Germany Opts for Europe Part IV

By | October 20, 2021

The court guards German democracy and its constitution, and it examines whether individual decisions violate the constitution. So far, all proposals to resolve the euro crisis have passed. The last two and most far-reaching are the establishment of a ” financial pact ” . Euroland’s budgets will then be checked and approved in Brussels before national parliaments get them approved.

The second is a permanent rescue fund – ESM – of 620 billion euros (about a Norwegian oil fund!). From there, debt-laden eurozone countries will be able to borrow at lower interest rates than the financial markets offer. Germany guarantees 27 percent of the loans. The challenge is that among the guarantors, in addition to France, we find the larger euro countries Italy and Spain, which may have to borrow from the fund themselves. There are limits to how many debt-laden countries Germany can carry.

In addition, the EU is working to establish a banking union with common banking rules and rule enforcement from the ECB, as well as joint measures to possibly rescue threatened banks in the member countries. This work has long stood still pending the formation of a new government.

8: Solidarity and responsibility

Merkel has been heavily criticized for her tough cutting demands. Against her austerity and austerity course is the perception that EU countries must grow out of the crisis . This will require the injection of fresh capital. But where should it be sourced from? Should the ECB “print money”
(increase the money supply) as the US , UK and Japan do? The ECB has approached such a price by buying government bonds from euro countries. In the event of a loss on such bonds, Germany will also have to inject new capital into the ECB.

Germany has long been criticized for unwillingness to show full solidarity with the rest of the eurozone . Prominent economists have pointed out that large international imbalances are a common responsibility: Countries with a balance of payments surplus (among them Germany) should use their freedom of action to stimulate increased demand, they say. At the same time, the financial markets will force countries with deficits (read: the PIIGS countries) to save measures when debt and interest rates become too high.

German government debt is still too high (81 per cent of GDP) for the government to pursue an active stimulus policy and increase public spending or adopt tax cuts. The country’s powerful unions have shown great moderation over the last ten years’ wage settlement. Now they see the possibility of more spacious wage settlements and that German workers will get their share of the sharply increased ownership income in German business. Higher wages – partly as a result of a possible statutory minimum wage – could have a certain stimulus effect. Nor will this be a final solution to the euro crisis.

Germany, a country located in Europe according to AGOODDIR, is therefore working for closer integration and increased political responsibility for the euro to the common institutions in Brussels. This requires treaty changes and a common will from EU member states to accept German requirements and solutions. Such a solution will at best take a long time. So far, it has spawned anti-German attitudes and British threats to leave the EU. But can the acute debt crisis be stagnated by these plans?

9: Only ┬źmarginal adjustments┬╗

There is political agreement in the new Bundestag that German political and economic interests are served by the EU and the euro. The paradox , however, is that the euro, which was created to bind German power, today binds the rest of Europe to an economic policy adapted to German interests . Moreover, the Germans do not want to pay the whole bill for one euro with serious shortcomings.

Some believe that Merkel has already done enough to save the euro. Others – especially among the EU’s crisis countries – hope for new initiatives from a government in which the Social Democrats participate. The SPD seems to have been more sympathetic to Eurobonds than the CDU. Eurobonds mean that all euro area countries take joint responsibility for government debt in the eurozone. Merkel has rejected such a responsibility in cash.

The Social Democrats have also called for a softening of Merkel’s tough cut and savings line. A tightening line that has made her strongly unpopular in countries such as Greece and Spain, but all the more popular with her own taxpayers and voters. After the election, she gave a clear answer to those who hope the SPD will pressure her to change European policy by referring to – precisely – the voters. The CDU / CSU’s brackish owner must be interpreted as meaning that voters do not want a comprehensive change of course, only “marginal adjustments”, according to Merkel.

She is also well aware that further guarantees to the weakest in the eurozone could increase support for, among other things, the AfD in the election of a new EU parliament in the summer of 2014. And while crisis countries and others are annoyed that Merkel secured re-election without major, new reforms and costly proposals, voters most her steady course. The desire for stability in times of crisis does not surprise in a country where political drama belongs to its recent history.

Germany – some facts

  • Surface content: 357,000 km 2 . Norway 324 000 km 2
  • Population: 80.8 mill.
  • Median age: 46.1 years
  • Population growth: -0.18%
  • Number of children per woman: 1.43
  • Life expectancy: 80.4 years. K: 82.9, M: 78.1
  • Religion: Protestants: 34%, Roman Catholics: 34%, Muslims: 3.7%. Other and non-believers: 28.3%
  • Composition of GDP: Agriculture: 0.8%, Industry: 30.1% and Services: 69%
  • Unemployment: about 6.4 percent
  • Employment by sector: Agriculture; 1.6%, industry: 24.6%, services: 73.8 (2011)

Germany Opts for Europe 4