The Cosmopolitan Fictioneer
A member here. He basically has the position that most of the businessmen, bankers and the Merkel led government (and their voters) have regarding the economic situation:
"Everyone else in Europe was a fool and didn't keep their domestic and fiscal ducks in a row and they have to clean their houses and learn responsibility like adults."
The IMF and the man heading the ECB (Mario Draghi) are essentially going to Germany "That's insane. Stop hording and saving your surplus like a dragon hording gold and start spending on infrastructure."
edited 14th Oct '14 11:42:38 PM by PotatoesRock
Crossposting from the Economics thread:
As cracks in its economy widen, is Germany’s miracle about to fade?
:
But in October 2014 it is the pessimists who are setting the tone: the German economy is looking about as rusty as the blue miracle in Dresden. In his book, The Germany Bubble, Olaf Gersemann describes the current boom as the “last hurrah” of a nation that faces almost certain decline after six successive generations of rising living standards, while economist Marcel Fratzscher’s The Germany Illusion argues that the country needs to shed itself of the fantasy that it can thrive while the rest of the continent continues to struggle.
Both identify a lack of investment in infrastructure as symptomatic of a wider malaise. Cliche may forever have Germany as the country of efficient autobahns and trains that run on time, but in reality it has invested less in maintaining its roads and bridges than other European state. Its investment rate in 2013 was the fourth lowest in the EU; only Austria, Spain and Portugal spent less. Fratzscher, who is head of the German Institute for Economic Research, calculates there is an “investment gap” of €80bn (£63bn).
But at least potholes can be spotted and filled. Missed investment in education, research and industry, on the other hand, might only be felt once it is too late. Gersemann, a journalist for the centre-right daily Die Welt, points out that official statistics show negative net investment in seven of the eight largest manufacturing industries since 2000, with the car industry the only exception. “The government needs to think urgently about how it can convince businesses to stay in Germany,” he said.
Fratzscher points out that Germany only invests 5.3% of its overall economic performance back into education, 0.9% less than the average Organisation for Economic Co-operation and Development country, the equivalent of €25bn. “Among western European countries, only Italy spends less money on its education sector than Germany,” he said.
Chancellor Angela Merkel and her allies are increasingly struggling to dismiss such warnings, with her finance minister, Wolfgang Schäuble, coming under attack from Merkel’s coalition partners, the Social Democrats. Schäuble’s plans for the next budget see Germany taking on no new sovereign debt for the first time since 1969, a historic achievement in the eyes of many German conservatives and an important demonstration of fiscal discipline to the rest of the eurozone.
However, many on the left say the obsession with a balanced budget – colloquially known as the “black zero” – is starving Germany and the rest of Europe of much-needed investment. “The black zero is a fatal signal,” said Fratzscher. Balancing the budget has become a “holy grail” for a succession of German finance ministers, wrote Jakob Augstein in Der Spiegel, the stuff of mystery and folklore, not genuine economic policy.
(...)
Assessments of the gravity and inevitability of Germany’s downturn differ. The government may have been forced to downgrade its growth forecast for 2015 from 2% to 1.2%, yet the economy minister and vice-chancellor, Sigmar Gabriel, refused to sound too pessimistic. Compared with 0.7% growth in 2012, Germany was still on a path to prosperity, he said last Tuesday: “Employment is still rising; unemployment is still decreasing.”
China’s slowdown and the impact of Russian sanctions were always bound to have a knock-on effect on the German economy, say others. Some, such as Kiel university’s Rolf Langhammer, go as far as arguing that the latest growth figures aren’t bad news at all, but encouraging signs that Europe may be rebalancing. By keeping down workers’ wages, Langhammer said, Germany had for years profited from rising labour costs in southern Europe. Now there were signs that the trend had been bucked: German workers were not only spending more thanks to low interest rates, but the introduction of a minimum wage in 2015 was also set to make German unit labour costs more expensive.
“What we’re seeing is precisely what we’ve been asking for from economies in southern Europe: they are exporting more, starting to kill their deficits and becoming more competitive,” he said. “Yet somehow some German politicians didn’t realise that this would also have an impact on our own economy.” Germany, he maintained, wasn’t doing as well as people said during the boom years – but it wasn’t headed for quite the disaster some were making out now either.
Economist Fratzscher remains positive that strategic investments and sufficient “political will” would allow Germany to avert the looming crisis – which is hardly surprising given that he is currently advising the government on its investment plans.
@Greenmantle:
"I guess that is why the Af D is doing well?"
One of the reasons, yes. Another one might be that the CDU under Merkel has moved to the centre and given up on many "conservative" values which has gained them many voters from the centre at the expense of "conservative" voters. Of course as evidenced by some regional elections, a lot of people who used to vote for the NPD have also decided to vote for the Af D, thus weakening the NPD (which is not too bad actually. The Af D is certainly problematic, but far less than the NPD).
"More like the people wouldn't accept a closer European Union — it's been hard enough for the Eurocrats to get where they are today."
Indeed. A closer political union would have to be based on new treaties, and the necessary fallout from altering the treaties (referndums et al.) are not desired by anyone. Angela Merkel has acutally pressed for a closer political Union for some time now, but politicans from Southern Europe have made it clear that their electorates almost certainly would not approve such a move.
@ Fighteer"Germans as a whole are doing an excellent job of shoving their heads in the sand and pretending that they know how to run an economic union."
It is always easy to lay blame on those who govern while not having to shoulder the responsibility. No one really knows how to run an economic union since it hasn't been done before to such an extent. While there might have been difficulties, the Eurozone has so far survived longer than many economists (among them Krugman predicted) so I don't really understand where there sense of entitlement comes from.
@Potatoes Rock, "It's Mashin' Time Europe Now Consists Of Two Factions: Germany, And Everybody Who Disagrees With Germany"
It isn't only Germany who backs austerity. Austria, the Netherlands, Estonia Luxembourg and Sweden als agree with this.
HGW XX/7
Sweden is not in the Eurozone, Luxembourg is irrelevant, and the other two are, even combined, not particular influential.
Schild und Schwert der Partei
Lost in Space
![[up]](https://static.tvtropes.org/pmwiki/pub/smiles/arrow_up.png "[up]"){kind=icon}
Economics is not a field that's governed by how many people agree with you, especially when those people are relatively unaffected by the crisis you're supposed to be solving.
edited 21st Oct '14 11:16:13 AM by Fighteer
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
Yet, filthy rich and close to Germany and the Netherlands.
Estonia is a good student, Austria has a kind of similar mentality to Germany, and Sweden not only is outside the Eurozone, but they also got the Nordic partnership, which allows them to overcome any crisis relatively quickly.
Estonia is a horrible example. They can afford to cut down their government spending because they're losing population in absolute terms and aren't that big to begin with. Their economic growth is much more like economic concentration than anything else, because the main industry they invest in - IT - is just not all that labor intensive compared to the likes of manufacturing.
edited 21st Oct '14 8:48:04 AM by FFShinra
A procrastination in of itself
Isn't Luxembourg just Switerland but smaller and in the Euro/EU?
edited 21st Oct '14 11:02:19 AM by SilasW
“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran
V
What about Poland and the Czech Republic?
Keep Rolling On
They're not part of the Eurozone. Also, Poland is good buddies with Germany.
Indeed, Poland also supports the way Germany has handled the crisis so far. Former Polish PM Tusk and Merkel are good buddies (which is one of the reasons why he became President of the European Council).
I'll give a longer response tomorrow, I am too tired right now.
Ok longer response: Obviously I meant Finland, not Sweden, my bad.
@Achaemenid "Luxembourg is irrelevant, and the other two are, even combined, not particular influential."
I really wouldn't underestimate the influence of smaller nations because of how the EU works. It has always been the case that bigger nations tried to win the support of smaller nations although their support might not have been necessary in order to not create gaps between the member states. Besides Juncker already caused already a big struggle between the UK and the rest. Not bad for such a small country.
Furthermore every state gets to send a commisar to Brussel which gives them some leeway. Why do you think Germany accepted Muscovici although his past and the current state of his home country all but disqualified him for the position? Because Valdis Dombrovskis from Latvia was positioned to more or less keep him in check. It has been normal for Germany in the past to not insist on placing Germans on key positions in the EU and instead opting on supporting other candidates they agreed on. This is btw the reason why Germans (unlike e.g. France) are so grossly underepresented on these positions. Although there are apparently signs that this is about to change in the future.
@Fighteer: "There's one that started in the 18th century and is still going strong today, in case you hadn't noticed."
Which do you mean? I hope you don't mean the British pound, since it is cleary not an union t "such an extent" as the Eurozone.
Lost in Space
It's across the pond. You know, the United States of America? Started as a union of independent states, got a common currency and a federal government, etc.?
edited 22nd Oct '14 7:36:11 AM by Fighteer
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
The USA had a lot of circumstances which made it more easier to evolve into the state they are right now compared to the EU.
I feel a sudden deja vu coming in this thread.
HGW XX/7
This was perhaps the most unproductive debate ever.
We know that a solution to the Eurozone's current problems is closer political union. For various political reasons, this is not an immediate possibility. That leaves policymakers two basic choices:
- Try something - anything - else that works.
- Try and create the political climate required.
I'd rather the ins-n-outs of those two options that do that dance again.
Schild und Schwert der Partei
V
You mean something like provoking Russia into forcing a closer Union?
....that would explain so much....
Lost in Space
Weaponized Keynesianism strikes again. Unification to resist overwhelming external threat plus massive military stimulus.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
V
The European Union was partially formed, and NATO explicitly, because of the Soviets.
Problem is, eventually it has to sustain itself without the threat. The EU can and has before, but NATO only now is getting reinvigorated, and that will only last so long for one reason or another.
Lost in Space
True. Unfortunately, the post-Cold War experience proves that peoples unified in response to a threat quickly fall apart once that threat recedes.
"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
HGW XX/7
Jean-Claude Juncker has pledged to present a €300 billion investment program by year's end.
Schild und Schwert der Partei
Are there any details in it or is it just for the usual reason (e.g. economy growth and lesser numbers of unemployed)?
