Germany Opts for Europe Part III

By | October 20, 2021

6: Agenda 2010 and German cuts

Many Germans realized that the large government deficits could not persist. The country’s budget deficit was largely due to reunification costs . At the same time, competition from low-wage countries in Eastern and Central Europe and Southeast Asia increased. This “double globalization pressure” drained the industrialized country of Germany of millions of jobs. In 2002, Germany approached the magic number from the interwar period: 5 million unemployed.

Under the Social Democrat Gerhard Schröder, Germany, a country located in Europe according to ALLPUBLICLIBRARIES, therefore initiated comprehensive labor market reforms , stricter requirements for the unemployed and solid cuts in contributions. A reform (Hartz IV) gave a minimum rate for unemployment benefits of 359 euros (2900 NOK) per month! Welfare schemes were shaved off / down. Many Germans had to go from full-time jobs to part-time jobs, and wages remained virtually stagnant for a decade! During the same period, revenues increased significantly in countries such as Spain and Greece.

The reforms worked. Unemployment almost halved from 2004 to 2011. It fell from 5 million to less than 3 in 2011 Рthe lowest (7.1 per cent) since reunification in 1990. Before the election in 2013, it was below 6 per cent. But the cost was borne by the individual worker and chooses in the form of real wage declines, lower living standards and an increase in the number of poor . Today there is talk of a low-wage class of 20-25 percent of the German population. As many as 7.5 million Germans earn far less than 8.5 euros per hour (approx. NOK 70) Рthe minimum rate the SPD went to the polls to get legislated as a minimum wage. The reforms of SPD Chancellor Schr̦der contributed to the SPD losing the election in 2005 and still struggling to gain the trust of workers.

During the same period as the Germans tightened and strengthened competitiveness, public and / or private borrowing grew considerably in Southern Europe. Part of the money that flooded in to borrowers in Southern Europe came from German banks . Thus, German banks and insurance companies own significant parts of the mountain of debt that weighs on both states and private individuals in Euroland. It contributes greatly to German politicians’ desire to save the euro.

But most Germans are unaware of German banks’ contribution to the crisis, and EU skepticism is growing. People feel that they have saved, sacrificed and worked hard for their own well-functioning economy, while countries in the south have lived beyond their means and are now apparently placing new burdens on German taxpayers. This EU skepticism was captured during the autumn elections by the party “Alternative for Germany” .

AfD (formed in 2013) aims to oppose the euro, but not the EU as such. The party founders believe that Merkel’s European policy is a waste of German taxpayers’ money without it having a real economic effect in the crisis countries. Instead, it creates social distress and conflict. They believe the millions of unemployed, especially young people in southern Europe, are a ticking bomb that could eventually blow up EU cooperation. The party will therefore either remove the euro altogether or expel some member states from the south. They believe that the single currency came too early, covered for different countries and threatens EU integration.

These attitudes are an important national backdrop for a new German government. Ever since the Greeks in the spring of 2010 admitted that they had long hidden that the government debt was significantly higher than the Stability Pact indicated, the debt has increased. Today, a staggering 26.5 million EU citizens are out of work – of which close to 20 million in Euroland and 5.5 million under the age of 25. In Greece, almost 60 percent of those under 25 are unemployed; in Spain 56 percent. When the crisis exploded, Merkel was criticized for passivity. She referred to the euro’s regulations which did not include financial assistance to euro countries in need.

With Germany at the forefront, the EU made demands on Greece for painful cuts in public spending, increased taxes and fees. This triggered social unrest and harsh accusations against Berlin, among other things with reference to the history of the war. Pictures of Merkel with a Hitler bar became commonplace in southern European demonstration trains. From the north came accusations of southern European prostitution, laziness and cheating. The mutual accusations have persisted.

7: Euro = politics

Chancellor Merkel sees the euro in a political light. ” The euro is much, much more than a currency,” she repeats. She is ready to do what is “necessary” to ensure the survival of the euro. The “necessary” has so far been to strengthen the EU’s common bodies and an economic and political union. A large number of solution proposals have been put forward – proposals that can be categorized into three different tools:

  • increased control and mutual monitoring of each other’s economies
  • increased possibilities for sanctions against countries that break the rules / stability pact financial contributions from the community if the affected countries implement extensive cuts in public spending and structural reform programs similar to those implemented by the Germans. Common currency requires common habits, it is said.

With considerable German voter skepticism behind it, Merkel has all along aligned her European policy with the parties in the Bundestag. Neither the SPD nor the Greens have opposed the CDU / CSU’s policy. Individual politicians, on the other hand, have it – especially from Merkel’s right wing. They have sued proposals that involve more transfer of sovereignty to Brussels, before the Constitutional Court .

Germany Opts for Europe 3