Deakin Speaking

The English have always been ambiguous towards "the continent". It is, as any self-respecting English person will tell you, full of foreigners. And England's Conservatives, particularly their more reactionary, chauvinistic rump, have always been anti-European Union.

So, as the EU contemplates moving towards greater integration, it was not entirely surprising UK Prime Minister David Cameron announced overnight he would hold a referendum on whether the UK would remain within the EU and, if so, on what terms. There was some ambiguity in Cameron’s speech, with some viewing it as a bet each way on the future of the UK’s relationship with Europe.

The Conservatives had already introduced a "referendum lock" on acceding further powers to the EU, which means further pro-EU changes have to go to a ballot. But Cameron is now looking to renegotiate the UK's relationship with the EU on those areas previously agreed to.

The Germany that engaged in the successful 1973 float of the DM, now seems to be missing the main point of that decision. That monetary autonomy is valuable.
Also odd is German backing of currency areas across very differing economies, in tandem with federal fiscal rules absent a federal government.

Inflation and threats to currencies loom large in German history and so German activism on such matters is no surprise. But what is a surprise is the evident failure to get the core issue of monetary autonomy right.

The rise of Hitler was a cataclysmic response to hyperinflation that destroyed German savings of the 1920s. German Marks traded at 67 billion to the US dollar in 1923. Notes were carried in increasing numbers of wheelbarrows, as people desperately sought scapegoats and new leadership.

Few economic challenges are as potentially destabilising as threats to currencies – or exchange rates. German history, including the rise of Hitler, was a shattering response to the hyperinflation that destroyed savings in the 1920s.  Assets had been destroyed by a currency that in Nov 1923 traded at 67 billion to the US dollar. Inflation that meant money was carried in wheelbarrows; and one needed more and more barrows.
Ever since that time, German unions, businesses and households have been inflation averse to a very marked degree – which made the 1999 Euro decision understandable in non-inflationary times, but unwise given widely divergent economic conditions across Euro nations and an uneven level of fiscal discipline across many European countries.