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June 25, 2012 9:03 AM Bashing Blinds

By Peter Ross Range

OK, the Germans won their big soccer match against the Greeks last Friday, contrary to my scenario. The Greeks never really had a chance. The Germans now romp into the semi-finals of the European Championships against Italy on Thursday.

With the Germans still ascendant on the sports field as well as economically, the Merkel-bashing goes on. But it does no service to solving the dangerous euro crisis which will once again be the subject of a summit meeting this week in Brussels.

I frankly don’t know whether austerity or an open growth spigot (of largely German money) is the right solution, as most U.S. voices seem to think.

I do know that the Germans, who fully understand Keynsian economics, strongly believe in their tough-love approach to the wayward economies of southern Europe. Their position is not pure stubbornness or, worse, pure Germanness, as all the cheap anti-German rhetoric suggests.

It should be noted that by insisting on reforms in the debt-wracked countries, the Germans are preaching what they have already practiced. Starting in 1998, they implemented a decade’s worth of painful labor market reforms—which are now paying off. Five or six years ago, Germany was still “the sick man of Europe.” Now that Germans have turned that around, they’re being called the meanies.

Germany’s economy booms, its unemployment continues to fall under 7 percent, its bond ratings are perfect. As I write this from Duesseldorf, I’m witness to a parade of prosperity in the Old City, including the sight of a Muslim family (head-covered mom) posing for photos beneath a statue of Jan Wellem, the elector who put Duesseldorf on the map 300 years ago.

The evidence is more than anecdotal, of course. And you can find plenty of folks suffering on the margins. But there is no disputing that Germany is in the throes of a new economic miracle, reminiscent of the first one in the 1950s and 1960s. Germans achieved this one by biting a lot of bullets, with lots of labor union resistance. Today, the unions love the boom and recently negotiated some big raises.

These are among the reasons why Germans believe in playing by the agreed rules and the necessity of strong reforms. They are well aware, too, of the argument that an artificial “internal devaluation” aided Germany’s export-driven economy—because the euro was weakened by its weak members, boosting exports, and because German labor accepted a kind of wage freeze over the 2000s.

But a cooperative labor-management approach to economic challenges is the time-tested German model. It worked in the 1950s and 1960s; it worked again in the 2000s. Eschewing wage increases in tough times is called doing the right thing. That makes it difficult for Germans to understand why they’re now accused of promoting the wrong thing.

Even though I do not take a position on reform v. growth—I am not economist enough to decide—I do worry about the unrelenting German-bashing, which distorts a serious debate. The carping has spread well beyond the fake photos in the Greek press of Chancellor Merkel and her finance minister, Wolfgang Schauble, done up as Nazis.

The Irish Times, for example, tarted up Merkel in a dirndl, showed her wielding a horsewhip over a manacled prisoner while refusing a wheelbarrow of cash, saying: “It is not zee munny! It is zee discipline!” Cute.

There’s nothing wrong, of course, with skewering Angela Merkel and all of Germany if you don’t like their policies (and, believe me, virtually everyone in Germany supports Merkel’s position). But, let’s face it, the Germans are an especially low-cost target for reckless invective.

After all, they are Germans. If editors caricature them as Nazis, what are the Germans going to say?

But cheap shots are not an argument. If a large part of your position is that the Germans are inherently flawed, which economic theory is that? You can hate austerity and love Keynes without going ad hominem, which is happening on a collective basis. The implication is that the only reason Merkel believes in fiscal discipline for the basket cases in the euro zone is that she’s German.

How else to understand this line from a Washington Post editorial: “Only in Germany could irresponsible policy take the form of self-denial”? Self-denial is something we teach our children. If a virtue is suddenly a flaw, why is it “only” a German flaw? Because Germans are Germans? We’re getting close to slurring on the basis of national origin here. Will race or religion be next?

Just ask the Greeks. Budgetary sinners they surely are, but the trashing they’ve received from some German publications on the basis of cultural stereotypes inflames rather than informs debate. “Bye-bye, Greeks!” headlined a boulevard tabloid before last week’s decisive soccer match. “We can’t help you guys now.” A German newsweekly put on its cover a statute of Aphrodite wrapped in a Greek flag and giving the world the finger—an offensive image in Greece.

Piling-on fever can lower resistance to conspiracy theories. Ezra Klein’s recent unsourced suggestion in the Washington Post of a secret-sounding German and northern European plan to drive the Greeks out of the euro zone without admitting it seems a case in point. Klein is a respected economic journalist and if he’s heard of such a plan, that’s an important story. I would like to know where he heard it—or at least how much credibility he ascribes to sources he has “begun to hear.”

It is absolutely true that Merkel believes that moving the goalposts now would lift all reform pressure off the mismanaged sovereigns. It is her core argument—she and her government have said so repeatedly. But it’s equally true that they’ve committed publicly to keeping Greece in the club; a conspiracy to do otherwise would be big news.

Getting to a solution in Europe is a tough and messy business. Neither of the pure arguments—total reform or unfettered stimulus—seems wholly convincing, which is why we’ll probably get a compromise package out of this week’s summit meeting in Brussels, like the gradualist approach recommended by Will Marshall. Either way, blindly bashing the Germans is an invitation to lazy thinking.

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Peter Ross Range is a Washington-based journalist who has often written about Germany.

Comments

  • KenZ on June 26, 2012 2:05 PM:

    Maybe people are bashing the Germans because they are relentlessly persuing a policy of austerity that is failing. Even Germany is now slipping into recession because of its policy. The Germans are so focused on "discipline" or consistency that they are now punishing themselves.

    It is also worth pointing out on a macro-economic front that Germany had higher deficits than Spain, Portugal, and Ireland. It is by no means a model of financial rectitiude.

  • gdb on June 26, 2012 3:11 PM:

    "I frankly don�t know whether austerity or an open growth spigot (of largely German money) is the right solution, as most U.S. voices seem to think."

    Enough said. If you don't know if F=ma or F=mv, then please don't post on whether using Newtonian mechanics is better than Aristotelian principals to lauch a rocket.
    Economics is now a science-- has been for at least 70 years with testable data. And keynesian theories are the only ones that fit the data in Depressions/liquidity traps. Next time-- please post on string theory as the answer or no to GUTS and TOEs. You are likely to do less damage-- and be more accurate.

  • matt w on June 26, 2012 8:22 PM:

    "It should be noted that by insisting on reforms in the debt-wracked countries, the Germans are preaching what they have already practiced. Starting in 1998, they implemented a decade’s worth of painful labor market reforms—which are now paying off. Five or six years ago, Germany was still “the sick man of Europe.” Now that Germans have turned that around, they’re being called the meanies."

    Please read Paul Krugman's blog, in particular his post "Germans and Aliens":

    "Not that it will do any good, but it’s worth pointing out that Germany’s experience can only be generalized if we find some space aliens to trade with, fast.

    "Why? Because the key to German economic affairs this past decade has been a truly massive shift from current account deficit to surplus: [graph omitted]

    "Now, other countries within Europe could emulate Germany’s past if Germany herself were willing to let its current account surplus vanish. But it isn’t, of course. So the German demand is that everyone run a current account surplus, just like they do — something that would only be possible if we can find someone or something else to buy our exports."

    So, having revived its own economy through exports, Germany is refusing to allow other countries to do the same, by insisting on a monetary policy that serves Germany's interests and no one else's. The bashing of the Germans is justified on the merits -- and if your objection is to the tone of the bashing rather than the substance, you need to get your priorities straight. Are we more concerned about the unnecessary massive suffering taking place in the Eurozone, or about people being big meanies?

  • HMDK on June 27, 2012 5:53 AM:

    Is this article a joke?
    Seriously?
    No one cares about or believes in stupid conspiracy theories here.
    By anyone.
    But Germany is wrong, wrong, wrong on the money, literally.
    And now you're trying to make it sound like it's some kind of conspiracy by others to make Germany look bad?
    There's no need to. They've dug a hole and are digging themselves deeper. People are trying to get Merkel to understand that, and to help her pull her country out.
    This article really is vapid.

  • Inez on June 28, 2012 5:23 PM:

    I liked the article very much. I am not an economist either, but German-bashing in Europe seems out of hand (my sources are newspapers). I have read only another article in the NY Times on the same vein: saying that contrary to common held opinions, Germany spent much more than it received in the construction of Europe. I have lived in Spain for a year, just before the euro (1999), and I was impressed with all the money poured into the country by the EU (with Germany's being the biggest contributor). Spain alone went in a few years from being a relatively backwards country to a modern one. In the ensuing years, most Spaniards had a higher standard of living that Germans did (I know quite a few Germans very well). I see a great injustice in all this. That is my opinion, as a layman who knows very little economics, but can judge other things such as living expenses, standard of living, etc.

  • Cubitus on July 02, 2012 6:56 PM:

    I just want to remind you that when the Wall fell, germany was in dire state. This is when the French president Mitterand decided to raise short term rates (no central bank indenpendace at that time) to support the DM and keep German exports competitive with its largest client at the time (France). The result... 10 years of growth lost for France.
    Unemployment zoomed up, import price got up.... just because the French prsident had decided to help Germany in this historic reunification period.
    Germany didnt do all the efforts, its neighbour helped.

    Fast forward 20 years, Germany economy is booming because of a low Euro, an capex equipement boom in china not because German are smarter just pure luck.
    Oh. I forgot. population growth is ZERO. ie they have no0t to spend a dime to support new babies (contrary to France).
    We all know that europe need a higher level of fiscal integration since the Euro was introduce. The problem was that the US RealEstate bomb vaporized some much European banks asset that the expected crisis is much more difficult to solve. following a German diet would be foolish. Their success is temporary. The day China growth slows down German are gonna look for a job on the Costa del Sol.

  • Gorobei on July 03, 2012 1:39 PM:

    Yay Duesseldorf!

    I don't think you can chalk up the German success to luck. The fact that they are in the right market to supply the Chinese is helpful, but it's not the whole story.

    The Germans invest in their society. They educate their workers and support their community and they have realistic expectations of what people can and should do.

    It seems the Greeks have been excessive and unreasonably generous in their benefits. It is not realistic to expect that you can retire at 50 with 80% pension and get paid for another quarter century.

  • Dirk from Saxony on July 11, 2012 9:38 AM:

    It is amazing what can I read here. I guess nobody know exactly what is going on in Europa. Germany alone took a risk for about 800 Billion EURO (1000 Billion Dollar) to hold the economy in Europe alive. I am from Eastgermany and I know exactly what happened there twenty years ago. The economy got sick for more than 10 years because the "communism business" was broken down. Everybody in Germany know it is not possible to get new structures, new business, new laws and a new life from a day of an other day. That need time! It is absolutely wrong to think you can get everything with money. Nobody is able to buy the time by money. The result of the try is visible in the States and in Europe as well.
    Greece situation is similar the situation in Eastgermany twenty years ago. They have to go through a very deep valley. Greece was characterized by a lot of farming business, we bought tomatos and olives from them. Also it was a nice and cheap Country for holiday. The EURO brought them a lot of money and nobody would like to do his job on the farms anymore. Suddenly they were able to drive BMW and Mercedes and to sit in a nice office in front of a PC.
    Everybody would like to earn a lot of money for a simple job or for nothing also. That is impossible! In Eastgermany we earn much less money than in Westgermany but we got the same prices like in Westgermany for everything. So what! That's the life. That is what i told above. It need time!
    In Spain it looks like the same. Everybody will have the money now! And if the Country doesnt able to pay for - Germany has to pay for. Mr.Schröder Chancellor of Germany until 2005 has conducted reforms which were very hard. Nevertheless he was convinced of the absolute necessity. Much people in Germany dont like to follow him and he lost his office. Today Mrs Merkel and Germany in total have a benefit of these. The other countries in Europe have to go the same hard and stony way, now!

  • Mel on August 18, 2012 1:10 AM:

    ^ Nice that you mentioned Schroeder and his reforms. Saying that Germany "got lucky" is completely ridiculous. Here's something for all of you: http://economix.blogs.nytimes.com/2012/05/29/in-europe-a-dispute-over-facts-and-fairness/