Tales Of The Unexpected: Who Really Benefited From The Euro (Hint: NOT Germany)

Tyler Durden's picture

With austerity supposedly destroying standards of living (that no real austerity has actually been implemented is a different matter entirely) across Europe's insolvent periphery, the only recourse said broke countries (here's looking at you Mario Monti and Mariano Rajoy) have is to desperately attempt to shame those countries who have money such as Germany, Austria, Finland and the Netherlands, aka Europe's AAA club, into shoveling more and more and more cash into the bottomless pit that are the PIIGS. After all, precisely this was the basis for the "hostage and extortion" strategy that Monti employed at the June 29 summit, and which has resulted in a surge in European stocks on hopes Germany will indeed bail everyone out. The reason for this is that, at least according to conventional wisdom, it was these countries that benefited the most from a decade of EUR-facilitated mercantilism, and exported inflation to their spendthrfit (and 'debt-thrift') southern neighbors. So it is only "fair" that these countries now give back a little (or a whole lot) back (just as it is only "fair" that Germany give a helping hand in Obama's reelection chances, which as everyone knows would be negligible if the global capital markets were to tumble just before November if reality in Europe were to come back with a vengeance). Well, as virtually always happens, conventional wisdom is wrong, and as the following chart from UBS demonstrates, when one analyzes the only relevant metric that compares changes in standards of living across various income deciles- namely changes in real disposable household income - it is precisely the PIIGS that benefited, while countries such as Germany and Austria were left in the dust.

From UBS:

If we look across the larger and longer established Euro membership we can see these two patterns being replicated according to country type. Each country shows the cumulative real disposable household income growth for each of its income deciles. The lowest income decile is to the left of each country’s selection, and the highest to the right.


Austria looks to be alarmingly weak – what this actually represents is very little change in nominal disposable income growth, coupled with inflation. Germany, Ireland, most of Italy and the French middle class all experience a decline in their standards of living. In most of these countries, the highest income groups do relatively well.


What stand out are Greece, Portugal and Spain. These economies have benefited from increased standards of living under the Euro (at least, until 2010), as nominal incomes have overcome inflation pressures. There has also been a concentration on improving the lot of the lower income groups in these societies.

Of particular note is the chart of France which is coming to every socialist and crony-capitalist country near you: the best off from the Eur "growth" phase are the bottom and top deciles. Everyone else, aka the middle class was substantially worse off. This pattern of class schism will be repeated in all other supposedly "egalitarian" countries as everyone becomes more and more "equal."

So what are the implication of this novel reinterpretation of the winners and losers from the Euro, and what happens now that Germany will have sufficient ammo to deflect ongoing attempts by broke Italy, Spain et al to attempt shaming the country with allusions to World War II and other irrelevant allusions:

This chart unfortunately plays into the hands of the more nationally minded politicians of the Euro core. The argument can be made (and increasingly is being made) that periphery economies must simply accept the declines in living standards that their non-periphery counterparts have had to accept. Lower living standards in the sense of real disposable income implies either  lower wages, or yet more fiscal austerity, or indeed both measures in combination. Why should Germany see its living standard decline to pay to maintain the Greek, Spanish or Portuguese living standard, when those standards rose by so much in the recent past? As a political sentiment it has a ready populist appeal.


... Someone occupying the bottom decile of French income distribution has twice the level of income of someone in the bottom decile of Greek income distribution in 2010. The income inequality between countries in the Euro area has been narrowed by the pattern of real disposable income growth (as a rule). In what is supposed to be a common enterprise, there is something disturbing about asking the poorest members of the poorest societies to become even poorer, in order to enhance the living standards of the richest societies. As the Italian Prime Minister has had occasion to point out, there may also be a natural limit to the extent to which such demands can be placed on poorer societies (or the poorest in societies) without creating a threat to civil order.


The problem is that this debate cuts both ways, using exactly the same argument. Why should one group of countries force another group of countries to accept lower living standards? This question could be asked by Germans of the Greeks (why should we see our taxes rise / disposable income fall to maintain your level of disposable income?). This question could be asked by the Greeks of the Germans (why should we see greater income inequality when we are already amongst the poorest in the Euro area, and suffer from a Germanocentric rather than a Helleno-centric monetary policy?). Both questions have a degree of validity. It does not make finding a solution any easier.

It gets worse:

The development of real disposable income growth across the Euro area adds an additional complication to the increasingly Byzantine Euro problem. Just like the Olympics, much of the attention is focused on the dynamic of speed. Looking at the growth of real incomes over the first few years of the Euro’s existence, it is hard to argue against the idea that the peripheral countries should be taking more pain now. Core countries have had to accept a decline in real living standards, and it seems unrealistic to expect them to finance an increase in living standards for others [ZH: Germany, are you reading this? Good].


When considering the static of income levels, however, the Euro has successfully engineered a slow move towards greater equality between nations, evidenced by the increase in real disposable income for the very lowest income groups in the Euro area. To reverse that achievement would seem to be perverse.


Politics and human nature means that the dynamic of growth rather than the static of income levels is likely to dominate policy makers’ discussions. It will not make for comfortable politics in the councils of Europe. Baron de Coubertin’s well known dictum from the first modern Olympics was “The most important thing… is not winning but taking part; the essential thing in life is not conquering, but fighting well”. The ideal is ideal, but it has a hollow ring if applied to the Euro. For most of the Euro countries if not all of them, taking part in the dysfunctional monetary union of the Euro at all was a bad decision in economic terms. Having signed up to the Euro’s irrevocable monetary union, the fact that living standards have fallen for some participating economies is likely to breed resentment and bitterness against those economies that have experienced an improvement in living standards.

All of the above simply means that the precarious European balance in which Germany quietly became the shamed underdog, responsible for funding its drunk, broke, and wayward neighbors because somehow it was its fault it benefited from their irresponsible spending ways, has just been shattered: now the opponents of the "convergence" theme have cold hard facts on their side, and we expect the above chart to make the front pages of most German papers in short order.

It also means that the political opposition to any acquiescence by Merkel to current and future Monti demands will now spike to intolerable levels, with dire consequences in national polls.

Finally, it also means that the entire precariously built-up European "Nash equilibrium" over the past 6 months was just dismantled. Courtesy of the facts.

We already knew September was going to be when the fun resumes (with August a scratch - just as expected). Now, we can hardly wait.

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diogeneslaertius's picture

i used to live in Not Germany, nice place

slaughterer's picture

* I live in Germany,  But nobody here is reading this.  They should, of course.  Can ZH please start a print run in Germany, aka Bildzeitung.  We need help here.  

YuropeanImbecille's picture

help yourself you useless fucking socialist

economics9698's picture

I eat sauerkraut on my hog dog, I am almost German. 

deflator's picture

 True economist's eat hog dogs, not sure how that equates to being German. 


 Hot dogs(Vienna sausages) are supposed to be as American as baseball, apple pie and Chevrolet.

 An American hotdog is the  epitome of economic substitution--you don't know what you are getting when you order a hot dog in the U.S. You can go to any Mexican restaurant anywhere and order tacos de carne asada and you know and there isn't a nickles worth of difference in any of them. Order a hot dog in the U.S. and you probably gonna get a varying amalgamation of pork, turkey and chicken even though hot dogs are supposed to be beef hearts.

icanhasbailout's picture

Real economists eat dog food and call it filet mignon

ratso's picture

This article is very misleading.  It equates correlation with causality.

AldousHuxley's picture

German and French banksters THOUGHT they would benefit from Euro by exploiting cheap labor in other Euro countries with more debt they can't afford....

But Europeans are not stupid like Chinese factory workers....they actually screwed the banksters over by partying on easy credit and then telling debt holder to shove it.



andrewp111's picture

Hotdogs? Even my cats won't touch that stuff. But they will gobble down Little Can, sardines, pork, and chicken.

smlbizman's picture

o.t....but i went to marketwatch to just see how manu was doing...than they had a facebook article...and i went to the comments...no comments...so i checked 5 more articles...no comments....well no way to place comments...comments are no more.....maybe its just a glitch?

Osmium's picture

Sauerkraut  should be placed on bratwurst, and only after adding caraway seeds.

AlphaDawg's picture

true man, slaughterer needs to wise up.

Its people like him and his constant pleading for help, what age are you slaughterer? 5?

Go and read some philosophy - Confucicus, and Plato are a good start

Then learn some accountancy, like how to read a P&L and Balance Sheet

Learn some science too man, seriously...........grow up

YuropeanImbecille's picture

To clarify, it is typical for useless socialist cunts to plead for help and HOPE someone ELSE will do something, instead of chosing to take action.


That is why I hate socialist, useless fucking cunts that just sit around and wait for somone else to do something.



AlphaDawg's picture

Right on teddy, complete losers, when they are lying in their death bed they will have achieved nothing of use but some shitty ideas. What a waste of a life?

Freedom for all would be great, but it aint ever gonna happen man, we will be serfs of the government for the rest of our lives till we pass away.

Drink, get laid, enjoy nature, act moral onto all human beings (even the scummy ones like police and beaurocrats) and dont fear death.

AldousHuxley's picture

socialists or not.....people don't go hungry for long....they resort to violence and mutual destruction.


America is not there yet, but we saw glimps of it with OWS....college educated kids out of work and deep in debt = no hope = riots

even soldiers refusing to serve

even generals "coming out" with truth


stage 1 is to realize what is happening and with internet media, people are awake.

stage 2 is for elites to tighten control and make the situaton worse leading to

stage 3 where spontaneous combustion occurs within society after some unrelated event.

stage 4 bloody wars

stage 5 cleansing of the old guard

stage 6 fight for control in new order

stage 7 stability

stage 8 new guard abuses their new power and repeat stage 1

gmrpeabody's picture

Somebody woke up on the wrong side of the bed...

AlphaDawg's picture

What do you know man? Ur just one of those creeps lookng for attention.

Go and have a glass of whiskey and sit in a dark room


LouisDega's picture

"Go and have a glass of whiskey and sit in a dark room"

 Hey, Dont bring me into this. Whats wrong with darkness whilst i sip my Wild turkey 101

sunaJ's picture

Government trolls.  There couldn't possibly be public manipulation in Germany, right?   For a German to respect ZH and want more coverage of the overarching farce, then governments of collusion would hate that.  Right?

Dr Benway's picture

Americans do not realize how good they have it in some regards, such as freedom of speech.


In many countries there are few, if any, dissenting voices like ZH, either by law or ignorance.


This website could never exist here in Australia, for example.

AlphaDawg's picture

sit in a dark room, have a glass of french red or isle of islay whiskey and listen to this


Its the weekend, fuck finance while everyone is on holiday

BigDuke6's picture

Ignorant chumps like you know nothing about islay malt.

you pretend to love the peaty power but are an embaressing tourist.

i'd drink my ardbeg with a german rather than you anyday.


AldousHuxley's picture

Pious bullshit from era in European history where "freedom of expression" consisted of biblical paintings and holiness worship music.


good old days when you can tax people for their belief in heaven.



herewego...'s picture

Only the Irish add an E to their whisky.
Something to do with the crac.

AlphaDawg's picture

ur smart, you should be a detective, i do live there

spentCartridge's picture

Zerohedge ain't broadcast from America.


Try Switzerland ...

Dr Benway's picture

OK fair point.


However, it *could* be run from the US, whereas realistically it could not function in Oz or UK or many other countries.


Also, due to the country's size and diversity, there is always a subculture fitting your need in the US, whether it be exposing the repressed truth about the financial system or fetishising furry antropomorphic animals.

BurningFuld's picture

Calling Germans useless fucking cunts is a rather clueless statement. You need to get out more dude.

YuropeanImbecille's picture

I called socialist useless fucking cunts.. and I was proven right.


What does a socialist do when he falls down a hole? he shouts for help until he dies from dehydration.


What does a human do when he falls down a hole? He gets his hands dirty and climbs back up.

AldousHuxley's picture

what does a capitalist do when he falls down a hole? He tells everyone that if he doesn't get bailed out, the hole sewege system will blow up. And right as he is rescued, he sues the city to have tax payers pay for his bailout and asks for some bonus award from the city for surviving the fall.





FreedomGuy's picture

A capitalist invents the shovel and creates a stairway. A socialist collectivizes the problem and says others owe him a way out. You have hit backwards.

Yen Cross's picture

YuropeanImbecille    Slaughterer is anything but socialist!

   The world is cluster f..Ked, but Slaughterer isn't a person that runs from/ takes advantage!  You should do some research, before you postulate. Slaughterer is a pretty good ally in my book!

  +1 to both of you!

Ghordius's picture

And the UBS study just PROVES NOTHING. The moves shown are the product of a million things and if you think about it you will notice it. The EUR introduction had a negligible impact on people, compared to other policies.


we are looking at ten years of common currency. Some countries stagnated, others reformed their labour markets, others went on a building spree, several went into a credit expansion never seen since the ages of the silver and gold laden galleons sailing back from the New World.

To assign much credit or blame of ten years of economic changes and transformations to the common currency is giving the common currency too much credit.

From an industrial perspective, the EUR allowed to have component production spreading all over the eurozone. Just as a stupid example if you look at a BMW, you see components from all eurozone countries. and SMEs can more easily engage in more than one national market without having to engage in the kind of fancy multi-FX management that the great multinationals do

Only two things are credible caveats to the above:

- The Target2 balances - though you have to look at ten years, not only at the post-2008 changes

- The fact that for millions of investors the eurozone looked as if having the same risks everywhere. Blame the dear financials that sold that message.

And, as dessert: the EUR is behaving in europe like gold and silver did.

TIMBEEER's picture

Would you please give Teddy a break, you know .. it's that time of the month .. Must be hard fitting all those tampons into that .. well, never mind.

turtle777's picture

One day, he'll figure out that stuffing them up his asshole is no good. He will be a much nicer person, uhm, teddy then.

barkingbill's picture

in AMERIKA you are doing sooo much better LOL. 

Yen Cross's picture

Constant ) a-v-a-t-a-r changes ?   Stick to your guns!

dogbreath's picture

slaughter.    I was just visiting your fine country and was tempted to do some grafitti  along the rail line outside hbf Berlin.    Gold Bitchez  and Zerohedge.com  maybe get a big stencil.

spankfish's picture

Perhaps this explains what is going on in Germany.  The German government now has the right to put an armed military on its streets for a threat of "catastrophic proportions"... I read coming financial collapse of the EU.

The article... German troops can be deployed on home soil, court rules

BERLIN (Reuters) - Germany's armed forces can carry out combat operations on home soil in case of a threat of "catastrophic proportions", the country's highest court ruled on Friday.

However troops cannot be mobilized against demonstrators, the constitutional court said.

The military had previously only been able to act in a similar way to the police in domestic disaster situations but will now be able to use combat weapons.

"This only affects exceptional situations of catastrophic proportions," the court said in its ruling.

"The deployment of armed forces and the use of specific military defense mechanisms is only permissible as a last resort in such an emergency situation," the court said.

Germany has had a strained relationship with the military since the Nazi period, when the armed forces had to swear an oath of allegiance to Hitler, and could therefore be manipulated for political purposes.

The judges said the ruling, which was in response to complaints from two federal states, did not affect its 2006 decision that it is unlawful to shoot down a hijacked passenger plane.



diogeneslaertius's picture

i always found the germans i did business with to be good folks


but its a classic microcosm of the central data proflieration problem

NotApplicable's picture

I find it utterly bizarre that people accept the idea that bureaucrats get to pick and choose collectively, who has what standard of living, rather than it being determined by the individuals affected choosing how to best live their lives.

It seems that a century of Prussian schooling benefits only those who were rich enough to avoid being indoctrinated under it.

Must be why I've seen nothing but Pussy Riot stories at the top of the headlines all day long.

malikai's picture

When I hear the words 'pussy riot', a band is not the first thought that comes to mind..

sablya's picture

Even if you knew them, the word 'band' wouldn't come to mind.  They are disgusting people, not musical at all, just trying to make a splash in the news, to make some kind of name for themselves.  They are shameless women who are not fit to live among human beings.  

Neethgie's picture

Funnily enough i had a similar opinion myself, their music is poor so they attempted to gain attention by being anti government. What they did is completely wrong, they went into a church and started playing their shitty music and blaring out obscenities, im not religious but it strikes me that you should have some respect for others space, like i dont like pussy riot but i dont go into their house and wank on their dad.

Karl von Bahnhof's picture

They are Soros backed. True.

bigkahuna's picture

2 years in the gulag for them, that'll show em!

roadhazard's picture

They went to jail because they didn't have the money to buy themselves out.  Yes, I'm sure the Russian/commie court system is outraged that they used a church for their protest... not.

YuropeanImbecille's picture

It is the zionist-satanist that do that, they did it in the 1930's but got gased for it.

old naughty's picture

The same unexpected:who benefited "tales" can be "told" on chimerica.

Almost all of the "sentiments" are there...

And then of course the politicians-bureaucrats have all been taking orders from the tptb for decades (if not centuries?)

Seems to me their playbook is pushing to the brink of collapse in finance AND social; then 1world.gov is the consequence.

So, what say you?