But austerity is necessary

The Netherlands, France, and the ECB: Europe's growing opposition to Germany's strict austerity measures is threatening the survival of the fiscal pact. Nonetheless, Berlin should continue to insist on discipline both for itself and for Europe, argues a German business journalist.

Published on 26 April 2012 at 15:20

Since when does the Netherlands lie on the shores of the Mediterranean? The euro crisis is back, and not just in the south. It has arrived on the northern shores too, which is where the good and the stable come together. Those who are like us.

Of course, the Netherlands is not Greece. The state however has gone into debt too quickly, and the private debt is immense. The government therefore has urged deeper cuts – and has been frustrated by the populists. Every case is different, though, from Madrid to Rome and now The Hague. The structure, still, is always the same: a stagnant economy and high unemployment leading to austerity cuts, which exact a price on economic vitality; the citizens get angry, the stock markets are rattled, and the politicians give way a little. Or – as in the Netherlands – sometimes they lose their offices too.

The United States has responded the same way as the opposition parties in Europe, accusing the Germans of ruining everything with their austerity. Berlin should rather take responsibility for its partners’ debts and free up money for new growth. Then calm would finally prevail in the shaky, much papered-over Euroland.

Such a solution would in truth suit the Americans, because as the world’s largest debtor they would then not be left standing so alone. But Europe is different from America. A bail-out in return for a little discipline has to be the deal here. Otherwise, one country after another will get sucked into the vortex of low ratings and high interest rates.

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All eyes are on Germany now. But what is Berlin doing, except saving with great farsightedness in the midst of Germany’s economic boom? It’s planning new social services such as subsidised childcare and even coming up with pension increases into the bargain. No matter how one stands on the individual measures, the sums make Germany, whose debt amounts to approximately 80 percent of its current economic performance, less than credible as a role model in the European austerity pact.

Europe, though, needs Germany as the champion of austerity. The crisis will be returning to the front pages more frequently in any case. Governments here and there will be running up more debt than the common pact allows, and all this is part of the game. But if Berlin doesn’t push for savings and reforms, no one else will. In the end it would be even tougher to save the euro – and to make Europe converge.

Comment

Merkel overlooks social dimension

“Germany versus the rest of the world”: business daily Handelsblatt wonders about Germany’s role as the master of austerity, and remarks that the Merkel government, which is overly concerned with the “economic”, has forgotten the importance of the prefix “socio-” —

“Germany appears convinced that opposition to austerity promoted by populist parties on both sides of the political spectrum is simply a nationalist anti-European reflex — a point of view on the crisis which is far too simplistic. The crisis has come to include a wide range of elements, and most notably political opposition to an austerity that demands sacrifices from the people without offering them the prospect of a better future. Such socio-political considerations have been given no weight in the standard manual for debt reduction, but they are critically important in politics. Representatives who are unable to communicate to the people will be isolated and destined for failure.”

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