European Tribune - Community, Politics & Progress.

Beggar Thy Neighbour

by redstar
Wed Dec 3rd, 2008 at 04:11:53 AM EST

I never thought I'd wholeheartedly cheer a Wolfgang Münchau article in the Financial Times, but there's a first time for everything. Mr. Münchau really gets to the heart of what is going on in Germany, which will, as in the past, prove a day late and a dollar short in facing the truth of a severe deterioration of the economic climate here in Europe:

Germany's boycott of a co-ordinated European response to this crisis has become serious and persistent. Only a day after the European Commission proposed a modest European Union-wide stimulus of 1.5 per cent of gross domestic product, Peer Steinbrück, the German finance minister, declared that Berlin would reject any co-ordinated EU-level response on the spurious grounds that Germany would have to pay a quarter of the costs.
Yet even he knows that economic conditions have deteriorated more rapidly in the past four weeks than at any stage in our lifetimes. I expect that eurozone - and German - GDP will decline by anything between 2 and 4 per cent next year. Even the more optimistic forecasters admit that the risk is on the downside.

For those who have doubts, the severe downturn here in Eurozone land is real, and the proverbial German head in the sand becomes more and more inexcusable with each passing day.

A challenging take on the issues - promoted by DoDo

Why do the Germans have their head in the sands? Münchau gives three reasons:

1) German economic structuralists thought they had done everything right. They reformed the labour market. They cut labour costs. They balanced the budget. They had no property bubble and household balance sheets are fine. The country is less exposed to global capital markets than others. Until recently, this was an economy oozing with strength and self-confidence. Looking at this from political Berlin, you could easily delude yourself into thinking that this is someone else's crisis.

Hmmm...Münchau doesn't seem to agree with those "structuralists." Does he disagree on the consumer and real estate credit side of the equation? On balanced budgets (in normal times to be sure)? On labor costs? (Surely Mr Münchau can't believe German laborers have been getting the extreme shaft on wages this past decade, with serious consequences on German consumer confidence and demand, can he?

2) Germans are chronically incapable of handling sudden slumps. Angela Merkel, the chancellor, approaches this crisis in the same spirit as Heinrich Brüning, the chancellor during the Great Depression, whose strategy consisted of balancing the budget and improving Germany's export share by cutting labour costs. Today's equivalent is cutting unemployment insurance costs for companies to increase their competitive position. In a typical demonstration of the country's beggar-thy-neighbour attitudes, Michael Glos, the economics minister, said last week: "We can only hope that the measures taken by other countries ... will help our export economy."

Of course, Brüning had very fresh in his mind a not so minor matter of hyper-inflation, and wheelbarrows full of marks to pay for a sack of flour. Not so Steinbrück and Merkel.

Begger-thy-neighbor, the perfect expression of the current German government's weltenschauung. An irony of history is that the biggest free-loaders are those who, at first glance and to themselves, are victims of free-loading.

3) Finally, the intense personal hostility between Ms Merkel and Nicolas Sarkozy, the French president, who has been pushing hard for a European response, has also been a factor. I believe that Mr Sarkozy is right on this occasion, but his persistent European Central Bank-bashing and his failure to take part in a co-ordinated deficit reduction lost him all credibility within the eurozone to the effect that he is now politically isolated. He is paying the price for listening to very bad economic advice at the time of his election.

Well, I know it's not popular on these pages to say so, but I think Sarkozy is right on ECB-bashing too, though clearly for my own reasons. But it is true that his fiscal shenanigans, starting with the bouclier fiscal, have underlines his bona fides as being serious on such matters. This being said, it is hard to be fiscally rigorous when one is bordered on nearly all sides by fiscal paradises which, what's more, speak our language. Belgium, with not tax on wealth and no tax on capital gains; Luxembourg ditto; Switzerland the world's reknowned laundered of tax evader's ill-gotten gains...well, you get the idea. It's hard to be fiscally progressive when your neighbors aren't playing by the same rules. This, as for all things about fiscal and social justice, must be EU-wide.

Just like the stimulus.

What does Mr Münchau think is going to happen?

Last week Mr Steinbrück said there would be no new stimulus when the coalition chiefs meet in early January to discuss the crisis. He wants to see how the present stimulus package is working. This suggests that no decision is likely until February or March at the earliest.

Note, Canada's Tories, who equally refused this past week to present a stimulus plan in a country with even more fiscal probity than Germany, are currently being taken down, with a vote of no confidence scheduled for next week and a Left/Seperatist coalition ready to take over govern over the very subject. Alas, no such coalition in Germany seems to be in the offing.

Germany's eventual response will fail each of the three "T-tests" of good economic stimuli - that they should be timely, temporary and targeted. Next year is clearly too late. For a country with a high household savings rate and a massive current-account surplus, the best stimulus would be a combination of lower value added taxes and temporary income tax reimbursements. But this is politically difficult in a country obsessed with fair income distribution, and so you are most likely to end up with another expensive environmental scheme that takes years to implement. There is a very serious probability that Ms Merkel and Mr Steinbrück will be facing the electorate in September in the middle of a depression of their own making.

Silver lining...given SDP drift and the current government's apparent macro-economic incompetence, look for big gains by Die Linke next September. Holland isn't the only place where all that is old can be new again if the ruling elite insists on studied tone-deafness.

The dual problem in the eurozone, and in Germany in particular, is the conviction that all economic policy is structural and that the creation of a single currency is irrelevant to economic policy. The fallacy of those convictions will be demonstrated shortly - at crippling cost.

Spot on.

Now I have to go wash myself, I feel dirty agreeing with so much of a Münchau article.

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Beggar Thy Neighbour | 30 comments (30 topical, 0 editorial, 0 hidden)

Re: Beggar Thy Neighbour (4.00 / 4)

I'm pretty sure that Münchau was leading the pack to call for structural adjustments in Germany, especially the labour market. I appreciate the pressure on Merkel to do more, but the direction of that pressure is in Münchau's case going in a predictable and wrong direction, namely tax cuts.

I appreciate that Merkel is a bit slow to respond, but I don't like the 'ZOMG we must do something, more, yesterday, more!!' directionless panic. The Germans have already laid out a stimulus package worth 31 billion euros and I can understand that they want to wait a month or two before deciding whether and how to add to that.

Now of course we will see that VAT cuts in countries with high consumption economies (the UK) will end up to some extent driving German exports, but that is also their own fault for not having an industrial policy.

As far as I know, France opposes VAT cuts, too.

The differences are over-reported and the reality is that for now we do have a somewhat coordinated response in Europe.

Yahoo finance | Germany rejects French call for more stimulus funds

French President Nicolas Sarkozy and German Chancellor Angela Merkel failed earlier this week to overcome their differences on an EU-wide effort to boost economic growth in the wake of the global financial crisis.
After a joint cabinet meeting on Monday, Merkel said Berlin would stick to a growth package already approved in cabinet and review the situation in January rather than commit new funds to a plan unveiled by the European Commission on Wednesday.
The EU proposal called for states to unite in a common fiscal stimulus package worth 200 billion euros ($258 billion), or 1.5 percent of the 27-nation bloc's gross domestic product, in an attempt to stave off recession.
Under the proposal, member states would commit some 170 billion euros, or 1.2 percent of their GDP, to their national rescue packages, while the remaining 30 billion euros would come from EU funding.
Germany says its stimulus plan amounts to 1.3 percent of national GDP, and that it is thereby 'over-fulfilling' the Commission's plans.

by nanne (zwaerdenmaecker@gmail.com) on Tue Dec 2nd, 2008 at 10:51:13 AM EST

Re: Beggar Thy Neighbour (4.00 / 3)

This is semantical on the German's part. In fact, only EUR 12bn of the referenced amount is actually new spending. Over two years. If you were already going to do, as a matter of course, regular public investment, this doesn't count but here Steinbrück and Merkel want the butter and the money from the butter.

Tax cuts are one way to say things, but look closely at what they are rejecting - a VAT tax cut, which is by definition a progressive tax cut, and income vouchers, which are also progressive. In both cases, you are getting ready to help those who will be needing the help, and in turn helping get the economy working.

What's more, while I recognize Münchau downplays public investment as a proper vehicle for stimulus, even Germany could use some, which would pay off in future. Alternative energy; improved transportation grid; public housing.

But where Steinbrück really shows he is out of his depth is when he says the following:

He also rejected the idea of issuing spending vouchers. He said these could boost consumption in lower income categories, but added: 'That has nothing at all to do with lasting support for economic growth.'

If the German economy follows the trajectory that is currently forecast (and remember, the risk is on the downside, not the upside, that's pretty much an established fact) then he is absolutely wrong. The lasting damage a couple of years of severe recession and negative growth in the -2 to -4% territory (if not worse) is real. The impact this will have on the health of Germany and the Eurozone makes a couple of year's deficit spending pale in comaprison.

Deficit spending, it should be added, wich is much easier to pay for when the size of the economy is larger thanks to the stimulus.

Too bad the Germans (and the Dutch for that matter) can't be asked to have the severe recession for themselves, since they seem so hell-bent to make it as bad as possible. Alas, we all will be treated to it, just like in the early 1990's...

Mais c'est un scandâââle!!

by redstar on Tue Dec 2nd, 2008 at 11:12:52 AM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 2)

I'm not really sure that the VAT as it exists is a regressive tax. We have a reduced rate for a number of products (food and milk as well as some culturual products, in Germany) that make up a larger share of poor people's baskets, and what they're talking about isn't lowering the reduced rate.

As for spending vouchers, that's a better idea, as long as they have some investment aspect. The Süddeutsche had a nice idea in that context which I wholly favour:

The World From Berlin: Merkel Puts on the Bailout Brakes - SPIEGEL ONLINE - News - International

The center-left Süddeutsche Zeitung writes:
"The level of the discussion in this country about the wisdom or folly of a stimulus program has been meagre. Instead of first considering what the criteria for such a program ought to be, all parties are contenting themselves with taking old ideas and presenting them as new. What we're getting is a hodgepodge of proposals which in the best case won't damage growth, but which will also certainly do no good to reverse the current trend."
"If we really want to put people in a buying mood, than we simply have to give them some money. If every citizen were given a climate-voucher worth €250, which could be used until Jun. 30, 2009 to buy energy-saving household and garden appliances, it would not only boost consumption, it would also promote climate protection... In order to stimulate corporate investment, they should be allowed as an exception to deduct the cost of new machine purchases in 2009 from their taxes."

by nanne (zwaerdenmaecker@gmail.com) on Tue Dec 2nd, 2008 at 01:45:14 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 2)

Most important rental is exempted from VAT. For some people even the cold rental makes ~40% of their income.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Dec 2nd, 2008 at 02:02:12 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 4)

"Cold rental", meaning the basic rent without communal charges, taxes, utilities, and other mysterious charges your landlord takes out of your bank account (at least in Bavaria). It doesn't mean the apartment is unheated... (I don't think the term is used outside Germany, so most people probably didn't understand).

by gk (g k quattro due due sette "at" gmail.com) on Tue Dec 2nd, 2008 at 03:34:25 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (none / 0)

Thanks, never heard it before.

by Zwackus on Wed Dec 3rd, 2008 at 06:35:18 AM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 2)

But where Steinbrück really shows he is out of his depth is when he says the following:

He also rejected the idea of issuing spending vouchers. He said these could boost consumption in lower income categories, but added: 'That has nothing at all to do with lasting support for economic growth.'

Note the nuance: lasting support. While I have serious doubts that Steinbrück would favour a lasting support in the form of a permanent spendable income increase like a payrise or a minimum wage definition (where non-existent)/raise (where existent), the vouchers will be an extra income and consumption that'll end. (Anso see my comment downthread.) Then again, Steinbrück may be out of his depth discussing lasting supports in the context of temporary anti-cyclical measures.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 05:18:45 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 2)

PS, I was quite tongue in cheek and ironical on the matter of Münchau and labor "reforms".

Mais c'est un scandâââle!!

by redstar on Tue Dec 2nd, 2008 at 11:14:19 AM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 2)

Brüning was facing another problem. Germany was highly indebted in foreign money and needed to stabilise its currency. He was nearly successful, when - partially due to policy mistakes of Germany - foreign countries stopped buying German federal debt.

This is very different today. It could however limit the capability of UK to make arbitrarily large fiscal expansions.

I don't know if you read my answer in the other thread about cheap money to your comment, so to give the reason for the reason of 2) Germans are chronically incapable of handling sudden slumps:
The politicians act according to learned rules, not based on an underlying economic theory. When the Sachverständigenrat was telling every year the same, it was a respected council. Now they have changed their opinion, and they are busted as flip floppers. The idea, that those economists react on a change of situation doesn't come to the mind of many.
Peter Struck, the faction leader of the SPD in the German parliament, even suggested to abolish that council. Usually one would expect some happiness, that the council finally suggests something the (equally single minded) left wing of the SPD wants all the time, so Struck could get some unity in his party, when the left wing and those who follow economic advice want the same policy. But he isn't. The rules are not allowed to change. The policy that was good yesterday has to be good tomorrow, because the world never changes.

From Herdentrieb blog:

Erst hat mich der Sachverständigenrat hoch erfreut, dass er ein anständiges Konjunkturprogramm gefordert hat - zum ersten Mal seit Mitte der 70er Jahre hat das einflussreiche Gremium zugegeben, dass es mehr als die Angebotsseite in der Wirtschaft gibt. [From the text written by Robert von Heusinger]
Vieleicht liegt das weniger an "Umdenken", sondern vielmehr daran, dass wir es zum ersten mal seit Jahrzehnten mit einer genuin keynesiansichen Unterbeschaeftigungssituation tun haben? Und differenziert denkende Oekonomen in einer keynesianischen Situation keynesianische Massnahmen empfehlen, waehrend sie einer strukturellen Unterbeschaeftigungssituation strukturelle Massnahmen fordern?
Nehmen wir die 2001-05-Episode, waehrend der Du ebenfalls beharrlich nach hoeheren Fiskalausgaben riefst. Damals hatte die deutsche Volkswirtschaft mAn ein offensichtliches Wettbewerbsproblem aufgrund des Kapitalkostenueberhangs nach der Euro-Einfuehrung, und musste den Ueberhang mittels Disinflationierung abtragen. Ausserdem hatte Eichel den Haushalt 2001 strukturell in den Sand gesetzt. Damals haette expansive Fiskalpolitik lediglich eine Verlaengerung der Wettbewerbsprobleme bedeutet und einen Haushalt, der voellig aus dem Ruder gelaufen waere, so dass heute kein Spielraum fuer fiskalische Massnahmen vorhannden waere.
Heute hingegen kann von einem Wettbewerbsproblem keine Rede sein--die Ursache fuer den Konkunktureinbruch sind offensichtlich die Implosion des Finanzsystems und das Wegbrechen der Auslandsnachfrage. Zugleich kann der Haushalt dank der disziplinierten Politik der vergangenen Jahre ein paar Prozentpunkte mehr Defizit verkraften.[comment from a reader, with whom I usually agree]

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Dec 2nd, 2008 at 12:14:07 PM EST

Re: Beggar Thy Neighbour (4.00 / 2)

I did. And actually, reading this blog post, it makes even more sense, on a number of levels. It's not just the caricatural issue of hide-bound bias against inflation and for strict fiscal policy and balanced budgets; it's that a number of elements have changed, both inside and outside of the country, and the political classes aren't catching up: first that labor markets have been "reformed" and so, if there's a downturn, it's going to hurt workers more than in the past, but the folks in charge are not in the policy mindset whereby that is a given. But also, that even though they appear ot have done everything they think should have been done, if economic growth has been underpinned by exports, as Von Heusingersays seems to say at the end, and if the countries to whom those exports once went are now suffering from not just a recession but also a very near total blockage of investment, who is going to buy the capital goods which have proved Germany's export motor in the absense of domestic consumption?

I think he will prove optimistic on 2009 growth though.

Per

Mais c'est un scandâââle!!

by redstar on Tue Dec 2nd, 2008 at 12:49:02 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 3)

Now I have to go wash myself, I feel dirty agreeing with so much of a Münchau article.

Well...

Next year is clearly too late. For a country with a high household savings rate and a massive current-account surplus, the best stimulus would be a combination of lower value added taxes and temporary income tax reimbursements. But this is politically difficult in a country obsessed with fair income distribution, and so you are most likely to end up with another expensive environmental scheme that takes years to implement.

How can you read anything else in this than the blatant attempt at pushing US-style spend-away consumption capitalism in line with the shock doctrine?

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 02:34:46 PM EST

Re: Beggar Thy Neighbour (4.00 / 2)

If I were to have commented on this part more specifically I would have commented that Munchau is off track here as far as I'm concerned on the income tax credit, and I like the voucher idea better, the idea being that the money go to those who both will need it and will use it, coupled with a jobs programme, preferably building useful things like public housing and green energy (which I did say elsewhere).

But private consumption incentives are very much on order in Germany today; the whole point (see Martin's linked blog post) is that Germany cannot simply sit back, like a PRC (as Munchau, in my opinion very mistakenly, points out in allusion) and wait for the rest of the world to do stimulus so they can buy German products and capital goods. It won't happen in good measure unless Germany does its part. This is especially true for the rest of us in the EU, those of us who are their main trading partners and neighbors.

(And why is Munchau wrong in his snarky allusion to the PRC? Because they're actually doing things right, building for the future in a mass stimulus plan involving both progressive tax incentives and massive public works...)

Mais c'est un scandâââle!!

by redstar on Tue Dec 2nd, 2008 at 03:45:26 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (none / 1)

The consumer voucher idea is also advocated by SPD members other than Steinbrück. I'm not entirely sure I like the idea: if they end when the economy rebounds (i.e. unlike permanent payrises), won't low-earning people, and that sector of domestic consumption, back where it was before?

While I wholeheartedly agree that at least a massive public works programme (including "another expensive environmental scheme that takes years to implement") would do good for Germany, I am not convinced that the German economy, or even German exports, is in mortal danger, like the scarecrows say (for always changing reasons). Export failed to collapse as predicted in recent recessions, either.

I note Münchau's focus seems to be a financial capitalist one: get companies' hands on people's savings.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 05:11:00 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 3)

DoDo:

The consumer voucher idea is also advocated by SPD members other than Steinbrück. I'm not entirely sure I like the idea: if they end when the economy rebounds (i.e. unlike permanent payrises), won't low-earning people, and that sector of domestic consumption, back where it was before?

This is why you'd want the vouchers to go to something useful, like, say, energy efficient appliances. A lot of poor people have old fridges, incandescent lightbulbs, etc. If they'd upgrade to something three times more efficient, which is a reasonable figure to project, they'd have more expendable income. So there you have an investment.

by nanne (zwaerdenmaecker@gmail.com) on Tue Dec 2nd, 2008 at 05:44:32 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (none / 0)

Even so: would fridge manufacturers not suffer a slump when the voucher programme is over?

OK, this could be managed by a slower tapering-out rather than instant end of the programme, or, even better, a reduced-scale voucher programme maintained until all old fridges are replaced.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 06:16:36 PM EST
[ Parent ]

Silver Bullet Fridges (4.00 / 2)

Fridges can be exported, too. And as long as we're talking about 250 euros, people are going to spend it on different kinds of stuff, from CFLs to washing machines to...

Anyway, it's the freeing up of money on the consumer side that matters in the long term for the economy, not the extra money for Siemens and Osram and Bosch. From the beginning of this stimulus talk I was thinking 'it might be a good idea to spend on greener stuff and infrastructure'. Because I always think that. But I wasn't sure how. The more I think about it, the more I think it's a great idea to do things like providing vouchers for energy efficienct appliances, and expanding the existing preferential (preferably down towards zero) rate interests for greening up houses. These things are long term investments. They're net positives to society on a level that we have been systematically underestimating.

A bit more on my blog.

P.S. I'm disappointed in the PES for not taking this theme and running with it. They had a pan-European Keynesian green expansion strategy lying on the shelf and have basically left it there, as far as I can tell.

by nanne (zwaerdenmaecker@gmail.com) on Tue Dec 2nd, 2008 at 07:13:08 PM EST
[ Parent ]

Re: Silver Bullet Fridges (4.00 / 2)

BTW, you are not the first making such proposals. Fricke has already in July argued for pretty much the same.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Dec 2nd, 2008 at 07:41:44 PM EST
[ Parent ]

Re: Silver Bullet Fridges (none / 1)

Yeah, I copied it from the Süddeutsche here, so no claims to originality. Thanks for the link. It's important to tie different strains of advocacy for this together. I see that Benjamin Lenz is making pretty much the same argument in the comments on the FTD that I am making here. The comment by Rolling_Rock is also interesting, although I do not know if freeing up more private investment will happen.

From what I could find on the internet, the leader of the Berlin state Linke has supported this idea, as well as Andrea Nahles (lefty deputy leader of the SPD). But environment minister Sigmar Gabriel is opposed, on rather spurious grounds.

by nanne (zwaerdenmaecker@gmail.com) on Wed Dec 3rd, 2008 at 03:54:35 AM EST
[ Parent ]

Re: Silver Bullet Fridges (none / 0)

Spurious grounds? Rather, no grounds at all, it seems to me. He is saying that he is against it and that it is more important to increase state investment in energy conservation, renewables and the grid -- but not giving reasons for either claim.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Wed Dec 3rd, 2008 at 04:10:05 AM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 5)

I'm no fan of Steinbrück, even less of Glos. But, Münchau isn't merely a misdshipman on HMS Europe.Is.Doomed, but a Korvettenkapitän of SS Deutschland.Geht.Unter, so I had to check the original quotes. One by one:

Peer Steinbrück, the German finance minister, declared that Berlin would reject any co-ordinated EU-level response on the spurious grounds that Germany would have to pay a quarter of the costs.

While Steinbrück indeed signs anti-Keynesian tunes, I find something a BIT more nuanced...

Steinbrück lehnt Mehrausgaben zur Konjunkturstützung ab \| Inland \| Reuters		Steinbrück rejects extra spending to bolster economic growth \| Domestic \| Reuters
Deutschland habe auch auf Druck der EU bei der Budgetsanierung Fortschritte gemacht, sagte er am Donnerstag in Berlin. "Und weil wir relativ erfolgreich gewesen sind, sollen wir jetzt Zahlemann und Söhne spielen", kritisierte er. Von jedem Vorschlag, der gemacht werde, müsse Deutschland in der Europäischen Union ein Viertel finanzieren. Viele Vorschläge, etwa halbe Steuersätze für Autos, würden aber enorme Unwuchten hervorbringen und brächten nichts.		Germany made progress in the budget rehabilitation under pressure from the EU, he said on Thursday in Berlin. "And because we have been relatively successful, we should now play Payman & Sons," he criticized. Germany as part of the European Union must finance one fourth of each proposal made. Many proposals, say halved tax rates for cars, would spawn enormous imbalances and bring nothing.
Die Finanz- und Konjunkturprobleme würden sich nicht auf einen Streich lösen lassen, sagte Steinbrück: "Es gibt diesen einen großen Rettungsplan nicht."		The financial and economic problems cannot be solved at one go, Steinbrück said: "This one big rescue plan does not exist."

His argument is, essentially, that he won't be rushed into doling out money for a badly throught-through package. Quick! Fast! No time to think about it! ...is indeed both shock capitalism style and Sarko's grandstanding style; and there is a lot of crap in that package, so I tend to think that at least here Steinbrück is reasonable.

Last week Mr Steinbrück said there would be no new stimulus when the coalition chiefs meet in early January to discuss the crisis. He wants to see how the present stimulus package is working. This suggests that no decision is likely until February or March at the earliest.

Quick, fast, don't think about it! Now for what you find in the German media:

FTD.de - Abfederung der Krise: Erste Hilfe für die Konjunktur		FTD.de - Damping the crisis: First Aid for economic growth
Weitere Maßnahmen zur Stärkung der Konjunktur lehnt Steinbrück zwar offiziell noch ab. Doch intern lässt Kanzlerin Angela Merkel (CDU) schon mehrere Vorschläge prüfen. Noch vor den Klausurtagungen der Parteien Anfang Januar werden die Partei- und Fraktionschefs von CDU, CSU und SPD zusammentreffen, um die Marschroute für ein zweites Konjunkturpaket festzulegen.		Though Steinbruck still rejects further measures to bolster economic growth officially, internally, Chancellor Angela Merkel (CDU) already has several suggestions checked. Even before the closed conferences of the parties in early January, the party and faction leaders of the CDU, CSU and SPD will meet to lay down the marching route for a second economic stimulus package.

In a typical demonstration of the country's beggar-thy-neighbour attitudes, Michael Glos, the economics minister, said last week: "We can only hope that the measures taken by other countries ... will help our export economy."

I failed to find the Glos quote -- the one which led to your diary title. The closest I found was Glos's comment on the Chinese stimulus package when meeting the visiting Chinese trade minister:

Chinas Konjunkturprogramm sorgt für Kursfeuerwerk \| Wirtschaft \| Deutsche Welle \| 10.11.2008		China's economic stimulus program causes stock market fireworks \| Economy \| Deutsche Welle \| 10.11.2008
"Ich glaube, daraus ergeben sich auch gute Liefermöglichkeiten und Geschäftsbeziehungen für deutsche Unternehmen"		"I believe that good supply opportunities and business connections for German companies will result from it, too"

If this is what Münchau 'translated', it is a pretty thin basis for his beggar-thy-neighbour claim. Meanwhile, things Glos did say on the subject was two things: a claim that according to his internal information, the German economy is sound with the sole exception of the car sector; and he promised to provide the financial guarantees exporters need but banks presently aren't too willing to give.

I note I found an interview with Glos where he disagrees with Steinbrück and Merkel's view that tax cuts won't boost consumption. The theme of tax cut demands was also jumped on by the CDU's über-neoliberal, Friedrich Merz. (Glos is from the Bavarian CSU, whose main conflict with the coalition partners at the moment is over its demand to extend inheritance tax exemptions to higher incomes.)

I also note that despite all the dire warnings about German exports, the latest numbers (for September) actually showed an increase.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 04:57:07 PM EST

You are both right (4.00 / 5)

Bundesregierung online, Speech of ... Glos

Der reale Zuwachs betrug seit dem Jahr 2000 nur zwei Prozent. Jetzt wird der Exportmotor aufgrund der internationalen Finanzmarktkrise leider in den Rückwärtsgang geschaltet. Wir haben keinen Einfluss auf die Exportnachfrage. Wir können nur hoffen, dass die Maßnahmen, die andere Länder ergreifen, unserer Exportwirtschaft helfen. In diesem Zusammenhang denke ich zum Beispiel an das große Investitionspaket Chinas, von dem wir uns Aufträge erhoffen, und an die Maßnahmen, die die USA eingeleitet haben.
Eines können wir allerdings tun - an dieser Stelle bin ich mir mit vielen einig -: Wir können die Binnennachfrage durch zusätzliche Impulse stärken. Genau diesem Ziel dient unser Maßnahmenpaket. Wir erhoffen uns davon eine möglichst große Wirkung auf Investitionen und Konsum. Wir stärken also Angebot und Nachfrage gleichzeitig. Ich glaube, das ist die richtige Antwort auf diese schwierige Situation.

Glos has said these words, but not in the context of doing nothing else, but specifically in the context of export demand.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Dec 2nd, 2008 at 05:12:52 PM EST
[ Parent ]

Re: You are both right (none / 1)

Thanks! One can't rely on Google: I correctly guessed and used "nur hoffen", "andere Länder" and "Exportwirtschaft" as search terms, but had no hit on this release.

My fear at this point is that there will ultimately be a second package, but one dominated by Glos's and Merz's tax cuts, some corporate welfare, some aimless consumper spending boost, and nothing sensible.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 05:26:20 PM EST
[ Parent ]

Re: You are both right (none / 1)

Just for clarity: Merz (and Glos) are hinting at permanent tax cuts.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 05:32:35 PM EST
[ Parent ]

Re: You are both right (4.00 / 3)

I used google at the workplace, there it goes to google.com and found it.
At home it uses google.de, and no results for the same search terms, unless I click on "Google.com in English".

I don't know which google.XX you use, but I agree that it is unrelyable, if the .com version finds a German gov't page and google.de doesn't.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

by Martin (weiser.mensch(at)googlemail.com) on Tue Dec 2nd, 2008 at 05:37:01 PM EST
[ Parent ]

Re: You are both right (none / 1)

I used the German-language news search. Funny, because in prior searches, I did have official government press releases among the hits. Maybe for some idiotic copyright reason, it was taken out?...

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 05:48:25 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 2)

I'm looking around for some statements by the Left Party. Here is the first one I found, on the CDU party conference (where Merz attacked 'cold progression' in income tax):

DIE LINKE: Die Darbietung ist langweilig, das Stück ist mies		THE LEFT: The presentation is boring, the stage play is lousy
...Kein Mindestlohn, keine Entlastungen für abhängig Beschäftigte, keine Rentenerhöhung, keine Anhebung der Hartz-IV-Regelsätze - die Politikansätze der Union haben mit dem realen Leben der Menschen in Deutschland nichts zu tun		...No minimum wage, no relief for dependent employed, no pension increase, no increase in the Hartz IV normal rates - the policies of the Union [CDU+CSU] have nothing to do with the real lives of people in Germany.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 05:53:50 PM EST

Re: Beggar Thy Neighbour (4.00 / 3)

DIE LINKE: Finanzmarktkrise darf nicht zu einer neuen Runde der Umverteilung von unten nach oben werden		THE LEFT: financial crisis should not lead to a new round of redistribution from bottom to top
DIE LINKE bleibt bei ihrer Position. Es kann nicht pauschal um Senkung der Steuern gehen, sondern man muss sich genau anschauen, wo Steuern gesenkt werden und wo auch Steuern erhöht werden müssen. Ganz klar und eindeutig: Wir sind dafür, dass der ,,Mittelstandsbauch" wegkommt. Da sollen Steuern gesenkt werden. ...Der Kompromiss der zur Erbschaftssteuerreform gefunden worden ist, ist ein inakzeptabler Kompromiss. Wir wollen, dass das Aufkommen aus der Erbschaftssteuer um 8 Milliarden € erhöht wird. Wir fordern eine Millionärssteuer, die gerade angesichts der aktuellen Krise notwendig wäre und auch Geld in die öffentlichen Haushalte bringen würde...		THE LEFT maintains its position. [The policy] cannot just be a blanket one of tax cuts, instead, we need to look closely where taxes neeed to be reduced and where taxes need to be raised. Quite clearly and unequivocally: We support the elimination of the 'middle class belly'. There, taxes should be reduced. ... The compromise achieved over the inheritance tax reform is an unacceptable compromise. We want to increase the proceeds from the inheritance tax by €8 billion. We call for a millionaire tax, which would be necessary in particular in view of the current crisis, and would also funnel money into public budgets ...

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Tue Dec 2nd, 2008 at 06:10:36 PM EST
[ Parent ]

Re: Beggar Thy Neighbour (none / 0)

I note quickly that I read a third on-topic stuff last night before going to sleep: "Red Oskar" issued a declaration that is almost the same as those parts of Münchau's which redstar liked; I'll bilingualise it once I have time.

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Wed Dec 3rd, 2008 at 04:04:11 AM EST
[ Parent ]

Re: Beggar Thy Neighbour (4.00 / 3)

...so here is Oskar Lafontaine on the issue, with rhetoric not far from what redstar liked in Münchau's:

DIE LINKE: Gegen den Strom in die Rezession		LEFT PARTY: Against the tide into the recession
"Die CDU-Vorsitzende und Kanzlerin findet keine Antwort auf die Weltwirtschaftskrise. Schlimmer noch, sie sucht sie nicht einmal. Mit ihrer Politik der kalten Hand treibt sie Deutschland immer tiefer in die Rezession", kritisiert der Vorsitzende der Partei DIE LINKE, Oskar Lafontaine, den Auftritt von Angela Merkel beim CDU-Parteitag. Lafontaine weiter:		"The CDU chairman and chancellor has no answer to the global economic crisis. Worse still, she is not even looking for one. With her policy of the cold hand, Germany is driving ever deeper into recession," is how the chairman of the LEFT PARTY, Oskar Lafontaine, criticized the appearance of Angela Merkel at the CDU party conference. Lafontaine continues:
Merkels hinhaltender Widerstand gegen ein Konjunkturprogramm, das internationalen Vergleichen standhalten kann, ist unverantwortlich. Während reihum Konzerne Entlassungen in großem Maßstab ankündigen, spielt die Kanzlerin auf Zeit. Angela Merkel trägt damit direkt die Schuld für die zunehmende Arbeitslosigkeit im nächsten Jahr. Nach dem deutschen Sonderweg sinkender Reallöhne in den letzten Jahren droht die neuerliche Eigenbrötelei der CDU-Vorsitzenden Deutschland endgültig zu isolieren. Erst durften die anderen Industrieländer die deutschen Exportüberschüsse bezahlen, nun sollen sie mit ihren Konjunkturprogrammen dafür sorgen, dass der Exportmotor nicht allzu sehr ins Stottern kommt, während die Regierung Merkel eigene Anstrengungen weitgehend verweigert.		Merkel's delaying resistance to an economic program that can stand up to international comparison is irresponsible. While big corporations are announcing large-scale lay-offs one after the other, the Chancellor plays for time. For that reason, Angela Merkel can be directly blamed for the increasing unemployment in the next year. After the German exceptionalism of declining real wages in recent years, the solitarity-ism of the chairman of the CDU threatens to isolate Germany for good. The other industrialized countries were first allowed to pay for the German trade surplus, now, with their economic stimulus programs, they are to ensure that the export engine won't get into stuttering too much, while the Merkel government broadly refuses to make own efforts.
Unterlassene Hilfeleistung wird im Strafrecht geahndet. In der Politik müssen dies die Wählerinnen und Wähler tun. Angela Merkel verdient die rote Karte.		Failure to provide assistance is punished in the penal code. In politics, it's voters who have to do this. Angela Merkel deserves the red card.

I note his missive about a German exceptionalism of declining real wages is almost certainly a rhetorical hyperbole: he must be aware of parallel similar developments in many if not most developed countries. (I don't think that he is of truly high opinion about the actual stimulus packages of some Western countries, either.)

*Traitor*, n.
A benighted individual who perceives an illusory distinction between serving his nation and abetting the criminals who govern it.

by DoDo on Wed Dec 3rd, 2008 at 11:27:55 AM EST
[ Parent ]

I answered in the Salon today (none / 1)

http://www.eurotrib.com/comments/2008/11/30/2323/3838/67

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Dec 4th, 2008 at 05:09:04 AM EST

Beggar Thy Neighbour | 30 comments (30 topical, 0 editorial, 0 hidden)

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