Eurozone: But austerity is necessary
26 April 2012
The Netherlands, France, and the ECB: Europe's growing opposition to Germany's strict austerity measures is threatening the survival of the fiscal pact. Nonetheless, Berlin should continue to insist on discipline both for itself and for Europe, argues a German business journalist.
Since when does the Netherlands lie on the shores of the Mediterranean? The euro crisis is back, and not just in the south. It has arrived on the northern shores too, which is where the good and the stable come together. Those who are like us.
Of course, the Netherlands is not Greece. The state however has gone into debt too quickly, and the private debt is immense. The government therefore has urged deeper cuts – and has been frustrated by the populists. Every case is different, though, from Madrid to Rome and now The Hague. The structure, still, is always the same: a stagnant economy and high unemployment leading to austerity cuts, which exact a price on economic vitality; the citizens get angry, the stock markets are rattled, and the politicians give way a little. Or – as in the Netherlands – sometimes they lose their offices too.
The United States has responded the same way as the opposition parties in Europe, accusing the Germans of ruining everything with their austerity. Berlin should rather take responsibility for its partners’ debts and free up money for new growth. Then calm would finally prevail in the shaky, much papered-over Euroland.
Such a solution would in truth suit the Americans, because as the world’s largest debtor they would then not be left standing so alone. But Europe is different from America. A bail-out in return for a little discipline has to be the deal here. Otherwise, one country after another will get sucked into the vortex of low ratings and high interest rates.
All eyes are on Germany now. But what is Berlin doing, except saving with great farsightedness in the midst of Germany’s economic boom? It’s planning new social services such as subsidised childcare and even coming up with pension increases into the bargain. No matter how one stands on the individual measures, the sums make Germany, whose debt amounts to approximately 80 percent of its current economic performance, less than credible as a role model in the European austerity pact.
Europe, though, needs Germany as the champion of austerity. The crisis will be returning to the front pages more frequently in any case. Governments here and there will be running up more debt than the common pact allows, and all this is part of the game. But if Berlin doesn’t push for savings and reforms, no one else will. In the end it would be even tougher to save the euro – and to make Europe converge.