Econocrat

It is ironic that the European Union, originally conceived as a mechanism to stop Germany ever again seeking to subjugate the European continent, should now be the vehicle by which German socio-economic values are imposed on struggling southern neighbour states in return for financial assistance. In the nineteenth century, the defeat of Napoleonic France and Great Britain’s single-minded pursuit of a far-flung trading empire left a vacuum in continental Europe for an industrial powerhouse, which Germany began to fill even before it was a country. In the twentieth century, Germany twice brought the world to war and was twice defeated, but the Marshall Plan was an admission that Europe’s economy could not recover without the rebuilding of Germany’s industrial strength.

Today, the nations of Europe are looking to Germany to save them from ruin. The Germans are a reluctant saviour. They keenly supported the formation of the Eurozone because it gave them a huge captive market for their goods without the fear that a strengthening Deutsche Mark would render them uncompetitive. While they paid lip service to the idea that other countries must adopt German style fiscal and monetary discipline in order to achieve ‘convergence’, they preferred not to take an active role in imposing such discipline. Germany’s days of seeking to dominate others were behind them. Let them concentrate instead on controlling wage inflation and on efficiency of production, let German companies sell to Europe and the world, and continuing prosperity was assured.

Unfortunately, if the Eurozone is to survive, it needs a stronger guiding hand. Southern European governments rushed to embrace northern European standards of living and economic growth based on consumption, but inflexible labour practices mean that industrial production declined. Simultaneously, growing prosperity and agricultural subsidies drove people off the land and into the cities. The resulting massive trade imbalances and budget deficits led to the current unsustainable levels of unemployment and debt. Meanwhile, populist politicians in Greece arouse public anger by blaming Angela Merkel for imposing painful austerity measures and parallels are drawn with the German occupation of Greece in the Second World War. The German people in turn rail against footing the bill for the corruption and wastefulness of the southern Europeans. German politicians are in an unenviable position. They either allow the Eurozone to break up and thereby lose their captive common market, or they stand as a guarantor for their neighbors to the south cognizant that any conditions attached to this aid will be seen as economic imperialism.

The greatest irony is that a dose of the discipline that has made Germany such an economic powerhouse would bring prosperity to a place like Greece, but any attempt to impose it from abroad is portrayed as an attack on national sovereignty akin to the German occupation.