This article was published by OMFIF and the Globalist late April/early May.
The French Socialist Party has launched a bizarre broadside against Germany. In a draft resolution ahead of a party conference, there is a direct personal attack on Angela Merkel and an accusation that she, and she alone, is responsible for Europe’s austerity malaise.
Waiting for Germany to provide the answers to Europe’s collective economic misery, like Waiting for Godot, is simply Freudian transference – finding anyone other than oneself to blame for economic difficulties.
It is true that in the first years of the recession German growth was strong, reaching 3.7 per cent in 2011. This compares to today’s collapse of growth in France, Britain, Spain and Italy as well as the Eurozone crisis nations.
But that was then. This year, the Bundesbank reports that German growth will do well reach 0.5 per cent. Not quite as bad as across the Rhine or Channel but not enough to lift the European Union out of its recession.
Der Spiegel front=paged in its last issue the fact that in terms of household wealth, Cypriots and Spaniards, were richer than Germans. This is a fake statistic based on the fact that home ownerships is much higher in southern Europe than in Germany where renting an apartment is the norm. Wages, pensions, and health care access are better in Germany but as Die Welt reports (29 April 2013) German television is dominated by demands that no more German taxes are sent to Cyprus.
New car registrations in Germany in March fell by 17.1 per cent, lower than any major EU country. Average wages in Germany remain 1.8 per cent below those in 2000. Jean Claude Juncker, the savvy Luxembourg prime minister once remarked ‘Every leader in Europe know what to do. They just don’t know how to get re-elected once they’ve done it.’ Gerhard Schroeder did what was needed with the 5-year freeze in industrial workers pay and the loosening up of the labour market to allow flexibility and low-pay jobs. It was great for German capitalism. It was a disaster for the social democratic government as Schroeder’s reward for reform was to be defeated by Mrs Merkel in 2005.
She does not want to make the same mistake ahead of the German election in September. Telling her core electoral base, the German Mittelstand of small and medium firms that they should boost demand by increasing wages is to tell them their profits should sink. The kind of Obama or Clinton model of economic boosterism based on importing millions of low-pay immigrants or fracking American soil to produce gas and oil will not work in Germany. The anti-immigant mood is as sour there as in Britain or France. Mrs Merkel has sought to buy the Green vote by closing down nuclear industry.
Germany is getting older and happy to rely on Russian energy to keep the old people’s homes warm in the years to come. This gemutlich, cosy Germany just wants to avoid experiments and be left alone to export Mercedes and Porsches to the world.
The OCED predicts German growth of not much over 1 per cent over the coming decades. It appears to be unknown to the rest of Europe that Germany made huge sacrifices to incorporate the bankrupt, corrupt, third world communist economy of East Germany – a bit like France merging with Tunisia – after 1990. Even today German taxpayers pay a solidarity tax of 5.5 per cent on top of income tax to pay for the costs of bringing up the former East Germany to the level of their western fellow citizens.
No British prime minister or French president ever thanked the Germans for this personal sacrifice and it seems hard to keep asking the German taxpayer to give money to pay for the serial mismanagement and lack of government supervision of banks and financial institutions in other EU member states.
There is a wider European problem which is politically driven. The austerity ideology that dominates Europe is the product of conventional thinkers who run most European governments and control the European Commission, the Council of Ministers, and the European Parliament. The conservative-liberal and centre right dominant ideology put into operation by politicians who grew up in the early days of globalization and worshipped at the Alan Greenspan shrine of deregulated debt driven growth now no longer works.
No-one appears to have an alternative except those who blame the Euro or call for their nations to leave the EU. The centre-left has its own worried electorate which rejects any reform that challenges its public sector, labour market and welfare state provisions. In France, President Hollande and his smarter ministers like Pierre Moscovici and Michel Sapin know this but they too can remember the fate of Gerhard Schroeder who lost to Mrs Merkel when his reforms hit voters hard.
Blaming Mrs Merkel for the failure of the French economy is not adult politics. New pro-growth reformism is now a priority for the intelligent left. But telling truth to power when you are in power is not easy politics.