The Euro, The Gold Standard, and German Power: A Cautionary Tale and the Lessons of History

Pundits around the world have criticized Germany for either trying to reshape Europe in its image or acting in its own self-interest. Germany has been accused of creating a new “empire,” of pursuing a new Sonderweg, of “going global alone,” of evasiveness, self-imposed isolation, and bullying. The U.S. Treasury and the International Monetary Fund (IMF) have accused Germany of pursuing “beggar-my-neighbor” policies with its trade surpluses that threaten the Eurozone and even the global economy. Germany protests that it did all it could to save the euro and is doing all it can to contribute to European economic health. Indeed, by 2017, the euro had survived. But, it survived at the expense of the societies and the economies of the Europe’s periphery and to the benefit of its core. As Mario Draghi’s quote above implies, a monetary union between a core and periphery cannot endure. We argue here that it can survive only if a liberal hegemon in Europe uses its resources to underwrite cooperation in the European Union (EU) by transferring resources from the core to stimulate growth in the periphery. That liberal hegemon should be Germany.