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Plus de bonnes poires en Allemagne

by marco Tue Apr 13th, 2010 at 05:42:33 AM EST

France and Germany traditionally have been the "motor" of the European Union, but relations between the two countries are badly strained over the Greek debt crisis, which is just the latest example of a new German willingness to resist the demands of Europe and assert its self-interest under Chancellor Angela Merkel.

All apparently is not well in the EU household, according to a New York Times article yesterday that describes the contrasting and conflicting outlooks and agendas of France and Germany with respect to how to deal with the Greek fiasco, among other things.


The article is based on quotes with "experts" and articles in the European press --

"Germany is no longer, as a matter of course or of principle, the motor, heart and savior of Europe," said Constanze Stelzenmüller, a senior fellow of the German Marshall Fund in Berlin. "This isn't the Europe we signed up for. It's much larger, much poorer, and we have to take care of our own."

<...>

"People want to be normal, in the sense that other people don't come to us first and say, `You have to pay.' And it doesn't have much to do with political orientation. All of us are huddling with our backs against the storm."

"We sublimated hegemony," said Ms. [Ulrike Guérot, a senior research fellow with the European Council on Foreign Relations] Guérot, a German who is working on a paper called "Germany Unbound." "But we're dropping the sublimation now." She laughed, then said: "Of course, this doesn't sound nice to others."

<...>

"With the French we have more that divides us than unites us," Ms. Guérot said.

Germans, who have already undergone a wrenching structural reform and paid a huge bill to integrate the former eastern Germany, say they feel that "they're paying a significant personal price," [European Council on Foreign Relations Editorial Director and Head of the Paris Office] Mr. Thomas] Klau said. "Poverty has increased considerably in Germany and is now a social reality. And it makes Germany more inward-looking than the old West Germany, and a more defensive country."

-- as well as anonymous officials --

Mr. Sarkozy yelled at the European Union president, Herman Van Rompuy, whom he summoned to Paris, European Union officials said. He threatened to boycott the summit meeting, while muttering that the Germans "haven't changed," according to French officials.

-- as well as an opinion piece in Le Monde by "Jacques-Pierre Gougeon, a Germany specialist at the French Institute for International and Strategic Relations":

[In fact, French criticism of German economic policy goes beyond the strictly economic and reveals a more profound malaise.  Indeed, if the criticism expressed by French minister of economy and finances Christine Lagarde with regards to Germany's "non-cooperative" policy was dressed up in the guise of the righteous cause of Europe -- repeating, actually, the reproaches expressed more discreetly by other European capitals -- it just as much] expresses a French malaise toward the growing gap between the two economies, and more generally toward this new Germany without which nothing is possible anymore in Europe, and which seems less and less likely to compromise if not in its national interests.

[Bracketed portion of quote my own translation].

The article suggests that this German uppitiness is in part due to the current generation of German leaders losing touch with their country's proper place in the aftermath of the Second World War:

Part of the change is generational, with Mrs. Merkel, who grew up in East Germany, representing those born after World War II, with only anecdotal knowledge of Nazi Germany. The members of Parliament are even younger, many of them teenagers or younger when the Berlin Wall fell in 1989.

So the German leadership paradigm from Konrad Adenauer through Helmut Kohl -- roughly 1949 to 1989, when Germany was a crucial junior partner both for NATO and European integration -- is gone. "When Germany steps out of the film, it changes," Ms. Guérot said.

Looking for a German perspective on this issue, and on the Greek crisis, I found an article in Die Welt about the recent bail-out proposal announced for Greece last Sunday, a bitter FAQ on the issue which rings with skepticism and even resentfulness:

Nur eine Atempause für Athen | Florian Hassel und Stefanie Bolzen - Die Zeit (13. April 2010, 04:00 Uhr)Just a Pause for Breath for Athens | Florian Hassel and Stefanie Bolzen - Die Zeit (April 13, 2010, 4:00 AM)
Die Kreditlinie der Euroländer bringt kurzfristig Entlastung - doch langfristige Probleme sind ungelöstThe Euro countries' credit line brings short-term relief -- but long-term problems remain unsolved
30 Milliarden Euro für Griechenland, dazu milliardenschwere Hil-fe des Internationalen Währungsfonds. Seit am Sonntag EU-Währungskommissar Olli Rehn und der Präsident der Eurogruppe, Jean-Claude Juncker, das Ergebnis fieberhafter Beratungen zwischen den Euroländern bekannt gaben, steht fest: Das hoch verschuldete Griechenland wird nun doch von der Eurozone rausgekauft - allen voran von Deutschland. Doch der Teufel steckt im Detail: Bisher steht weder fest, ob die Griechen Hilfe überhaupt in Anspruch nehmen, noch, was sie als Gegenleistung tun müssen. Die WELT gibt Antworten auf die wichtigsten Fragen. ...
30 billion Euros for Greece, plus billions worth of help from the International Monetary Fund. Since European Commissioner for Economic and Financial Affairs Olli Rehn and Euro Group president Jean-Claude Juncker announced the outcome of feverish discussions among Euro countries, one thing has been certain: Deeply indebted Greece will yet be bought out by the Eurozone -- first and foremost by Germany. And yet the devil is in the details: it is still not certain whether the Greeks will even take advange of the offer for help, nor what they would have to do in return. Die Welt provides answers to the most important questions. ...

Professor Gougeon's Le Monde piece lays out a series of points that illustrate the striking robustness of Germany's economy, even in the face of the current crisis:

Non-dit franco-allemand, par Jacques-Pierre Gougeon | Le Monde (05.04.10 | 13h39)What's Left Unsaid about France and Germany, by Jacques-Pierre Gougeon | Le Monde (April 4, 2010 | 13:39)
... le déficit public allemand atteignait 0 % du PIB en 2008 et 3,1% en 2009, celui de la France respectivement 3,4% et 8,2% ; l'excédent commercial allemand s'élevait à 135 milliards d'euros en 2009, le déficit français à 43 milliards ; la part de marché des exportations allemandes au sein de la zone euro est passée, entre 2000 et 2009, de 25 % à 28 %, celle des exportations françaises de 16 % à 13 % ; l'Allemagne est parvenue à conserver une industrie forte, fer de lance de ses exportations et représentant 26 % de son PIB, en augmentation depuis 2000, contre 14 % pour la France, chiffre en net recul ; l'Allemagne consacre 2,6 % de son PIB à la recherche et au développement, la France 2%.... the German public deficit reached 0% in 2008 and 3.1% in 2009, that of France 3.4% and 8.2% respectively; while Germany's trade surplus grew to 135 billion euros in 2009, France's trade deficit grew to 43 billion; German export market share in the heart of the euro zone went from 25% in 2000 to 28% in 2009, France's from 16% to 13%; Germany has managed to maintain a strong industry, the spearhead of its exports and representing 26% of its GDP, an increase since 2000, in contrast to 14% in France, where that number is declining; Germany spends 2.6% of its GDP on research and development, France 2%.
Signe des temps : depuis 2008, l'Allemagne a détrôné la France du rang de troisième exportateur mondial de produits agricoles et agroalimentaires. Même ce qui avait longtemps constitué un avantage pour l'économie française, le coût élevé de la main-d'oeuvre allemande, n'existe plus puisque dorénavant une heure travaillée dans le secteur marchand a un coût supérieur de 10 % en France comparé à l'Allemagne où le coût unitaire de la main-d'oeuvre a baissé depuis 2000 de 1,3 % contre une augmentation de 17 % en France. Même ce qui est vanté comme un modèle français de protection face à la crise connaît des limites : pour une récession deux fois plus importante que la France en 2009, l'Allemagne a vu son taux de chômage augmenter trois fois moins. Sign of the times: since 2008, Germany has dethroned France as the world's third largest exporter of agricultural and food industry products. Even the higher cost of labor in Germany, which had long been an advantage for the French economy, no longer exists, since now one work hour in the commercial sector costs 10% more in France than in Germany where the unit cost of labor has dropped by 1.3% since 2000 whereas it has risen 17% in France. Even that which is vaunted as a French model of protection against the crisis meets its limits: faced with a recession two times greater than France's, Germany saw its unemployment rate grow three times less.

Can't help but make one sympathetic to Germany's Verbitterung about having the screws turned on them.

Display:
maybe the deal isn't so bad for German taxpayers after all, according to Thomas Klau (in the New York Times article):

"The German taxpayer is much more likely to make money from this deal than to lose it, and the agreement is within the framework of what she [Merkel] agreed upon in successive Brussels summits."

Though I don't understand how that logic plays out, nor does the article bother to explain it.

The point is not to be right, but to get to right.

by marco on Tue Apr 13th, 2010 at 05:52:00 AM EST
That would be true only if Greece could pay back the money without further loans from EU countries.
In that case Germany (and other EU countries) would pocket the interest rate difference.
(Roughly 5% for the Greece loan versus - say - 3% interest rate for "our" loan.)
by Detlef (Detlef1961_at_yahoo_dot_de) on Tue Apr 13th, 2010 at 11:48:58 AM EST
[ Parent ]
As explained here, Germany can make 4% by borrowing on the markets the amount it would lend to Greece.
For 3 years' maturity the yield for German bonds is 1.34%, making the IMF spread 1.5% and the EU spread 4%
In addition,
Reuters: The yield on short-dated Greek government bonds fell by over a full point on Monday, after after euro zone finance ministers on Sunday approved a 30 billion euro aid mechanism for Greece.
The move took the 2-year bond yield to around 5.9 percent, below the 10-year bond yield, according to traders. That normalised the country's yield curve after it inverted last week on fears over Greece's ability to fund its debt.
this means that the yield for 2-year Greek bonds was 6.9%, above the 10-year bond yield (the curve was inverted due to fears over the short-term default prospects). A 5.33% cap on the interest rate up to 3 years helps bring the short-term rates lower though they still remain above the interest rate of the IMF/EU loans.
It also increases the likelihood that Greece will be able to pay the interest on its debt, though it will still need to roll over the €30bn loan after it expires.

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 12:06:00 PM EST
[ Parent ]
  1. remember my quip about this being an English language article about France, Europe and Germany. There are biases and agendas;

  2. remember that the EU has been built, largely, on the fundamental disagreements between France and Germany. The locomotive worked because the two countries, which really think differently, forced themselves to reach compromises. As far as I can tell, this is still the case;

  3. after years of narrative about Germany as 'the sick man of Europe,' we're suddenly back to the more traditional 'France is worried about Germany's economic strength' which was the basic European diet throughout the 70s, 80s, and early 90s (and triggered traumatic devaluations of the Franc). My reaction is: yawn.

Germany never stopped defending its core interests(or what it sees as such), witness the Ost-Politik and the creation of the ECB.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Tue Apr 13th, 2010 at 06:41:40 AM EST
Jerome a Paris: remember my quip about this being an English language article about France, Europe and Germany. There are biases and agendas;

no doubt.  but then what is the bias of Jacques-Pierre Gougeon, a French professor writing in Le Monde?

he agrees, by the way, and describes how the situation of tension between Germany and France "is not new".  But:

... dans le cas présent, la polémique lancée par la France au sujet de la politique économique allemande cache une inquiétude plus générale face à la question du leadership en Europe, question jamais tranchée entre les deux pays, alors même qu'une nouvelle génération de dirigeants politiques allemands, Angela Merkel après Gerhard Schröder, n'entretient plus la même relation émotionnelle au voisin français. Chacun de ces deux chanceliers a d'ailleurs connu des moments de crispation forts avec la France : au sommet européen de Nice en décembre 2000 pour l'un, à l'occasion du débat autour de l'Union pour la Méditerranée en 2007-2008 pour l'autre. Chaque fois, il s'est agi de la place de la nouvelle Allemagne en Europe et du maintien (ou non) d'un équilibre entre les deux "grands Européens".

Au-delà de la nécessité d'élaborer des positions communes sur les sujets européens précédemment évoqués, il y a donc urgence à évoquer entre les deux pays cette question du leadership, soit en construisant un mode de régulation commune par le biais de consultations plus efficaces, soit en procédant à une répartition des tâches en fonction des enjeux et des dossiers. Le contexte est plus favorable qu'il n'y paraît, tant l'Allemagne pour des raisons à la fois historiques et géopolitiques répugne à être isolée, situation où risque de la plonger progressivement son attitude face à la crise grecque.

Non-dit franco-allemand, par Jacques-Pierre Gougeon - LeMonde.fr



The point is not to be right, but to get to right.
by marco on Tue Apr 13th, 2010 at 07:23:16 AM EST
[ Parent ]
Germany never stopped defending its core interests(or what it sees as such), witness the Ost-Politik and the creation of the ECB.

So the enlargement to 27 and the creation of the Euro were Germany's interest and have worked in Germany's interest, and now they refuse to give something back.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 08:55:20 AM EST
[ Parent ]
It may not be so much the problem of not giving something back, as the apparent blindness to where Germany's interests really lie.

A broken euro and single market are not in Germany's interest. If the single currency were to collapse, the mark would suffer a pretty massive revaluation relative to other European currencies, not to speak of the return of borders and tariffs. That may be an extreme scenario. But the German attitude seems to be "wherever it's heading, it's not our problem".

But it is.

by afew (afew(a in a circle)eurotrib_dot_com) on Tue Apr 13th, 2010 at 10:21:37 AM EST
[ Parent ]
Well, Germany could always just let Greece default. How bad could that hurt them?  :-)

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Apr 13th, 2010 at 03:28:50 PM EST
[ Parent ]
"Poverty has increased considerably in Germany and is now a social reality. And it makes Germany more inward-looking than the old West Germany, and a more defensive country."
Here we have a country running a trade surplus, and with high levels of public debt (higher than the Euro limit of 60% of GDP for the past several years), which has still let poverty increase, and they pretend to lecture the rest of Europe?

If the fiscal position of the state (large debt) and households (rising poverty) has deteriorated despite trade surpluses, who has benefitted? The balance sheet of private firms.

So the German people are being screwed by their government's subservience to the pecuniary interest of business leaders, and it's all the EU's fault!?

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 08:39:33 AM EST
"This isn't the Europe we signed up for. It's much larger, much poorer, and we have to take care of our own."

They say this after absorbing East Germany and then having the EU expand its haste into the German sphere of economic influence? What makes the EU much larger and poorer if not the Eastern European states that German capital wanted unfettered market access to while keeping the German labout market closed to their citizens?

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 08:41:34 AM EST
expand itsin haste

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 09:57:13 AM EST
[ Parent ]
It's ironic too that she leads the Marshall Fund!

Americans in 1945:

"This isn't the Europe we signed up for. It's much larger, much poorer, and we have to take care of our own."

by Upstate NY on Tue Apr 13th, 2010 at 01:32:55 PM EST
[ Parent ]
the German public deficit reached 0% in 2008 and 3.1% in 2009, that of France 3.4% and 8.2% respectively; while Germany's trade surplus grew to 135 billion euros in 2009, France's trade deficit grew to 43 billion; German export market share in the heart of the euro zone went from 25% in 2000 to 28% in 2009, France's from 16% to 13%; Germany has managed to maintain a strong industry, the spearhead of its exports and representing 26% of its GDP, an increase since 2000, in contrast to 14% in France, where that number is declining; Germany spends 2.6% of its GDP on research and development, France 2%.

Both of them have been keeping aggregate debt to gdp ratios above 60%, for most of the decade, but the quote doesn't discuss that bit of their fiscal position. Germany should have been running budget surpluses in the boom years in order to bring the deficit down but instead they - together with France - forced a redefinition of the Growth and Stability Pact when it suited their excesses, and kept running deficits throughout.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 08:46:04 AM EST
... nations, but rather large states within an economic sovereignty, they should on the one hand have been running a surplus during boom years to build up a cushion in case of a downturn, but on the other hand the Eurozone as a whole should have been running a balanced budget during the boom years and a substantial deficit from the onset of the recession.

Demanding that neither the Eurozone nor the individual nations in the Eurozone take on the responsibility of the economic sovereign for maintaining economic stability is indeed a trick of the plutocrats.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Apr 13th, 2010 at 02:54:20 PM EST
[ Parent ]
Demanding that neither the Eurozone nor the individual nations in the Eurozone take on the responsibility of the economic sovereign for maintaining economic stability is indeed a trick of the plutocrats.

And how about this?

Consolidated version of the Treaty on the Functioning of the European Union [PDF]

Article 123
(ex Article 101 TEC)
1. Overdraft facilities or any other type of credit facility with the European Central Bank or with
the central banks of the Member States (hereinafter referred to as `national central banks ') in favour of
Union institutions, bodies, offices or agencies, central governments, regional, local or other public
authorities, other bodies governed by public law, or public under takings of Member States shall be
prohibited, as shall the purchase directly from them by the European Central Bank or national central
banks of debt instruments.
2. Paragraph 1 shall not apply to publicly owned credit institutions which, in the context of the
supply of reserves by central banks, shall be given the same treatment by national central banks and
the European Central Bank as private credit institutions.
What kind of central bank is legally barred from assisting fiscal policy?

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 04:05:55 PM EST
[ Parent ]
A central bank in the alternative fantasy universe of neoliberal belief.

It seems highly likely that there is some artifice by which the functional equivalent of an overdraft facility can be provided ... after all, when a government "borrows" to "finance" deficit spending, it is "borrowing" purchasing power brought into being by that deficit spending ... so someone who knows how the economy actually works may indeed be able to work out an instrument that follows the rules of the neoliberal fantasy while in fact relying on the actual working of a reserve banking chartalist money system in the real morning.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Apr 15th, 2010 at 12:23:25 PM EST
[ Parent ]
It seems highly likely that there is some artifice by which the functional equivalent of an overdraft facility can be provided

The Government gets an overdraft facility from a politically connected major private bank, and the private bank uses ECB repos to fund that facility.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Thu Apr 15th, 2010 at 12:28:40 PM EST
[ Parent ]
Bear in mind that the US central bank is not "a" central bank, but a network of regional central banks, de jure privately owned, but with their core central bank functions controlled by a majority government appointed external board of governors.

This evolved, of course, in the aftermath of an entrenched anti-central-bank ideology among agrarian populists, so that chartered "third Bank of the United States" would have been politically much harder to get established than the "network of clearing houses".

Quite the same trick could be done to provide for EU central commission overdraft facilities in some privately owned but publicly governed bank. The pretext, being a pretext, would be any useful function that would involve a subordinate clearing house role ... it could be related to trade promotion (say, with low-income nations), with regulating some variety of transaction, or insuring deposits in some class of institution ... , and with the privately owned shareholder banks being under some legal requirement to  hold some share of their Eurobank reserves on account with the subordinate clearing house by transfer to its own Eurobank reserve account.

That gets around the letter of the law regarding discrimination between public and private institutions.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Apr 15th, 2010 at 12:56:32 PM EST
[ Parent ]
Quite the same trick could be done to provide for EU central commission overdraft facilities in some privately owned but publicly governed bank.

Ah, we have found a use for the much maligned Spanish Cajas de Ahorros, German Landsbanken and Sparkassen, etc...

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Mon May 3rd, 2010 at 01:05:53 PM EST
[ Parent ]
A central bank in the alternative fantasy universe of neoliberal belief.

Thanks for confirming that the fantasy world of neoliberal belief is encoded in the European Union's treaties.

[Europe.Is.Doomed™ Alert] and I don't mean to snark.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Thu Apr 15th, 2010 at 12:29:51 PM EST
[ Parent ]
Germany was running a surplus before the crisis hit. France did not come even close, under right wing governments (the last time it even came close was with a 1.2% deficit under Jospin in 1999 or 2000).

Wind power
by Jerome a Paris (etg@eurotrib.com) on Wed Apr 14th, 2010 at 03:34:13 AM EST
[ Parent ]
I find this whole issue difficult in a number of dimensions:

1) The high moral tone attributed to Germany's export-led, trade surplus prosperity.
It seems in every reality-based economics framework to require some others to import and have a trade deficit - so it's not clear to me that there's an easy way to allocate moral superiority. As for budget borrowing - it's not so long since Germany bent the rules on the GSP...

2) I can understand ordinary Germans feeling hard done by - wage stagnation and even decreases have been their lot for a while... but at the same time it seems that corporate profits have not been so stagnant... so I wonder about the "competitiveness" tales being told. Bait and switch by the German plutocracy?

by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 13th, 2010 at 09:17:35 AM EST
I see Migeru is well ahead of me in making these and other important points.
by Metatone (metatone [a|t] gmail (dot) com) on Tue Apr 13th, 2010 at 09:18:55 AM EST
[ Parent ]
Great minds think alike, or Groupthink™ Alert?

The brainless should not be in banking -- Willem Buiter
by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 09:39:24 AM EST
[ Parent ]
Neither?
by afew (afew(a in a circle)eurotrib_dot_com) on Tue Apr 13th, 2010 at 10:07:08 AM EST
[ Parent ]
This is, I think, a very serious problem.

Many people in the PIGS (i.e. countries with trade deficits) understand that something has to be balanced.

People in countries with trade surpluses (like Germany) see to see themselves as superior.

Obviously some countries can only run structural deficits if others runs structural surpluses: it takes 2 to tango.

Correction has to come from BOTH sides. If one side think it is superior and has nothing to correct, then we have a attitude problem. More insidious, this superiority attitude coming from the Germans.

There is a foul stench of the 30s in the air, in many ways.

PS - I would not have any problem with a "superior" model if it was at least balanced (better than balanced: not very dependent on the exterior for fundamental things like erm... energy or food).

by t-------------- on Tue Apr 13th, 2010 at 05:03:05 PM EST
[ Parent ]
We have the same problem with the China/US debate on the savings glut vs. the debt binge.

Also, there was a chance of a balanced international system wat Bretton Woods (namely, Keynes' International Clearing Union) but the US, being then the exporter of last resort, saw fit to take the same position of superiority.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Tue Apr 13th, 2010 at 05:08:42 PM EST
[ Parent ]
What are the engines of growth?

Isn't this the only thing that matters?

I can't see how cutbacks in social welfare programs, especially education, helps with growth.

Professors are as greedy for money as anyone else, but the fact is, the growth and wealth they generate gets pumped into non-profit educational institutions or else into the private sector, while professors earn pretty good middle class salaries.

This is a dynamic that should be better heeded because it shows that growth comes not necessarily from the unfettered movement of capital but rather from people (some of them smart and talented) who derive more pleasure from creating growth than from financial remuneration.

by Upstate NY on Tue Apr 13th, 2010 at 01:36:44 PM EST


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