Germany: Austerity solidarity or grubby politics?

<!–Patrick Young–>

Patrick L Young is expert in global financial markets working in multiple disciplines, ranging from trading independently to running exchanges.

Germans find themselves in a tricky position: broadly loathed by the blame-storming Mediterranean zone while their domestic economy teeters on the cusp of recession with an impending election which has long been Mrs Merkel’s to lose…

Lest you don’t spend your waking hours studying industrial
production statistics, you may have missed some rather worrying
data. According to surveys which tend to pre-empt the overall
state of the economy, China is now in a manufacturing recession.
What’s worse, Europe’s uber-dynamo powerhouse Teutonic industrial
heartland, Germany, has been looking sickly too… True, the
latest data suggests a pick-up in the Eurozone. The Mediterranean
patient looks to have awoken from their coma. However intensive
economic palliative care will still be required before a return
to growth. Germany too has just had its best manufacturing
numbers for months but the statistics still presage contraction
as opposed to growth…

Meanwhile, Mrs Merkel’s government has been making noises behind
the scenes: perhaps it might be time for a little economic
stimulus? In other words, austerity is the rule for the dissolute
south with stimulus for the thrifty Teutonic north. Doubtless it
will be dressed up as EU solidarity to conceal a subsidised
electoral campaign export drive for German industry.

Of course we have been here before. During the last decade
Germany flagrantly ignored Eurozone budget deficit rules when it
suited Berlin. Subsequently Germany has been shocked when other
nations such as Greece did the same thing, ultimately plunging
the entire Eurozone into crisis.

However, a spirit of hypocrisy has never obstructed the political
classes from self-perpetuation in most parts, and Germany is not
immune in this regard. Having insisted that the Mediterranean has
its feet held to the fire, Germany now appears to be relenting in
a move fuelled by pure undiluted self-interest. While Finance
Minister Schauble may be decrying tabloid tales of largesse, it
is feasible that a nervous Mrs Merkel will launch economic
stimulus ahead of the hustings as she doubles down to stay in
office.

Eurozone unemployment now totals a staggering 19.2 million
citizens (equivalent to the combined population of Austria and
Belgium). Meanwhile in Frankfurt, anti-capitalists have been
protesting outside the ECB. Given how West Germany fared compared
with East Germany during the period 1945-1989, this rather
beggars belief.

Nevertheless, the prospect of recession in Germany is acute:
growth has been anaemic for some time. However, with unemployment
unchanged for more than half a year at 6.9%, things still look
rosy compared to the catastrophic 12.2% Eurozone average.
Therefore Mrs Merkel may well rush to demonstrate her credentials
as a provider of Euro-solidarity while appearing keen to avoid
domestic recession when securing re-election is her core focus.

Of all the issues facing the EU right now, the abysmally designed
Euro remains pivotal to the bloc’s economic woes. Vast exporter
Germany is in a pact whereby it gets a currency held artificially
lower than the Mark would have been, thanks to the fiscal
inconsistencies of the Mediterranean. Meanwhile, Mrs Merkel has
been politicking with France proposing a new post of President of
the Euro Currency Group. Clearly what an ongoing currency / debt
/ unemployment crisis really needs is another tax-free salaried
bureaucrat – particularly another President to add to the already
burgeoning ranks of Presidents within the EU.

Germany remains under pressure to provide bounteous transfer
payments to its poorer EU neighbours. However, the nation has
been there once before in recent times and that raised the
hackles of many voters even when the transfers were to fellow
members of the Volk.

Despite all the massive transfer payments that subsidized the
“Ossis” after the fall of the Berlin Wall, the eastern
Land has remained stubbornly less productive. Post reunification,
the adoption of parity between the Deutsch- and Ost-Mark ensured
Eastern savings retained value albeit at the dreadful cost of
making Eastern German industry wretchedly uncompetitive.
Ironically, billions of Marks/Euros later and the border lands of
Germany now find themselves enjoying an influx of investment…
from Polish families. Polish thrift and tenacious entrepreneurial
spirit has driven their property prices above those of German
houses just west of the Oder. Poles have been working tenaciously
towards prosperity helped only by relative paucity of transfer
payments from the EU, compared to vast German Federal largesse to
its east.

When German citizens baulk at providing another generation of
subsidies to the Mediterranean Eurozone, it is easy to understand
why. Transfer payments didn’t work within a unified Deutschland,
why will it work across borders? Will exasperated voters rally to
Mrs Merkel’s defence of the Euro or will she resort to that
remarkably Mediterranean electoral technique of intervening to
stimulate the economy and thus retain power?

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

This article originally appeared on: RT