DEUTSCHE BANK: Only Jesus Can Save The Euro

Deutsche Bank's global head of FX strategy, Bilal Hafeez, recently gave a speech at the annual Deutsche Bank Mittelstand (small and medium-sized enterprises) FX conference in Hamburg, Germany.

The bank's research department transcribed Hafeez's speech and sent it out to clients in a note. The speech focuses on the euro area's economic woes and the need for the currency bloc to move forward with further integration in order to be economically successful. Hafeez opens the speech with a reflection on parenting and a child's years as a "terrible teen." The gist is that euro member states are behaving like infighting teens – which is preventing further integration – and they need a role model that everyone across Europe can respect. "I can only think of one figure that is respected by most Europeans and has never sinned, Jesus!" said Hafeez. Read the excerpt from Hafeez's speech below. ------------------------------------------------------------- Europe’s Saviour

Who else has entered the terrible teens? The Euro-Area! It was born in 1999, and so is currently fourteen years old. It has all the hallmarks of teenage angst. It is ridden with internal conflicts, it is groping around for structure, and it is suspicious of authority. So who can be a positive role model for the Euro-Area? Well it cannot be the “fathers”: Germany or France. It has to be an external figure that all Europeans respect, and whose motives and character are beyond dispute. That rules out anyone living as even the most competent person will make missteps or have something from their past dredged up to undermine them. That leaves us with historical figures whose lives have been laid bare by history. I can only think of one figure that is respected by most Europeans and has never sinned, Jesus!

Who’s to blame, and who is blameless

If everyone in the Euro-area would adopt the principle of not casting stones unless they were without sin then the constant accusations would stop. And remember, everyone has breached agreements in one way or another, even the stronger countries like Germany and France. How so? Well, all Euro-area countries were supposed to follow the Stability and Growth Pact (SGP), which amongst other things imposed a limit on of fiscal deficits of 3% and of government debt to GDP of 60%. Both Germany and France breached the SGP in the early 2000s and suffered no penalties. I should add that both Ireland and Spain met the SGP rules before 2008. So blaming “weaker” countries for not following agreements rings hollow.

If everyone held back their accusatory stones and instead focused on the future, then we may have a clearer vision of things to come. The two pressing issues for the Euro-area are the impact of austerity and the survival of the Euro-area in its current form.