Stop blaming the 4th Reich for the Crisis

There is a growing anti-German feeling in Europe. Sometimes that is latent or openly hostile. First and foremost these resentments are rising in those mainly South-European countries, which are under the pressure of either the financial markets or the Trojka and the need of austerity. The newest pictures being transported by the media are from Cyprus, where a the people are demonstrating among others also against Germany, which is held mainly responsible for the dramatic downstream of Cyprus banks and economy, because it insisted on participation of the rich capital, which was invested in the Cyprus banks. The whole mess of the banks is accredited to the new 4rth Reich and a German Chancellor being shown as Adolf Hitler. While the German government still reacts in a diplomatic way, the normal German citizen does not understand: “That is how they thank us”, the common man asks, who still cannot look at Hitler as a joke and reacts in anger to the utterly inappropriate comparisons.

There are several reasons, why other European leaders like Barroso, van Rompuy, but also finally Hollande should take a position against this one-sighted blame games. Not only because these accusation are unfair, but also because they are counterproductive.

First, it is unfair, because it is not only Germany alone, which insists on stringent bail-out policies. Also Finland, the Netherlands, Austria are supporters of the austerity-policies, not to mention East-Europen-Euro-countries, like Estonia, Slovakia and Slovenia, which also have difficulties in explaining to their citizens, the need of taxpayer´s money within the European Stability Mechanism. In the case of Cyprus, it was also France, supporting the idea of the participation of the rich men´s capital.

It is also unfair, because it ignores the existing solidarity. Germany is the largest depositor in the European Stability Mechanism with pure cash of 22 billion and accessible capital of 168 billion Euros. Germany also already agreed upon 750 million euro´s of actual less interest rates as a minus in the budget 2013, which was agreed on among the second rescue-plan for Greece. The pure risks within the Deutsche Bank due to the balancing scheme in the Eurosystem (Target 2) and the massive imbalanced trade is currently around 450 billion Euros. These complicated risks and payments are difficult to explain to the common citizen, generating the growing ground for eurosceptics, decrying the lost of financial sovereignty.

Of course it is true, that Germany is following these rescue-policies not because of only solidary reasons, but also because its very own interest lies in the stability of the Euro. As a matter of fact Germany is currently benefiting from low, even negative interest rates on national state bonds.

However, these are no arguments against the domestic policy constraints. Germany is also in debt to 81 % BIP and has demographic and social problems. The current low interest rates are bound to rise in the medium term. Also in Germany public goods are reduced and some municipals are in danger of bankruptcy. Another expulsive effect is given by a recent study of the ECB, according to which both the average and median German has less assets then the people in Spain or Greece. Even though this does not take into account the average pension rights in Germany, due to which the citizen can afford to rent a flat in the retirement-age, it is a controversial number. One can certainly discuss approaches to economic policies, but also not the arguments of Keynes can wipe out these German political tensions, maintaining the illusion of an eternal source of ESM and also German money. It would be political naïve to argue, the German Bundestag could simply agree on giving out massive guarantees for Cyprus banks, without looking at the conditions of economic sustainability and the need for accountability. This will also not change if the current Liberal and Christian democratic coalition would be replaced by a government of the Social democrats and the Green party.

Of course, Germany could still pay a higher price to promote growth: We federalists are thinking of limited Euro-bonds in terms of a sinking fund, a more perfect Banking Union or the ideas of an unemployment insurance scheme, in order to better balance out the asymmetric shocks.

But the question that arises however is: What happens when the Southern European countries then simply continue their rather less sustainable distribution and nepotistic policies and tackle reform less courageously? What are we doing, if in the end the current trade imbalances are rather being sustained because the productivity in those countries does not increase? The argument, that Germany is in the need of a healthy economies in the South is not valid then, because in the view of the German government the austerity measures are aiming precisely at this: having healthy economies, which can become independent from transfer schemes.

The crucial question then is moreover: Can Germany in the present imperfect institutional framework actually spent more money without the appropriate control at EU level (no taxation without participation). To put it further: Will other European countries still agree on a further institutional set up and a new convention, once you have already agreed on Euro-bonds and further redistribution schemes? This is a valid question, keeping in mind how tough it will be actually to get a European referendum on a new treaty passed. Looking at the current political crisis in Italy for example, there is a legitimate momentum, questioning other governments will to explain their people the need for reform and the need for “More Europe”.

With all European love, it is about hard-hitting interest. The Southern European countries want to have more money and more time for their reforms, while the Northern European governments do not want to sell more to their citizens and voters. If you want to unfold an argument of the “European added value” in this maze, then you have to stop blaming counterproductively Germany, but give good domestic and European answers to the questions. An isolation of Germany will not bring the European project any further.