate had been set, the cost would have been shared. Now we're like Japan, the UK and to some extent the US: way over-leveraged, and the problem is our asymmetry and the fact that we really don't believe in the Union. When push comes to shove we shift blame. In the US nobody talked about expelling California from the Union when it went kaput and their hole is of a much bigger dimension than that of Greece. Germans will never consider Greeks as equals, it's a fact, so we either enforce it or call it quits.
The EU consists of independent countries which have their own governments, their own economic policies, their own banks, ... a real-estate bubble in Greece is fully the responsibility of Greece.
A hot 'real-estate' market not stoppable? Where was it tried?
How about Mexico? Would the US pay for Mexico to prevent a bancruptcy there?
If someone in the US decided the interbank interest rate, then they would have shared responsibility.
You are very misguided. The EU is one thing and the eurozone is a different thing. The UK does have some economic independence and very importantly, monetary independence. Those countries in the eurozone have surrendered their monetary policy to the ECB, and the ECB responds mostly to the interests of Germany, followed by France, followed by Italy, Spain and then smaller countries.
The economic cycle of Germany is substantially out of phase with that of most countries from Southern Europe, who in turn thought the Germans would pay for the party. In any case it wasn't their call. Turns up things have snowballed out of control.
Yes it is out of sync b/c Germany cut costs in the 2000, cut social security, changed job laws, increased the minimum pension age etc while the southern countries increased spending and increased massively labor costs.
You seem to think "southern countries" collectively decided to increase costs while Germany took the high road. Southern Countries HAD their costs increased and their internal inflation out of control, so the ECB could help out the then-struggling Germany and France duo.
Germany was stagnating in 2000 and MISSED their promised objectives, while Southern Countries were growing healthily. Then they found themselves with extremely low rates to help growth in Germany and France, which was basically "free money" and an out-of-cycle policy they simply did not know how to deal with. Their internal corruption did the rest.
There is one way to enforce responsibility: stop giving away free money, either be it through low rates, or through "rescue packages" done to ensure your banks won't need to swallow a massive hole from not having their lent money back.
A bit too late for this, but hey, better late than never.
- raise the rates. NEVER drop the rates below 5% as long as there is a single overheating economy in the monetary Union.
- drop the debt. Suck it up. No more rescue plans, also buh-bye to the money irresponsibly lent away. Maybe you didn't know this but you have already dropped a lot of it. Now it's when the big monster Merkel has been avoiding will rear its ugly head: the same will have to happen with other MUCH bigger countries than Greece. This will cost Germany and all the other countries massively, you will be in RECESSION for some years.
Otherwise they will be out of the Euro and then you can bet your lucky pants they will declare bankruptcy and they won't repay the debt or any rescue we (EU members including the UK that's not even in the eurozone) have given them, as Argentina did not that long ago when they let their currency float. Simply because they are unable at this point to go into a position from which they can repay.
Even with those "cuts" the German wages are still 2 times over the "southern countries".
Except if you mean to say that those in the South are less humans and do not deserve even half the wages and social welfare that Germans do --which Germany has historically said in a few occasions...
"The ECB is the central bank for Europe's single currency, the euro. The ECB’s main task is to maintain the euro's purchasing power and thus price stability in the euro area."
Which has been done at the expense of causing massive persistent damage in some "secondary" countries in the EU.
As a said before, there was a middle ground, but it wasn't considered. Higher rates during the last decade would have caused stagnation in Germany but would have avoided the complete demolition of some countries. Note that this demolition process was not only beneficial for Germany, but also for bank tycoons in these countries - their direction is now a bunch of billionaires despite whatever happens to their banks now. In these countries 2 full generations basically have had their lives destroyed from being out of the housing and job market chronically, and those with a job will have most of their disposable income confiscated. These are the really important figures usually not told in the BBC, Euronews or Deutsche Welle.
And the worst part of it is the "rescue" - the rescue consists in ensuring the banks in the most affected countries don't need to sell their massive housing stocks in a firesale. It basically consists in pegging housing prices in these impoverished countries so their average house costs twice the price of a house in an average German city, keeping 30+ year olds (the generation coming out of school during the euro-originated frenzy from last decade) homeless or living with their parents. The rescue basically consists in perpetuating this tragedy: a lost generation, birthrates to the ground (impossible to emancipate), people deprived of a sane life plan and forced to be enslaved for decades. Because that's what happens when you "so kindly" inject money to these over-stocked banks. They. Won't. Let. Their. Stocks (housing mostly). Lose. Value. This will only happen when you cannot continue "helping", the sooner the better. But this will ultimately happen, thankfully.
That's the rescue plan. Social collapse in several countries from the eurozone so all banks (both rescued banks and very especially lenders - in supposedly "responsible" countries) can be happy and, very importantly, German banks (and French banks, Spanish banks, British banks in the case of Ireland, ...) don't have to take responsibility for over-lending. The rescue is mainly a rescue to the banks of ALL parties disguised as a rescue to these "filthy irresponsible P.I.I.G.S."
Fucking let them bankrupt and take the hit, you have done enough damage already. Say buh-bye to all the money lent instead of pretending to be "saving Europe".
"Higher rates during the last decade would have caused stagnation in Germany but would have avoided the complete demolition of some countries."
No. There is consensus that during the decade Germany as a country, the people and companies were not borrowing enough. Low rates had no impact on that. So there would not be any stagnation in Germany with higher rates, as companies and people did not borrow. The government is cutting costs especially on the social cost side for a decade now, they have not been Keynes spenders in any way.
Economy growth in the last years came from massive social cuts, restructuring employment laws, increasing the minimum pension age over several years (will be 67 in 2012), cutting early pension programs and cost cutting in companies. Germany is exporting (too much?) because the price per unit cost is low compared to other European countries.
If your argument would have anything behind it, there should be numbers how borrowing increased in Germany , which it did not.
Borrowing in most countries with a "hot" Real Estate market was unstoppable. Only higher rates like they historically had could have controlled it. The dimension of the damage done by this policy is incalculable.
There was no compromise. If a middle-ground, 5-6% rate had been set, the cost would have been shared. Now we're like Japan, the UK and to some extent the US: way over-leveraged, and the problem is our asymmetry and the fact that we really don't believe in the Union. When push comes to shove we shift blame. In the US nobody talked about expelling California from the Union when it went kaput and their hole is of a much bigger dimension than that of Greece. Germans will never consider Greeks as equals, it's a fact, so we either enforce it or call it quits.