Hill, S., (2013), “A New Growth Bloc Against Germany’s Flawed Leadership”, Social Europe Journal, 17 December.
What does the German Grand Coalition have to offer Europe? Not much.
I have been carefully reading and weighing all the commentary regarding Germany’s Große Koalition (or GroKo) agreement, and it’s clear that the coalition agreement can be read as a testament to the current state of German political and economic philosophy. Having waited a year for the results of Germany’s federal election, now we know what that bipartisan philosophy has to say to Spain, Italy, Greece and the other struggling eurozone states: “Call us only in an emergency. And even then, we will do as little as necessary.”
While that “muddling through” approach got Europe through the worst of the eurozone crisis, it will not be successful in building a vibrant Europe for the 21st century. Germany is forfeiting its leadership and sowing the seeds of a eurozone split because it has complacently affixed the future to its very flawed economic vision.
Initially during the economic crisis that was unleashed in 2008, Germany provided badly needed leadership. I praised Chancellor Angela Merkel (including in an article on the Social Europe Journal website) for projecting confidence and reassuring financial markets and the broader public. During the early chaos of the Greek default crisis and a fear of spiraling debt levels in 2010, Germany’s brand of austerity economics had its place, with its emphasis on debt consolidation as a way of steadying the boat in rocky seas, particularly in places like Italy and Greece which had run up sizable public debt even before the economic or eurozone crises (unlike Spain and Ireland, which had low public debt before its bank bailouts). Chancellor Merkel had a point in 2009, when she lectured President Barack Obama and other world leaders about the perils of a global economy that is built on “debt and speculative bubbles.” Merkel sounded practically like a Social Democrat when she declared that the era of US-style, Wall Street casino capitalism must end.
But in the aftermath of September’s election, it is all-too-clear now that the German long- and medium-term vision for Europe is shortsighted, rigid, and not grounded in basic economics. The recent coalition agreement between the CDU and SPD has done little to pivot and rechart the present precarious course, which has resulted in damaging levels of unemployment and miniscule growth in far too many member states. Germany’s insistence on policies focused exclusively on competitiveness, debt levels and inflation – otherwise known as “austerity” — has only led to deflation and even higher debt levels for many states. Much of Europe is stuck or going backwards, and Chancellor Merkel seems unaware or unconcerned about her policies’ longer term consequences and the north-south divide they are cleaving.
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Relevant Posts
- Springford, J. and Tilford, S., (2013), “Why Germany’s trade surplus is bad for the eurozone”, Centre for European Reform Bulletin, Issue 93, December 2013/ January 2014.
- Marzinotto, B., (2013), “The euro complements Northern European economies more effectively than those in Southern Europe”, Europeans Politics and Policy Blog, 02 October.
- Krugman, P., (2013), “Germany’s lack of reciprocity”, The New York Times, 12 November.