As most people are probably aware, it is now Germany that is calling the shots in the financial crisis in Europe. And on this website I’ve been sounding warnings, as most of you who are regular readers here know. But in fairness, one should present the German side of the equation, which the Christian Science Monitor, courtesy of a Facebook friend, Mr. T.O., kindly shared with me:
The nub of Germany’s criticism of the rest of Europe, and for that matter by implication, Britain and North America as well, is contained in these paragraphs:
“The world criticizes Germany for being strong, but not leading, in the euro crisis. Now, as we start to lead, we are criticized, if not demonized. We are called selfish or Nazis. But if we are to lead, we want to use our experience, our rules, and our models. That means an austerity policy favoring price stability and cutting debt. And we don’t want to be rushed; we have domestic political hurdles to surmount. German voters don’t want to pay for others’ excesses. They were told when Germany joined the eurozone that they would not have to bail anyone out. This is basic.
“Our approach stresses responsibility and competitiveness. We keep wages low, build quality products, and export them for cash. We do not take a Keynesian view of stimulus; we rely on the neoliberal school of Hayek. Our distinctive German model emerged after the war from something called ordoliberalism, which stresses clear rules and fiscal rectitude. (“Ordo” comes from the Latin word for “order.”)
“We are suspicious of the Anglo-Saxon model that has brought a global morass of financial instruments, debt, and excess. Washington and London are not our fiscal ideals. We take seriously the problem of moral hazard, where money is loaned with no guarantee of payback. Greece, which borrowed, spent, and hid its balance sheets, is a poster child for this hazard. The new EU “fiscal compact” agreed to in January will ensure it doesn’t happen again. Germans can’t afford to be left holding the bag for the rest of Europe. Germany is strong, but it is not that strong.”
This, to me, is the real core issue, for Germany is expressly challenging the financial assumptions of the Angl0-American elite. Those assumptions are, as indicated, Keynesian at their core, and to that degree, the Germans are right to point out the following:
“And why doesn’t anyone look more closely at our success? We are Europe’s only real globalized export economy. We didn’t have a housing bubble, debt bubble, or credit boom. We had few financial products to detoxify (and the bad ones came from the United States and Britain).
“Our policies have brought a good life and our situation is secure. Germany doesn’t have an unemployment problem; it has a labor shortage! We have created 2 million jobs since 2000. Prices are stable. Germans are working harder. The retirement age has been increased from 65 to 67, while in Greece, some public workers retire at 52. There are very few German strikes. Germany benefits from a systematic approach to high-tech and industrial niche products. It stays competitive and fresh and plans to remain so. We make machines that Asian and South American firms are buying. We are busy. We do our homework. If others can’t keep up, maybe they should look at how we do things.”
To the criticism that Germany is breaking away from Europe, the end of the article makes it clear that it is not:
“Yes, we feel some frustration with Europe. Yes, we had a quiet but intense debate last year on whether Europe is dragging us down, and whether to align more closely with emerging global players, the so-called BRICS (Brazil, Russia, India, China, and South Africa), whom we voted with on Libya. But we realized that in a changing world, we need to stand with our friends and the ones we know best, and we closed that debate.
“We want Europe. Europe helps us avoid backsliding into authoritarianism and nationalism and helps stability. Europe is our main trading partner and, for crying out loud, we have spent 50 years in pursuit of European harmony and good citizenship. We want and deserve to be seen as “pro-Europe.”
“But Berlin is starting to tire of attacks on Germany’s efforts to solve Europe’s problems. We believe deeply in austerity. It is a consensus supported by the German mainstream and the two large center parties.
“There is little chance the German view will change. So don’t waste your time trying.”
It is there that I tend to disagree. Germany will of course remain a European power and remain the predominant one. But historical memories, unfortunately, die hard, and for the Greeks and Italians in particular, those memories are bitter for obvious reasons. Then there is the added factor that I have often predicted would happen, and that is a growing rapprochement between the two powers that dominate Eastern Europe: Germany and Russia. As the later has been quite influential in bringing about the BRICS alliance, it is in my opinion inevitable that as Germany continues its buildup of global trade, it will gravitate increasingly into that orbit…
….and that will strain the European project, perhaps to the snapping point. It remains to be seen if German diplomacy is up to the subtleties of that challenge.
But in any case, the article makes a good point, namely, that Germany’s criticisms of the rest of Europe and indeed the financial terpitude within the Anglosphere that led to this current mess is well justified. It isn’t Germany that needs to hang its head, it’s the rest of Europe.
One final thing…note that Germany, in the midst of this financial crisis, with less than half of the population of the USA, added 2,000,000 jobs…. compare that to our performance, and it would seem they have a point…
See you on the flip side…