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Tuesday, April 30, 2013

Criticise it all you want, Germany is not going to drop austerity

Writing on his Telegraph blog, Open Europe Director Mats Persson argues that anyone who prays for Germany to U-turn on its eurozone policy after the September election will probably be left sorely disappointed.

Read the full article below:

"Fuelled by an intensified wider debate about the merits or otherwise of austerity as a remedy to economic problems, the last few weeks have seen politicians, commentators and economists coming out in droves to criticise Germany’s austerity-for-cash approach to the eurozone crisis.

The new Italian Prime Minister Enrico Letta – who is today meeting his German counterpart, Angela Merkel – said yesterday that Italy “will die of fiscal consolidation alone”, leading some to conclude that Italy will lead the revolt against austerity in the Eurozone.

Everyone is now looking ahead to the German election in September, with the idea being that with election season gone and perhaps with a Conservative/Social Democrat "grand coalition" at the helm, Germany will flinch and drop the whole austerity thing.

Unlikely. We might see some easing of targets and toned down rhetoric, but no fundamental shift. The German consensus on austerity runs incredibly deep.

Although, strictly speaking, in Germany, austerity is actually not called austerity at all (it sounds “evil” as Angela Merkel has pointed out). Instead, the term used is sparkurs (savings course) or sparpolitik (savings politics). Or as a verb; Hausaufgaben machen – to do your homework. The opposite is schuldenpolitik (debt politics) or Schulden machen (to make debt).

Such semantics matter. Fundamentally, they illustrate that the perceived dichotomy between ‘austerity’ and ‘growth’ – which strikes a chord with some other electorates in Europe – is a non-starter in Germany. It would be electoral suicide for a German politician to advocate schuldenpolitik – akin to an American Presidential candidate professing himself an atheist or a Swedish politician denying climate change (the latter would most likely also involve being stripped of one’s Swedish passport). This logic drives politicians’ approach both at home and abroad.

By and large the main opposition party, the centre-left SPD, does not advocate a radical departure from Merkel’s blueprint. Instead, it merely nit-picks at the edges while garnishing the whole exercise with concerned rhetoric about the social consequences. A typical SPD critique is that expressed by Nils Schmidt, the leader of the Party in Baden-W├╝rttemberg: “We have to make cuts, but step-by-step, we can’t make them all at once.” The key there is “we have to make cuts”. And remember, in an effort to be seen as tough on irresponsible banks it was the SPD that was the most hawkish over Cyprus. Even the Green party is keen to be seen as fiscally responsible taking a tough line on paying down public debt.

German opinion polls have also consistently backed the austerity-for-cash approach abroad with a recent opinion poll showing that 65 per cent said they agreed with Merkel’s handling of the crisis – up from 46 per cent in July 2011.

In other words, even under a grand coalition between Merkel’s CDU/CSU and SPD, the basic course in Germany’s Europe policy will remain fairly steady. Crucially, the complicated sequencing for any further eurozone integration – such a resolution fund for banks or public debt pooling – will likely stay broadly the same: constitutionally-anchored eurozone-wide supervision first, cash later. This also means that Franco-German axis will continue to suffer from tensions.

There is, of course, an intense debate going on within Germany over the country’s position in Europe – and a worry about being seen as the neighbourhood bully. As I’ve argued previously, the crisis sees Germany’s two post-war pillars clashing head-on – firm commitments to both Europe and sound money.

Exactly how this debate will play out remains unclear. However, anyone – say a French socialist – who prays for Germany to U-turn on its eurozone policy after the September election will probably be left sorely disappointed."


Anonymous said...

If anything, Germany is being consistent. And the Germans will follow that path until a major problem happens(and it will happen sooner or later).

That doesn't mean they are right(in the current situation, they are definitely not). Nor that they know what to do to make a U-turn, something I fear they don't even consider. Which is shame really, Europe needs bold moves not middle-of-the-road-we-will-where-it-goes.


Anonymous said...

It is interesting how austerity is not to be used as it sounds evil, but Schuldenpolitik is used domestically just for that same reason - because it sounds evil so that nobody can deviate from the opposite of evil Schuldenpolitik. By making its opposite evil-sounding conservatives and liberals in German government have secured that their policy (which they call Sparpolitik) sounds good, sacred even.

Rik said...

If you look at the polls in Germany, when there has been a strict line they are close to 70. When however Merkel gives away things it drops to around 50%.
For Cyprus the public like the Cyprus and Russian oligarch pay stand. Merkel the political animal she is will have noticed this.
In that respect austerity via ESM and non-CB measures will be more strict.

Also the AfD will likely assure harder statements from Germany's politicians. It is now between 3-7%
whoever you believe. But as shown elsewhere it is a protestparty. So any defence by Schauble and Steinbruck and alike is free PR for AfD. There are 20-30% of people that have lost all confidence in traditional politics in Germany (my calculated guess). Any statement by the posterboys of these politics is per definition uncredible, untrustworthy for the voterpotential of these protestparties. And therefor free advertising.

A huge mistake half of the Tories are making in the UK. You donot get customers back that moved because they are disappointed in your product, by (indirectly) stating they are biassed, closet racist and in a general sense idiots. And if you have insulted people it is hard to correct.

Anyway AfD needs one more push over the 5% hurdle (and have it look like a stable situation) and it starts to play as it would become a real alternative for the rest.
Works fine, Merkel herself is the only one that understands that she better keeps her mouth shut. The rest is going in with a stretched leg, mainly confirming they are not credible and AfD is a realistic alternative.
As said earlier you need simply media attention, the traditioinal parties will do the rest. Their defence for their own voters works ast the same time as a huge add towards the voters for the AfD.
But that works better with a charismatic figure, you simply get more media attention and for a longer period. But at the moment it looks to be working without one.
And stay away from scandals. No former Nazi or racists with tattoos on the lists.

Anyway when AfD is on the map, the rest will have to react. With as an added problem that it is probably harder hitting the rest than the CDU as things are now. Which simply means more austerity.

Rollo said...

What the Germans want is good housekeeping; working hard; paying your way. That is what others, who think that borrowing, spending, wasting, idling, is called austerity.
The Germans would be wrong to drop their style; they would be right to drop the EU.
If we had applied good housekeeping, we would not be in the state we are. I had a government officer writing to me to explain why having a deficit was a good thing. Stupid ignorant bastards.

Jesper said...

Germans aren't the ones employing 'guilt-policy', they are employing a debt-policy.

That is not to say that 'guilt-policy' isn't being used, it is used quite a lot in an attempt to guilt Germany into paying....

Btw, what does 'a firm commitment to Europe' actually mean? Not going to war in Europe? Never questioning EU-institutions? Not insisting to have maps redrawn so that ones country is not part of Europe? Or is it just some meaningless political statement which people can interpret whatever way they want?