Currency

The Ghost That Haunts Europe's Debt Crisis

"I know you: You're inflation!" From a cartoon created by the European Central Bank.

"I know you: You're inflation!" From a cartoon created by the European Central Bank. ECB hide caption

itoggle caption ECB

In Germany, a cab driver can quote you the inflation rate off the top of his head. A big bank has a contest to guess how much a basket of groceries will cost in 10 years. And a newspaper editor says: "There are two things in German psyche that are important: monetary stability, and soccer."

On today's show, Caitlin and Zoe report from Germany, where the fear of inflation runs deep. It goes back to the years after World War I, when Germany experienced one of the most catastrophic bouts of hyperinflation in the history of the world — an economic disaster that helped lay the groundwork for the rise of the Nazis.

So when Germany joined the euro, the Germans insisted that the newly created European Central Bank be bound by strict rules aimed at preventing inflation.

But, as the ECB confronts the European debt crisis, those rules are being tested. Just today, the German economist Juergen Stark resigned from the ECB, reportedly because he opposed some of the drastic measures recently taken by the central bank.

The fate of the euro is in Germany's hands. Stark's resignation is just the latest reminder that an economic disaster from 90 years ago may determine the fate of Europe's economy.

How much will these groceries cost in 10 years? Deutsche Bank's very German contest.

How much will these groceries cost in 10 years? Deutsche Bank's very German contest. Caitlin Kenney/NPR hide caption

itoggle caption Caitlin Kenney/NPR

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