Deutsche Mark Nostalgia

Germany is beginning to miss the Deutsche Mark.  Germans feel like a climber, desperately clinging to a fragile tree over the Euro precipice with four huge pigs tied to their feet.  Why didn’t they follow the Brits, and manage the Deutsche Mark as an independent currency?

Deutsche Mark Complexity & Euro Hubris

I began doing business in Europe in the mid ‘90’s.  Weak credit card acceptance, ATM infancy, and multiple currencies created business and tourist complexity.   There were times I considered a belt coin changer, spitting out Pounds,Francs, Lira, and Marks, as I moved through the continent.  Supplier contracts, accounts receivables, and paying expats were just a few of the multiple currency challenges.

For 53 years, the Deutsche Mark was a stable currency, but only a dot on the German timeline.  Deutschland became a champion of the one European currency.  Unification was a major factor.   With the West and East managing separate currency, centering on the Euro made sense.  The Germans also saw the opportunity for business growth, inside and outside the European Union, via simpler currency.

The Euro launched with the blaze of a space shuttle in 2002.  Business in the EU became easier for all of us.  Within two years, the Euro value exceeded the dollar by over 30%.  Chatter grew in Brussels and within the local media about the Euro replacing the U.S. Dollar as the international business currency.  That kind of hubris reminds me of a Custer quote at the Little Big Horn, “Take no prisoners.”

Deutsche Mark – German Euro versus British Pound

As Portugal, Italy, Ireland, Greece, and Spain debt pounds down the Euro, even Germans born after 2002 miss their Deutsche Mark.  Great Britain refused to jump into the Euro pool.  Did managing their own currency enable them to outperform the Germans?

GDP Per Capita (PPP – Purchase Power Parity) Compounded Annual Growth Rate (%)

	Currency	1998 – 2002	2002 – 2010	Global Rank
Germany	Euro	1.5%	3.3%	5
United Kingdom	British Pound	2.4%	2.7%	6

German real GDP advanced 1.5% in the first quarter of 2011, three times the UK growth rate.  Germany is the world’s second largest exporter, after China.  Unlike the UK, the Deutsch trade deficit is positive.

Unless you are German, and never satisfied, being stuck with the Euro actually helped rather than hindered.  71% of all German-made exports go to European countries with 60% shipped to EU Partners.  A standard currency eased the ability to do business with neighbors in addition to the world.

Deutsche Mark – Pulled by the Pigs

The EU and its Euro faces difficult times.  Greece is the latest needing over hundred billion Euros in loans, but still unable to convince its citizens the need for austerity.   Fears of bankruptcy by the Greeks, and four other countries, are shaking global financial markets.  Maybe they recover.  Possibly the EU throws one or more of them out of the union.  Perhaps the Euro value loses value, slowing German and European growth.

Individual currencies are the last things the Germans or their partners need.  Imagine the weaknesses from half dozen or more slices of the former Euro competing against the Yuan, Pound, and Dollar.  Consider the complexity of renegotiating all trade agreements, or scrambling all of the European tourist prices.

American humorist, Will Rodgers, once commented on nostalgia, “Things ain’t what they used to be and probably never was.” A tarnished Euro may cloud memories.  Leave the Deutsche Mark to the coin collectors.

 

Tagged as: deutsche mark, euro, euro history, european pigs, germany versus UK, greece crisis