Wednesday, July 10, 2013


"Germans see themselves as the model student of Europe and are convinced that all other countries should emulate this successful model. However, it is surprising for some Germans that criticism against the German economic model and the German approach to the crisis can also come in a more intelligent form than posters of Angela Merkel with a Hitler mustache." - Sebastian Dullien, A Clash Of Economic Civilizations? Social Europe Journal 02.07.2013

This is the perspective that German Chancellor Angela "Frau Fritz" Merkel has promoted in Germany. The SPD, to their own shame, have largely collaborated with her in the policies and attitudes associated with this state of affairs. In the campaign for the parliamentary elections in September, Peer Steinbrück as the SPD's Chancellor candidate is running what may be the most pitiful campaign in the Party's history. He's clearly angling to become the junior partners and Vice Chancellor to Merkel in a new Grand Coalition government. So the last thing he wants to do is mount any serious challenge to Merkel and the neoliberal consensus that he shares with her.

IMF cuts global growth forecast, underestimated eurozone recession - economy Euronews 07/09/2013:

The notion that Germany is the model that the inferior countries of the eurozone have to learn to imitate is nuts. Germany's economy is heavily export-oriented, with a large portion of its exports going to eurozone countries. Not every eurozone country can become a net exporter relying on other eurozone countries.

The single currency is working to Germany's relative advantage at the moment. Because the euro's market value depends on the strength of the economies in the eurozone as a whole, the value of the euro is considerably smaller that what the value of a separate German currency would be. So not only does the euro facilitate Germany's exports to eurozone countries but to everywhere else, as well.

If the euro were to collapse, Germany's export prices would jump by 30% or so. And the euro-specific clearing system known as Target 2 currently has the Bundesbank effectively loaning large amount of money to other eurozone national central banks. If the euro disappears, the German government will face recapitalizing the Bundesbank to the tune of €700 billion or so, i.e., a trillion dollars or more.

Dullien writes:

The economic thinking of the German elite on the one side – and the elites in Spain or Italy on the other could not be more different. Antonio Cortina (Deputy Director Research Department from Banco Santander) for example argues that Germany should increases wages to promote domestic consumption and he calls for a German contribution to re-balance the economy in the Eurozone (something you would never hear from a banker in Germany). The German argument is critical towards this line of thinking. Dirk Heilmann (the chief economist of the Handelsblatt) thinks that more domestic demand in Germany would actually not help other European countries to overcome the crisis – because Germans would probably buy Chinese-made DVD players and not Italian shoes or Spanish olive oil. According to Heilman, Germany is not able to do anything to help the ailing Southern economies. They must help themselves. ...

Despite some encouraging signs within the German discourse it seems that the "clash of economic civilizations" is not over yet. This can only happen when the North and South develop a common understanding of the reasons behind the crisis.
At this point, the hope of that last paragraph looks unlikely to be fulfilled in time to save the euro in its current form.

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