The messages given at the last meeting of the U.S. Federal Reserve (Fed) might make history as the most dovish messages ever. The Fed, as expected, did not raise interest rates at this meeting, and postponed the balance sheet reduction to an unknown date.

Now, the dollar is depreciating all over the world. But, there is a very interesting detail here. Before the Fed's decision, U.S. President Donald Trump praised Fed Chair Janet Yellen, saying that he would reassign her. Thus, Trump made history as one of the few U.S. presidents who directly intervened in the "independent" Fed. In developing countries like Turkey, the question of the independence of central banks has been debated for years, and almost all negative speculation about these central banks is raised in a manner of "a storm in a teacup." Now, is this decision by the Fed not controversial, after Trump said that he is pleased that the dollar is competitive and that he will reassign Yellen? Is there no political influence here? So, it is necessary to say that the effectiveness of central banks, especially the European Central Bank (ECB) and the Fed, the suppliers of two major reserve currencies, have been partially removed and that it is an impasse.

Based on all this and considering the situation of the U.S. economy, we can certainly say that Yellen and her team will not do what former Fed Chair Alan Greenspan did in 1995. So, the Fed will insistently maintain its dovish stance and compete with Germany in Europe and South Korea, Japan and China in Asia.It is also necessary for the U.S. to protect the dollar-based global trade level in terms of its own financing. For this, it will not allow the dollar to quickly lose value.

On the other hand, we see the example of a useless central bank on the European side because of the Germany factor. Today, despite all the efforts made by ECB President Mario Draghi, the ECB is an ineffective central bank. This is because Germany's policies, in the words of British economist John Maynard Keynes, are turning the ECB into a crisis center that constantly creates a liquidity trap.

However, the Fed's effectiveness and the competence of the dollar as a global reserve currency is also controversial, as the Fed and the U.S. are also in a total stalemate.

The U.S. can no longer make up for its three insurmountable deficits with financing based solely on the right to seigniorage. Asia has caught up with the U.S. in technology competition. Unlike before, technology rent is not an advantage to be used by Britain, Europe and the U.S. today - which is why the U.S. needs a competitive dollar. However, if the global dollar trade and the dollar reserve demand fall quickly, the U.S. knows the best that it will be a huge crisis.

However, we have to talk more about the ECB and eurozone here. The euro is now the de facto Deutsche mark, and the Fed's recent decision has made it much clearer.

The euro was born at the beginning of the 21st century as a new phase of European integration. Former German Chancellor Helmut Kohl, who had a large part in the emergence of the euro, claimed in a later statement that he supported the emergence of the euro not with economic, but with political motives, even that he imposed euro in a dictatorial manner, and that if he had not done so, a new war would have broken out in Europe.

The fall of the Berlin Wall in 1989 and Germany's reunification with East Germany in the early 1990s was undoubtedly a process that produced not only political, but also economic consequences. France and Britain announced that they would support East Germany's inclusion in West Germany only with a new common currency and, in the case of the continuation of the mark, this union would be considered to be an unjust expansion of Germany.

The euro has two political leaders. Kohl and former French President François Mitterrand.

Kohl made it clear that both himself and Mitterrand gave the green light to the birth of the euro, without creating the economic infrastructure and sufficiently negotiating, so that the process that would begin with the fall of the Wall would not lead to a new war in Europe.

Actually, Kohl turned out to be right. This is because the euro and the eurozone initially delayed a political crisis in Europe and ensured the postponement of the sovereign debt of southern countries, but led to a crisis economy that made these countries more indebted, made them increasingly dependent on the German economy and eliminated their competitive power.

When we look at the euro-dollar parity today, we see that the euro is not a common currency, but is the direct continuation of the Deutsche mark. This value of the euro versus the dollar is on a level that will justify Kohl's worries in the 1990s. The Italian banking system is currently bankrupt, and Germany is under sole responsibility of this. Germany is also responsible for the current crises of the Greek, Portuguese and Spanish economies.

Germany's treatment of the euro as the mark and the fact that German leaders who succeeded Kohl did not keep any promises to Europe is the only reason behind the huge European crisis that will come soon.

Regardless of how much ECB President Mario Draghi grows balance sheets and collects junk bonds, the crisis will deepen as long as Germany stands in the middle of Europe like this.This is because the euro is now the national currency of Germany and fluctuates according to the data of the German economy. This distorted situation can only be overcome by a common fiscal policy that will support the common monetary policy.

But this is not enough: a new and complementary growth-expansion policy that will spread the technology-labor mobilization to the whole of Europe is also necessary. Moreover, Germany is the country that has cast away the Lisbon Strategy, which would provide common productivity. Without a new Lisbon Strategy, Italian and Spanish financial systems cannot recover.

Of course, Britain's Brexit process is not in this equation. From 2018 onwards, Brexit will have an impact that will deepen the European crisis. In this case, we should worry about the future of the euro and the ECB, and even the whole of the eurozone.

Well, is there no positive dynamic about the future of the eurozone in this case? Of course, Turkey is the only country that will prevent the eurozone crisis from deepening. Now, Germany is trying to prevent this with inconceivable speculation and lies. But all European investors, especially German companies, see that Turkey is the only safe country in Europe. This confidence will be further consolidated by market-friendly reforms that Turkey will carry out in the upcoming days.

https://www.dailysabah.com/columns/cemil-ertem/2017/07/28/fed-decision-and-europes-crisis