Tuesday, July 17, 2012

Is German Economist Exacerbating Euro Crisis?

July 17, 2012

Germany's Hans-Werner Sinn is fighting desperately against the euro rescue. His controversial theories fill the pages of newspapers for days at a time, but his answers are often simplistic. A growing number of his colleagues are distancing themselves from the influential Munich economist.

Shortly after 5 p.m. last Tuesday, fatigue began to take hold in the courtroom at the Federal Constitutional Court in the southwestern German city of Karlsruhe. The judges sank back into their cream-colored armchairs, and the audience began to thin out.

The lawyers and judges had already spent about seven hours addressing the question of whether the European Stability Mechanism (ESM), the permanent euro bailout fund, is compatible with Germany's constitution. Constitutional law expert Karl Schachtschneider, one of the plaintiffs, made an impassioned plea for a a national referendum on the issue, while German Finance Minister Wolfgang Schäuble warned against the "immeasurable consequences" of a Karlsruhe veto.

It seemed as if everything had already been said by the time Munich economist Hans-Werner Sinn stepped up to the microphone. The professor gave a technical lecture on the economy, but what made his listeners perk up were his bold assessments.

Sinn was sharply critical of what he called a "bottomless pit," and he spoke of "false therapy" and a "machinery of asset destruction" and accused the European community of nations of employing instruments that are doing precisely the opposite of what they are intended to achieve. "They are getting in the way of a cure," Sinn said. When he was finished, the judges no longer had any questions.

It was a performance entirely to Sinn's liking. Before the gates of Germany's highest court, the 64-year-old professor with a Captain Ahab beard was given an opportunity to present himself, once again, in what is currently his favorite role: as a vehement opponent of the prevailing euro policy.

With his tirades against what he characterizes as Europe's bailout monstrosities, from the European Financial Stability Facility (EFSF) to the ESM, Sinn isn't just trying to show that it is possible, contrary to the prevailing view, to express the complicated issues facing the European monetary union in simple terms. He is also demonstrating to the nation that he has added a new type of individual to the German academic community, the economist campaigner.


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