Friday, September 21, 2012

How well is Germany doing in the euro crisis?

When it comes to managing the crisis, for which Germany and its Chancellor Angela "Frau Fritz"" Merkel have the primary responsibility, they are doing terribly. At this point, there looks to be a greater chance of Mitt Romney winning the US Presidency than of the euro currency and the EU organization surviving Frau Fritz' "ordoliberal" austerity disaster.

Germany in general has benefited greatly from the euro currency. It has an export-oriented economy, with most of its exports going to other European countries, a large portion of them in the eurozone. Since the value of the euro reflects the combined strengths and weaknesses of all the eurozone economies, the euro is a cheaper currency than a separate German currency would be on its own, which greatly facilitates Germany's exports. For that reason and also because of the "Target 2" issue - very briefly, a borrowing-and-lending function of the national banks of eurozone countries related to managing the common currency in which the German Bundesbank is a big-time lender right now - an end to the euro before the economies in Europe get into strong recovery would hit Germany very hard. But on the whole, Germany is doing better than most other eurozone economies right now economically, though its economy is showing real signs of serious weakness at the moment, too.

But that doesn't mean that German workers are all benefiting greatly from Germany's relatively advantageous position in the eurozone. László Andor is the EU Commissioner for Employment, Social Affairs and Inclusion. In an interview with the FAZ (EU-Kommissar László Andor. „Deutschland hat die Krise mit verursacht“Frankfurter Allgemeine Zeitung 21.09.2012), Andor addresses some of Germany's problems.

One is that a large portion of Germany's workers are now working in what he calls "mini-jobs". The previous SPD/Green government (red-green) coalition introduced a system under the name of Hartz-IV that relaxed the labor rules governing employment so that businesses could create more jobs with lower wages and far less job security that had been the norm under the German social compact between business and labor, which was a major feature of what Germans call their "social market economy." This was a neoliberal idea - "flexibility" of labor laws in the euphemism - enacted by a left coalition government, another sign of the political corruption of left parties into the neoliberal consensus that has become so obvious in the post-Cold War world. Andor warns that these low-wage jobs can become a "trap of poverty" ("eine Armutsfalle") for workers.

Interestingly enough, the "social market economy" worked well enough that what Republicans would call a "European socialist" country like Germany doesn't have a legal minimum wage. There is pressure now in Germany to create one, a measure that László Andor supports.

The European Commission recently approved assistance to German workers displaced by globalization, the beating heart of the neoliberal ideology. From the Commission's website, COMMISSION PROPOSES €5.3 MILLION FROM GLOBALISATION FUND FOR FORMER WORKERS OF MANROLAND A.G. IN GERMANY 13/09/2012:

Germany applied for support from the EGF for 2,284 workers made redundant by Manroland AG and three of its subsidiaries and suppliers. Of the total, 2,103 would be eligible to participate in the measures. The package aims to help the workers by offering them training courses leading to qualifications, in-depth advice on starting up their own businesses, job search services, as well as coaching and advisory services during unemployment and in a new job. The package will also include a job-search allowance ('Transferkurzarbeitergeld') and an activation premium to help redundant workers to decide to accept a lower paid job.
If this sounds like just the opposite of the policies that Frau Fritz is insisted on in countries like Greece, Ireland, Italy, Portugal and Spain, it is. Angie has not imposed that kind of austerity policies on her own country yet.

But when you have a left coalition government establishing a path for businesses to degrade the level of jobs as with Hartz IV, you don't have as much need to use a depression and a currency crisis to impose neoliberal measures to reduced workers' incomes. The "left" is doing it for you. And even in opposition, the SPD leader is pressing for reductions in pensions! With friends like that, the labor movement doesn't need sworn enemies.

Andor points out the German productivity has soared but wages haven't nearly kept pace with the increase in productivity. This also gives Germany's export economy advantages relative to other eurozone nations. But with the depression, the currency crisis and Frau Fritz' austerity regime for the countries currently victims of it, that is a problem. For the eurozone to work, if that's still at all feasible, Germany will have to accept higher inflation (which is not the same as higher wages!). But in this case, a more fair level of wages would also have the advantage of helping to restore economic equilibrium within the currency zone. As Andor puts it:

Die Ungleichgewichte im Euroraum sind nicht nur das Ergebnis fehlerhafter Politik in den Krisenstaaten. Deutschland hat dabei ebenso eine Rolle gespielt, mit seiner nach Ansicht einiger merkantilistischen Wirtschaftspolitik die Ungleichgewichte im Euroraum verstärkt und so die Krise mit verursacht. Wir müssen deshalb die Lohnentwicklung künftig auf europäischer Ebene genau beobachten und so dazu beitragen, dass sie innerhalb des Euroraums nicht wieder so stark wie zuletzt auseinanderläuft.

[The imbalances in the eurozone are not the result of failed policies in the crisis states. Germany has also played a role in it, strenthening the imbalances in the eurozone in my view with some mercantalist economic policies and so started the crisis. Therefore, we in the future must carefully monitor the wage levels on the European level and with that to make sure that within the eurozone that they don't diverge so much as they have recently.] {my emphasis}
This reflects the reality that, among other things, a common currency zone needs a basic fundamental level of wage standards and labor practices. In other words, the kind of political and economic union that Frau Fritz and German conservatives don't want.

Andor also supports the issuance of eurobonds, obligations of the entire eurozone, another essential element for a workable common currency to which Angie is bitterly opposed.

He also thinks Germany's approach to early childhood care is sub-optimal. What they do is almost unthinkable in American politics. The state pays a certain amount for each child in the first couple of years of their lives to enable one parent - almost always the mother - to stay home to care for the child full time. This, however, can a disadvantage for women's careers, and Andor would like to see expansion of kindergartens and early child care facilities in Germany. He also favors more of what we would call "affirmative action" (a term from English common law, not one he uses) for women in Germany, a topic currently under heated debate there.

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