Bad Neighbors?

German Intransigence Could Threaten Europe

Germany’s excellent second-quarter export and growth results have set the country at an increasing—and increasingly dangerous—distance from other members of the European Union. That jeopardizes the EU itself and the euro—which many in Britain and the in United States would like to see fail. Thus Germany’s success is tending to encourage market pessimism rather than international optimism—everywhere but in Germany itself, it seems, where complacency reigns, together with a certain amount of what the Germans themselves term schadenfreude.

There is always a correlation between the national outlook of a society and what may be called its national character, formed in part by its history of religious belief and practice. Germany is the land of Lutheranism, a religion committed to belief in the radical corruption produced by original sin, the punishment of evil, and that only faith, and not good works, justifies. Those who waste the bounty of good times through extravagance and the neglect of duty, as in the case of Greeks, and supposedly of Spaniards, Portuguese and French, can expect no pity. The culturally Catholic Latins are more tolerant of sin and more willing to forgive, and take a positive view of good works that benefit the poor and laggard.

In June, Germany recorded its most spectacular rise in exports since 1984. The relative weakness of the euro has been very good for German automobile and heavy industrial exports. At the same time, Germany has been resistant to imports from elsewhere in the euro zone. Greece is selling only 2 percent of its GDP to Germany, and France only 3.8 percent, with Italy, Spain and Portugal trailing France. Yet Austria and the Netherlands are exporting, respectively, 14 percent and 12 percent of GDP to Germany.

In the EU’s overall plan for recovery, Germany insists on deficit-reducing measures across the entire euro zone, even though this has a depressive effect on other national economies and stimulates unemployment elsewhere. That has particularly dangerous implications for weaker economies where, as George Soros has recently written (in the New York Review), “even if budgetary targets [demanded by Germany] were met, it is difficult to see how the weaker countries could regain their competitiveness in the absence of exchange rate depreciation.” He argues that the demanded adjustment process would require reduction in wages and prices, producing deflation.

Should there be a continuing decline in the value of the euro, which touched a recent low against the dollar in June, euro-zone exports would benefit. But without economic growth, “the relative weight of [those nations’ debt would] continue to grow,” writes Soros. That is true not only for national debt but also for commercial loans held by banks “even more reluctant to lend, compounding the downward pressures.”

Germany has been the principal material contributor to the construction of the European Union since the its beginning in the Coal and Steel Community of 1951. (France has been the intellectual and political driving force in the construction of “Europe,” inventing its institutions and pushing its development).

The present economic crisis has brought out in Germany something that has been feared since the days when the novelist and commentator François Mauriac remarked of Germany that he admired it so much that he was glad there were two of them. Both Margaret Thatcher, Britain’s prime minister at the time, and France’s President François Mitterrand opposed Germany’s reunification, which the United States successfully pushed for in 1990—and which was in any case inevitable once the USSR had foundered.

This united Germany has since acted with prudence and generosity, most of all in its reluctant sacrifice of the Deutschmark to the common currency in 2001. The present crisis has reignited German fears of inflation, a part of its national emotional heritage. It has also brought out in Germany a new condescension in dealing with nations of lesser economic virtue (if more palatable histories, as some Greeks bitterly noted earlier this year, calling attention to the fact that Greece has never seen German reparations for the damage done to Greece during its brutal wartime occupation by Germany).

Since the creation of the European community and German rearmament within NATO, good Germans have boasted that they practiced no national foreign policy, only a European policy—and no national military policy. Now, however, under stress, many Germans have found that adopting a new national economic policy comes naturally. Others, including other Germans, are discomfited by so casual a treatment of the accomplishments of Europe in constructing its union, and its single market and common currency, over the past sixty years—a collective achievement that has no counterpart in modern history, and a value that demands to be preserved.

© 2010 by Tribune Media Services International. All Rights Reserved


Related: Does the EU Have a Future? by William Pfaff

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The current balance between the merged Lutheran-Reformed church and Catholics in Germany is 29.9% to 30.7%, and this is not far out of line with the historical proportions. So how is it "the land of Lutheranism"? I'd love to hear someone try to explain to Bavarians how their economic behavior is a fruit of their enchantment with Lutheranism.

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About the Author

William Pfaff, a former editor of Commonweal, is political columnist for the International Herald Tribune in Paris. His most recent book is The Irony of Manifest Destiny: The Tragedy of America's Foreign Policy (Walker & Company).