20171129-NATIXIS-Has_Germany_forgotten_the_1992-93_crisis__5页_612kb

Flash Economics Summary

Core Content

This document discusses the historical context of the 1992-93 European Monetary System (EMS) crisis and draws parallels with Germany's current economic policies within the euro zone. It highlights the consequences of Germany's non-cooperative stance in the past and warns that similar behavior today could jeopardize the stability of the euro.

Main Viewpoints

1. The 1992-93 EMS Crisis

• Impact on Germany: The break-up of the EMS led to the overvaluation of the Deutschemark, which negatively affected Germany's industrial competitiveness and caused long-term issues in foreign trade, industry, investment, and employment.
• Causes of the Crisis:
  • Germany raised interest rates sharply after reunification, forcing other countries to do the same to maintain exchange rate stability, which stifled their growth.
  • Other countries lost exchange rate reserves to stabilize their currencies, but Germany did not support them.

2. Germany's Current Non-Cooperative Policies

• Persistent Budget Surpluses: Germany maintains consistent budget surpluses, which contrasts with the economic conditions of other euro-zone countries.
• Refusal to Lend Savings Surplus: Germany does not lend its savings surplus to other euro-zone countries, resulting in an unbalanced external trade situation.
• Rejection of Federalism: Germany opposes federalist policies that would allow for transfers between countries, which could help reduce income disparities.

3. Risk of Recurring Crisis

• The document suggests that Germany's current policies could lead to a similar crisis as in 1992-93, threatening the euro's stability.
• It emphasizes that the 1992-93 crisis was a direct consequence of Germany's non-cooperative approach, and a repetition of such behavior may have the same outcome.

Key Information

• The 1992-93 EMS crisis had severe and lasting negative effects on Germany's economy.
• Germany's current economic policies, such as maintaining budget surpluses and rejecting federalism, are seen as non-cooperative and potentially risky.
• The document warns that these policies may repeat the conditions that led to the EMS crisis.
• It includes several charts (Chart 1 to Chart 8) that illustrate the economic data and trends related to the crisis and current policies.
• The document is issued by Natixis and is intended for professional and qualified investors only, with strict confidentiality and legal disclaimers.

Conclusion

• Germany is criticized for having a short memory regarding its past non-cooperative policies that led to the EMS crisis.
• The document concludes that Germany's current stance could again destabilize the euro zone, based on the same principles that caused the previous crisis.

Disclaimer Highlights

• The document is not a financial analysis and does not constitute personalized investment advice.
• It is confidential and not intended for third parties.
• No liability is accepted for any use or interpretation of the information.
• The document is based on public information and does not take into account specific tax or accounting rules.
• All views are personal and may differ among authors.
• The document is subject to the regulations of various financial authorities in different jurisdictions.