Ten people who changed the world: Hans-Werner Sinn, German economist who made sense of the financial crisis

Whether in the cut-throat field of politics or the fashion industry's corridors of power, this year they left our planet a better place. Celebrate 10 of the best, nominated by Independent writers

When the history of the euro is written, 2011 will be seen as the year when the authorities started to lose control of events. The three weakest members, Greece, Portugal and Ireland, had been bailed out in 2010, but at the beginning of 2011 there was still time to contain the crisis. By the ill-fated EU summit in December, that time was clearly running out, though the next stage remains quite unclear.

The key to the future of the eurozone is Germany, but government policy has been inconsistent and confused. Through the year the clearest and most consistent voice in the country, explaining the weakness of the eurozone and the potential burdens it places, has been that of Hans-Werner Sinn, president of the Ifo Institute in Munich. You could say he did not change things in 2011. But his comment and analysis during 2011 seems likely, more than that of anyone else in Europe, to change them in 2012 and beyond.

The Ifo Institute is the best-known private economic research organisation in Germany. Its reputation for hands-on economic analysis has been built up over many years, but it is only recently that it has come to stand out as an effective critic of the eurozone, applying its forensic skills to dissect what is actually happening.

In 2010, Professor Sinn was certainly critical of the initial bail-out of Greece, but felt that the financial markets – by charging weaker countries higher interest rates – would supply the discipline that the politicians had failed to do. But this year, as the crisis deepened, he lifted the tone of his challenge. The key point he made is that all the comment has been on whether the fringe governments can finance themselves and how the EU and IMF step in if they can't. But a greater issue is the hidden flow of funds from Germany to the fringe via the European Central Bank.

Through the year he wrote a series of papers attacking the way in which the ECB has been doing what he has dubbed "The ECB's secret bail-out strategy". Thus, in April, he described how it worked: one eurozone country runs a current account deficit, with the result that cash flows out of the country to pay for the surplus imports. That creates a shortage of euros in that country. So the local central bank prints the extra money. But in the surplus countries, the net exporters, there is an excess of euros, so the central bank there reduce the flow of money they create. There is no overall change in amount of euros in circulation and hence no inflationary impact. The transfers do not show up on the accounts of the ECB. But the balances do show up as liabilities and credits on the accounts of the national central banks. In effect, Germany was financing consumption in the fringe European nations.

In June, he noted that the only way to make adjustments would be for the fringe European countries to become poorer: "Europe's peripheral countries have to shrink their nominal GDP to regain competitiveness".

In August, he argued against issuing "Eurobonds" – that is, bonds with a pan-European guarantee, the idea pushed by the Commission, on the grounds that they would merely "numb the distressed countries' current pain, but, by failing to treat the underlying disease, they – and the eurozone as a whole – would end up far sicker than before".

In October, he was warning about the capital flight from Italy, and earlier this month he made his most trenchant comment yet, writing about the way in which the Germans were unwittingly paying to hold up living standards in the whole of the fringe of Europe.

"It is not only Spaniards, Irish and Greeks who are on a shopping spree in Germany," he wrote. "They have been joined by many Italian wealth owners who, with the money freshly printed by their national central banks, are buying anything that is not nailed to the floor. The money the Germans get for this bargain sale ends up in the money shredders at the Bundesbank."

He noted that in the previous three months Italy alone had borrowed more than €110bn from the ECB, and asked: "When will politicians wake up to this fact?".

The answer is not yet, but when they do it will be Hans-Werner Sinn who has changed the whole argument.

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
PROMOTED VIDEO
Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Travel
travelWhy Japan's love hotels are thriving through an economic downturn
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Life and Style
Alexander McQueen A/W 2014
fashionPolitics aside, tartan is on-trend again this season
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Rapper Jay Z performs on the Pyramid Stage at Glastonbury in 2008
musicSinger sued over use of the single-syllable sample in 'Run This Town'
Sport
Joel jumps over the board...and into a giant hole
footballFrom joy to despair in a matter of seconds
News
i100
Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week