10th February 2012

At Davos – which in 2012 turned out to be remarkably unremarkable – Merkel made a passionate call for greater European integration.

"Do we dare more Europe? Are we ready to be more European? Yes, we are ready," she told delegates. Fine sounding, but ineffectual stuff. It would have been more to the point had the German Chancellor posed a question not to the delegates, but to German votors, which went something like: "Do we as Germans dare square up to our responsibilities and to the logic of our position in Europe?"

The Telegraph's Louis Armitstead quotes a telling comment from an unnamed "high profile industrialist" at Davos.

"As part of the euro, Germany has had a decade of being artificially competitive. The country has gained at the expense of others – including the UK – and it's now time they put their hands in their pockets and paid out instead."

The point here is that had Germany still possessed the Deutsche Mark, the Bundesbank would by now have been in an even more embattled position than the Swiss Central Bank. The Mark would have been seen as one of the premier safe havens on the planet and funds would be pouring into it, pumping it up and up and up, just as they are doing to the Swiss franc. Germany's exporters would have been crushed by a hugely appreciating Deutsche Mark and the German economy would now be in dire straits. This would, over time, have a chilling effect on the funds pouring in to Germany and would impose an outer limit on the onward and upward climb of the Deutsche Mark, but by then the damage to Germany's export industry would in all probability, be profound.  Tucked safely inside the euro, the value of which is being dragged down persistently by the troubles of the peripheral eurozone countries, Germany's exporters are having themselves a party.

This can't be a free lunch for the Germans.

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Markets rise as Europe teeters on the brink

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