Are Germany and France exploiting Spain and Greece?

A Japanese correspondent asked me about the economic woes of Spain, Portugal and Greece. He said: “I suspect the EU is exploiting them, and big countries like Germany and France are getting profits from it. Do you agree with me?”

I live in Europe, and economics are not foreign to me, so I replied: Politicians in Spain, Portugal and Greece have spent more than their countries could afford during decades. But they really abused the system since they joined the euro, borrowing without restraint as they enjoyed the same credit rating as Germany. Now they are technically bankrupt, but want to stay in the euro. This can only be done if they tighten their belts and reduce their sovereign debt to reasonable levels in relation to their economies. There is no miracle solution: if they want the benefits of the euro, they cannot keep spending far more than what they earn. The US can do that, because they print their own money; and as a result the value of the US dollar is going down. If this is what the three sick men of Europe want, they should get out of the euro, resume printing pesetas, escudos and drachmae, and renegotiate their sovereign debt at 40 or 50 cents to the dollar (euro in this case).

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But they want to have it both ways: stay in the euro, and keep spending more than they earn. In other words, they pretend that Germany, France, and the rest of Europe do like them, instead of them putting their houses in order. Demagogues in these southern European countries are trying to put the blame for their woes on Germany and France, saying they should not be so strict – i.e. they should allow the southern profligates to keep spending more than they earn (like handing out billions to build more wind farms, for instance – which Greece is still doing, apparently). But this would only increase their debts, and make the problem worse. Their arguments are as shallow as those of a corrupt politician blaming an honest one. It is of course true that German and French companies are making profits in Spain or Greece, but conversely, Spanish, Portuguese and Greek farmers are making plenty of money selling their products to the Germans and the French. Besides, French and German companies have created a lot of jobs in Greece, Portugal and Spain, and so have pensioners who built retirement homes in those countries. This has nothing to do with money squandered away by Spanish or Greek politicians. The private economy is one thing, public finances are another. Here is another analogy: the thief who robs your savings could pretend that he is helping the economy and the poor because he will spend that money, whereas you would have saved it. There is no end to spurious reasoning.