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Saturday, 12 January 2013

Germany: The king with no clothes

The Guardian carried a piece on Monday that should be amongst the most compelling reads of the week. It set out the simple, raw unvarnished and undistorted truth about the state of the German economy, and why the Eurozone is doomed to failure. Guardian readers reacted like Little Britain character Marjorie Dawes - "Nah, sorry, still can't understand you ..." - and the comments feature became an entirely unrelated debate on Marxism. Gunnar Beck is the unknown columnist cogently pointing out the king's nakedness, whilst the Guardian's big guns such as Jonathan Freedland are still effusively praising the taste, cut and style of the king's clothes.

Beck points out that despite 115% export growth between 1998 and 2011, German GDP grew annually at only 1.4% in the same period, compared to 2.7% for Sweden, 2% for the UK, 1.8% for the Netherlands and  1.5% for France. Real personal disposable income over the whole of the same period rose by just 7%, about a third of the UK increase. Poverty is increasing. The Germans are much worse off than they were. The recent spectacular export boom has completely failed to deliver economic growth in Germany - in fact, the Mediterranean basket cases apart, Germany's economy is amongst the poorest performing in Europe. 

The reason, Beck writes, is the operation of the Eurozone's Target2 transfer mechanism. At this point many Guardian eyes will glaze over and railway minds click onto the intellectually safe tracks of dialectical Marxism. Germany has effectively lent €715bn of sovereign wealth to southern Europe; as Beck writes
This German "wealth destruction" fund allows the euro countries to buy German goods they cannot afford and provides German industry with a multibillion euro export subsidy, which it does not need.
Target2 means that the benefits of the export boom in terms of national and per capita economic growth are enjoyed by the Eurozone countries to which Germany exports, rather than by Germany. Beck concludes;
Through the rescue funds, government bond buys and Target2 system the ECB and the German government are propping up a system that is ultimately unsustainable. With the euro rescue, Germany is shackled to a corpse. Germany's Panglossian politicians refuse to accept that even now Germany would be better off cutting her losses. Draghi, meanwhile, has not lost sight of his project for the "lirafication" of the euro and busily pours liquidity into the financial market at negligible interest – in defiance of his mandate and the EU treaties, to the eurozone's ultimate doom and to sustain the profits of international investment banks.
 "Nah, sorry, still can't understand you ..."


G. Tingey said...

So the Germans, too, would be: "Better off out" ??
It'll take time to percolate.
However, even in prosperous semi-rural Nordrhein-Westfalen, where I have friends I visit every year, the realisation that something isn't quite right is growing on them.....

Very interesting.

Also, if heavyweight Grauniad correspondents are starting to suggest that all is not well with EU-land, that IS a significant straw in the wind, isn't it?

Anonymous said...

That the German people have been lied to is a given, whether they realise it or not is open to question and the strength of the WWII guilt complex is something still very strong in the older German population, how long that will last is anyone's guess. If and when the Germans decide they've had enough of being fleeced by Brussels and by extension France....we shall see.

TrT said...

A German born in 1946 is now 72 years old.
WWII guilt is a rotting corpse, if not long buried.

EUrope hasnt been that for a generation, Germany thought they were "winning", but Mercantilism is a doomed philosophy.

Anonymous said...

Do they have shorter calender years in Germany?

meltemian said...

I was born in 1945 but I'm only 67.
Are German years shorter?

Anonymous said...

Its no good selling people goods if they don't pay for it.

TrT said...

maths in the morning :(

Fair enough, but the point stands, if you were born before the war ended, you are retired.

Anonymous said...

OK, maybe I should have said, residual remorse [and not all Germans - true] and that of the post war generation, who were children when Adenauer was Chancellor.

Blue Eyes said...

Same thing with China. They lend all their capital to the consumer countries (US and UK mainly) so that we can prop up their factories.

It's the usual thing: if I owe someone £100 and can't repay then I am in trouble; if I owe someone £100m and can't repay then they are in trouble.

Germany can't just quickly leave the Euro to get out of the mess, they'd lose all that money they've lent out. That is why Merkel et al. are so keen to get the southern economies reformed.

German wages are something like a third lower than British. Their export boom is based on cheap labour.

Demetrius said...

Berlin's new airport? And a few other things. They are not quite so efficient as we think. Bring back the British Control Commission of fond memory. Did I really once get 20DM to the pound?