Germany’s success and advice anger partners in Europe
BERLIN » Throughout the crisis in the eurozone, as governments have fallen, debt burdens have mounted and economies have stagnated or shrunk, Germany has floated above the fray. While its economy has hummed along nicely, its leaders have steadfastly insisted that the path to redemption for the debtors lies in austerity and suffering.
When Chancellor Angela Merkel on Monday described the debt crisis as Europe’s "most difficult hours since World War II," she was describing something most Germans had only read about in newspapers or watched on television. The German economy once again surprised experts on Tuesday, growing an unexpectedly healthy 0.5 percent in the third quarter and 2.5 percent higher than the year before.
While there were ominous signs that Europe’s slowdown will also strike Germany, its biggest economy — particularly worrisome was a sharp drop in industrial production in September — the pain that eurozone partners have been feeling has yet to arrive here.
With German consumers spending freely, unemployment has reached the lowest level since German reunification more than two decades ago, and it continued falling in October. Tax receipts consistently beat government projections, to the point that Merkel’s coalition even has plans to cut taxes by more than $8 billion.
And in a widely noted twist on the accounting surprises that helped cover up Greek debts, Germany recently found its own mistake in the spreadsheets: Its obligations were $76 billion lower than previously thought.
Germany’s continued prosperity has helped fuel growing anger in countries like Greece and Spain against what is increasingly viewed as harsh German domination. More and more, Germany is cast in the role of the villain, whether by protesters in the streets of Athens, Greece, or exasperated politicians in the halls at the recent Group of 20 meeting in Cannes, France.
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"The Germans often don’t sufficiently appreciate how wrenching the economic changes are that they’re prescribing," said Philip Whyte, a senior research fellow at the Center for European Reform in London.
Germany, Whyte said, was trying to remake all of Europe after its competitive, export-driven economic model, without understanding the connection between its success and foreign indebtedness in countries like Greece, which for years used borrowed funds to purchase German goods.
"Not everyone can be like Germany," Whyte said. "The world as a whole doesn’t trade with the moon."
European partners have taken notice of the yawning divide between their struggles and Germany’s strength, and of how German leaders have resisted aggressive measures by the European Central Bank that may have provided some relief, but may also invite what for Germans is the deep dread of inflation.
Greeks in particular have been outraged at demands for change dictated by Berlin that impinge on their sovereignty. Some Greek protesters have even carried blue European Union flags with yellow swastikas in the middle and compare the debt deals to the occupation of Greece during World War II.
The European crisis has often been likened to a morality play — sinful southerners, virtuous northerners — but at times in Germany it has taken the shape of Wagnerian opera, with Germany cast as the dragon guarding its hoard of gold.
Last week, Germany was awash with reports of a proposal floated at the Group of 20 meeting that might have allowed the International Monetary Fund to draw on German gold reserves to bolster Europe’s rescue fund.
The condemnation was swift and disproportionately harsh for a suggestion that was basically doomed from the start. "The German gold reserves must remain untouchable," said Philipp Rosler, the economy minister and vice chancellor.
A cartoon in the newspaper Suddeutsche Zeitung showed three men trying to crack a bank safe marked "Bundesbank gold and foreign currency reserves," a reference to the German central bank.
The masked man attacking the safe with a drill had the German abbreviation for the European Central Bank on his back, while the one placing the dynamite bore the letters for the International Monetary Fund. Holding a flashlight was the president of the European Council, Herman Van Rompuy.
Leading politicians here defended the independence of the Bundesbank but also took the opportunity to call for Italy to sell off its own gold reserves, the fourth largest in the world after the United States, Germany and the International Monetary Fund.
"I am of the opinion that a country should do everything in its power to help itself," said Gunther Krichbaum, chairman of the committee on European affairs in the German Parliament, who spoke in favor of Italy’s selling gold to help with its $2.6 trillion debt, "and in this regard Italy is far from exhausting its options."
As the overall health of Germany’s economy and its fiscal position widen the rift with Europe’s poorer periphery, Germans have a ready response. They say that they already made the structural changes in work-force rules and pension reforms that they are now recommending for the slow-growth countries, and that, by the way, they actually pay their taxes. So if the laggards want Germany’s money, they have to play by German rules.
"We believe this success is because we have certain criteria around which we organize our economic policies, and these are the criteria we want other countries to comply with if they ask for our money," said Tanja A. Borzel, a professor of European Union politics at the Free University in Berlin. "When you put national taxpayer money on the line, the people have a say, and that is if we have to eventually pay for the economic sins of others that they at least change their policies if we bail them out."
Guntram B. Wolff, deputy director at Bruegel, a research group based in Brussels, said that as the focus in the debt crisis had shifted from tiny Greece to the much larger Italy, the need for domestic action versus international bailouts had risen. Wolff, who formerly worked at both the European Commission and the German Bundesbank, said that Berlin had played a more assertive role in the European crisis in part because the European Commission had not played as active a role as it could have, particularly over Italian indebtedness.
"The shift of power is clear," Wolff said, "and you see that it is Berlin that has been gaining power."
© 2011 The New York Times Company