European Politico-economics QA Mega-thread - Page 62

On February 24 2015 08:12 MoltkeWarding wrote:


Germany did not "throw" debt at Greece; during the Papandreou negotiations it was Germany which was most reticent about bailing out Greece, but finally succumbed to international pressure and political conformity. The Merkel government took a sizable political risk in giving German assent, in view of a sceptical public. In Germany, it was the Europhiles, not the "nationalists" who pushed hardest for the Greek bailout. The fact that these roles have been reversed in the assignment of motives merely 5 years on is a powerful testimonial to the force of resentful rationalisations.

I recall the domestic mood quite clearly, as back then I told my (largely pro-bailout) German acquaintances that contrary to their prognostications, this was not a loan, but a welfare scheme. They were fooling themselves in falling for the smoke and mirrors of "austerity" crafted to mute the sceptics.

On February 24 2015 08:22 cLutZ wrote:
When did loaning money to people at low rates become predatory?

On February 24 2015 08:29 MoltkeWarding wrote:
Greece borrowed heavily from European banks of which Germany held approximately 15% of the liability. France and Switzerland had greater exposure pre-crisis, a situation which has been largely reversed by the German-led bailouts.

Yet in this thread, we are naming Germany as the chief culprit of irresponsible lending. Tell me what this is, if not Europe's old Bismarck-complex.

Within the euro area, countries with large and persistent surpluses need to take action to boost domestic demand growth and shrink their surpluses. Germany has maintained a large current account surplus throughout the euro area financial crisis, and in 2012, Germany’s nominal current account surplus was larger than that of China. Germany’s anemic pace of domestic demand growth and dependence on exports have hampered rebalancing at a time when many other euro-area countries have been under severe pressure to curb demand and compress imports in order to promote adjustment. The net result has been a deflationary bias for the euro area, as well as for the world economy.

On February 24 2015 08:25 JonnyBNoHo wrote:

When you replace bankruptcy with debtor's jail.

On February 24 2015 09:33 JonnyBNoHo wrote:

The US Treasury has also cited Germany's lending as problematic.

From 2013: Link

A few points:

Germany is a major net lender, which is related it its being a major net exporter. That position necessitates someone else on the other end doing the opposite - net importing and net borrowing. And Germany's net exporting is HUGE - their current account surplus is >7% of GDP recently. So while Germany may not have been the biggest lender to Greece specifically, they've still been one of the biggest, if not the biggest, player in that game.

Germany seems to want other countries to follow its example of exporting (competitiveness ho!) and frugality. But not everyone can net export and be frugal.

Correcting for the imbalance for PIIGS is painful, correcting for the imbalance for Germany is not. German consumers can buy more stuff (so painful omg!!), German businesses can invest more in Germany (so painful omg!!) and German workers can get paid more (so painful omg!!). The only thing for Germany that would be painful is debt reduction for the PIIGS, which they could largely avoid by just doing the non-painful stuff. Yet Germans are basically saying that they refuse to make Germany a better place because doing so would also help out the PIIGS... and that's just not acceptable to them.

On February 24 2015 09:42 Nyxisto wrote:
Yes, our government should just pass a law that forces everybody to buy new stuff every week, obviously solely imported from Southern Europe. We're not a planned economy, most decisions are made decentralized by private actors.

Also we're not "refusing to make Germany a better place", please. Debt reduction is an important goal of German politics because we're in a demographic shift. The workforce is shrinking and moving the public debt reduction into the future will mean that future generations will have to deal with that in addition to the demographic problem that is straining or social spending already, which is a problem most other European countries suffer from, too.

It's funny that you accuse Germany of ignoring the fact that everybody can't run a trade surplus while proposing that we pursue American policies that heavily rely on brain-draining the rest of the world to keep the economy growing while running a constant deficit.

On February 24 2015 10:11 Toadesstern wrote:


I thought the entire critique was that the lending to Greece was unreasonable, not that lending at all is bad?
Didn't people mention that the baltics caught up a lot faster than they would have been able without the EU money? And that that was the entire plan to begin with?

You've got to stick with something here... if the major net lenders stop doing that, that wouldn't have happened either because like you mentioned, it all balances out in the end.

On February 24 2015 10:31 Toadesstern wrote:
I never thought I'd get to hear someone from the US complain about low taxes in Germany / northern Europe. It's probably not going to happen.

As for private spending that's mostly a mental thing with Germans. Debt and borrowing has a massively bad connotation in german, both from a historic background as well as from plain language so you'd have to turn german mentality upside down to get that.

On February 24 2015 10:25 Nyxisto wrote:
Hours worked annually has been going down, not up.

http://stats.oecd.org/index.aspx?DataSetCode=ANHRS

You are somehow operating under the assumption that the investment decline is somehow a result of active political decision-making. It's merely a symptom of an aging population combined with the fact that productivity is already high and investment is increasingly flowing into second and third world economies.

On February 24 2015 10:19 JonnyBNoHo wrote:

Oh great! Now you're exporting straw men!

You want to reduce the deficit? Lovely, tax the rich more and lower consumption taxes.

On February 24 2015 10:47 cLutZ wrote:


That wont reduce the deficit...its just a way to redistribute income. To reduce the deficit you need to cut government spending and/or raise revenue and most income tax increases on the rich produce only modest revenue. The reason Europe successfully taxes such a larger % of its GDP compared to the USA is that they have much larger consumption taxes. Plus, we are talking about a crisis caused by poor capital allocation driven by natural human optimism and government intervention. And you propose raising a highly distortionary tax (marginal income tax) in place of one of the least (consumption taxes)?

On February 24 2015 10:49 Nyxisto wrote:
having more people working is generally considered to be a good thing. The part time work policies were an instrument to get long-term unemployed back into the workforce and I don't think that's necessarily a bad thing.

I'm also not turning problems into virtues. I understand very well that running a trade surplus is not optimal. What I'm not believing is that this has to do with apparently low wages that in reality are not low or that just randomly buying stuff is some kind of feasible solution. Sure we could get a huge ass military which would reduce our trade surplus on paper, problem solved, but if that would increase anybody's living condition is another question.

Germany seems to want other countries to follow its example of exporting (competitiveness ho!) and frugality. But not everyone can net export and be frugal.

Correcting for the imbalance for PIIGS is painful, correcting for the imbalance for Germany is not. German consumers can buy more stuff (so painful omg!!), German businesses can invest more in Germany (so painful omg!!) and German workers can get paid more (so painful omg!!). The only thing for Germany that would be painful is debt reduction for the PIIGS, which they could largely avoid by just doing the non-painful stuff. Yet Germans are basically saying that they refuse to make Germany a better place because doing so would also help out the PIIGS... and that's just not acceptable to them.