Ordinary Germans also suffer to pay the bankers!

Anti-German feeling is prevalent in Ireland. One hears it vehemently expressed in the most general terms at public meetings dealing with the economic crisis and even in everyday conversation.
A greater amount of caution needs to be exercised concerning such sentiments. The ordinary German citizen is not responsible for the actions of the German banks and their political representatives in government. Germany’s working people are not benefiting from the policies of Merkel and Co., even though many of them might gullibly believe the propaganda of their masters.
Visit Germany’s capital city, and poverty is plain to see—not just people begging on the streets and in the underground but also well-dressed individuals of both sexes and all ages rummaging through street bins in search of returnable bottles.
Supermarkets pay 8 cents for certain glass bottles, 25 cents for plastic ones. Germans are indeed resourceful. Many of these bottle-hunters travel the city on bikes, carrying a number of large bags for their glass and plastic booty.
There is an element of surprise when one first becomes aware of the poverty. Unemployment in Germany may be at a relatively low 6.6 per cent, but a recent study carried out by the the German Trade Union Congress, the DGB, found that of those in full-time employment 29 per cent of West Germans and 34 per cent of East Germans receive social welfare assistance to supplement their inadequate wages in order to survive. In total, this costs the German taxpayer €6 billion per year. In other words, many German employers are being heavily subsidised by the state.
There is no minimum wage in Germany, and the average wage in the low-wage sector is €6.50 per hour. Another study carried out by the German Institute for Economic Research (DIW) showed that 22 per cent of the work force is employed in this sector—7.3 million people in total. The report reveals that low wages inevitably means that these workers have to work long hours—an average of 50 hours per week—to earn a basic wage.
The authorities have made eligibility for unemployment benefit or social welfare extremely stringent. The unemployed are put under constant pressure to take on “mini-jobs” and part-time work at extremely low rates of pay or else face the loss of benefits.
As in Ireland, the ruling political class want the ordinary person to pay for the economic crisis. In late June the German parliament, the Bundestag, debated the ESM and Fiscal Pact Treaties in the one session. Only Die Linke (Left Party) opposed both treaties. The Green Party and the Social Democrats supported the governing coalition proposal to pass both.
Sahra Wagenknecht of Die Linke spoke against the treaties. She argued: “You are behaving like puppets. The puppet-masters are the bankers, and the result has been treaties in which citizens are short-changed in order to rescue the fortunes of the richest and keep the financial market casino rolling along . . . This is a project for the smashing of employees’ rights and a project for the reduction of wages and pensions. It is a project by Deutsche Bank, Goldman Sachs and Morgan Stanley for the plundering of European taxpayers.”

EU austerity régime beginning to hurt German Economy

Germany is continuing to impose disastrous economic austerity measures all over Europe.


Senior German politicians and officials relentlessly plead for the continuation of the austerity policy, undeterred by the erupting recession in areas of the eurozone.


The policy became binding for almost all EU member-countries through the signing of the Fiscal Pact on 2 March. As the German Minister of Finance, Wolfgang Schäuble, declared on 6 March, by signing the pact Europe is on the “right path.” On 13 March the president of the Federal Bank, Jens Weidman, called for the southern euro countries, which are now slipping into recession, to apply “stiffer reforms” and additional austerity measures.


The austerity diktat is driving nearly all indebted southern European countries deeper into the recession, as shown by new data on the economic developments of Spain, Italy, Portugal, and Greece. 


According to this data, Portugal’s economy, for example, declined by 1.3 percent in the last quarter of 2011 and could shrink by up to 6 percent this year. Industrial production in Italy registered a sharp decline. In Spain, retail sales—an indicator of private consumption—declined by almost a quarter in comparison with 2007. Greece is approaching the economic level of countries in Latin America or south-east Asia, which up to now had clearly lagged behind European standards.


In the longer run the recession could have a backlash on Germany, because the massive slump is also affecting German exports. This could have serious repercussions. 


Where this austerity policy, imposed by the German government on Europe, will lead can be seen in Greece’s dramatic crash, which can simply be characterised as Greece saving itself to death. 


According to all predictions, in 2012 the country will remain in its fourth year of recession and continue to approach the economic level of the “Third World.”


The German business press predicts that if Greece’s economic contraction continues it will be bypassed by such countries as VietNam or Peru. A deeper recession could even saddle Greece with a GNP, in terms of buying power, lower than that of Bangladesh.


The German edition of the Financial Times speaks of a “historically exceptional” economic collapse.

"Some experts fear that the GNP for 2012 will again decline up to 8 percent, after an approximately 6 1⁄2 percent drop in 2011.”

This is “the worst recession that a western country has encountered since the war,” explains Barry Eichengreen, an economic historian at the University of Berkeley in California. 


In the end, Germany’s export industry will not escape the downward trend in the eurozone, despite its growing exports to so-called threshold countries. Orders from EU countries coming into German industry are dramatically diminishing. The business press reports, 

“Already since the middle of the year the quantity of new orders from countries of the monetary union has declined consistently, since the debt crisis resurged in the summer.” 

In other countries “a demand for German products has decreased also, because of their austerity measures.”


Berlin’s austerity diktat is ultimately threatening to push Germany’s export-dependent economy into a recession. Like the populations in Greece, Portugal, Spain and Italy today, the German population will most probably have to confront drastic austerity schemes. 

Greek president rejects German interference

Relations between Germany and Greece, strained since the beginning of the economic crisis in 2009, appeared to reach a new low point amid the exchange of barbed comments between the two countries.

President Károlos Papoúlias was uncharacteristically blunt in his response to repeated criticism about the Greek economy and politics. He accused the German minister of finance, Wolfgang Schäuble, of making insulting comments, including the suggestion that Greece should not hold elections now, because its politicians are incapable of keeping to the terms of a new bail-out. “We all have a duty to work hard to get through this crisis,” he said during a visit to the Ministry of Defence. “I will not accept Mr Schäuble insulting my country. I don’t accept this as a Greek.

“Who is Mr Schäuble to insult Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not only our own freedom, not only our own country, but the freedom of Europe.”

The comment that appears to have sparked Papoúlias’s response was a suggestion by Schäuble that Greece should follow Italy’s example by forming a “technocratic” government. He also cast aspersions on the record of Greek politicians in the past.

“After [the technocrats have completed their work] the democratic process can resume with the effects that we have all seen over the last few decades.”

The German role in the euro-zone crisis

The Economic and Monetary Union that Ireland signed up to under the Maastricht Treaty (1992) and Lisbon Treaty (2009) assumed that the deficit rules of 3 per cent and 60 per cent of GDP for every euro-zone state would be complied with and enforced by means of sanctions that are set out in those treaties.

When Germany and France broke these rules in 2003, the EU treaty sanctions were not applied against them, and they were effectually dropped for everyone else.

Now Germany and France are using the present euro-zone crisis to set about increasing their political sway over the euro zone by changing the whole basis of the Economic and Monetary Union that Ireland signed up to by establishing a permanent €500 billion so-called European Stability Mechanism bail-out fund, surrounded by a framework of controls over national budgetary policy, including a permanent balanced-budget rule (0.5 per cent deficit rule) proposed in the Fiscal Compact Treaty.

Remember that, under the Lisbon Treaty, in two years’ time Germany’s vote in making EU laws, as well as voting in euro-zone matters will double, from its present 8 per cent to 16 per cent, while that of France and Italy will go up from 8 to 12 per cent.

And Ireland’s vote? Cut by half, to 1 per cent.

But what about the German economic model?

Here is a typical portrayal, by Martin Hart-Landsberg at www.spectrezine.org:

As growing numbers of countries face renewed austerity pressures, there is a tendency to explain the trend by searching for specific policy failures in each country rather than considering broader structural dynamics.

Key to the credibility of those who argue for a focus on national decisions is the existence of countries that people believe are performing well. Thus, the argument goes, if only policy makers followed best practices their people wouldn’t find themselves in such a bad place. Recently, German has become one of these model countries.

Here is a typical framing of the German experience:

At a time when unemployment rates in France, Italy, the UK, and the US are stuck around 8%–9%, many are turning to the apparent miracle in the German labor market in search of lessons. In 2008–09, German GDP plummeted 6.6% from peak to trough, yet joblessness rose only 0.5 percentage points before resuming a downward trend, and employment fell only 0.5%. In August 2011, the standardized unemployment rate was about 6.5%, the lowest since the post-reunification boom of 20 years ago.

In other words, Germany seems to be doing things right. Despite suffering a deep decline it actually enjoyed a lower unemployment rate. So, how did it do it? Often cited are recent German policies which have increased labour market flexibility.

But are these the best practices that should be adopted elsewhere? One way to answer that question is to look at what these changes have meant to German workers.

A Reuters report concluded: “Job growth in Germany has been especially strong for low wage and temporary agency employment because of deregulation and the promotion of flexible, low-income, state-subsidised so-called ‘mini-jobs’.”

The number of full-time workers on low wages—sometimes defined as less than two thirds of middle income—rose by 13.5% to 4.3 million between 2005 and 2010, three times faster than other employment, according to the Labour Office.

Jobs at temporary work agencies reached a record high in 2011 of 910,000—triple the number from 2002 when Berlin started deregulating the temp sector . . .

Data from the Organization for Economic Cooperation and Development shows low-wage employment accounts for 20% of full-time jobs in Germany compared to 8.0% in Italy and 13.5% in Greece . . .

One out of five jobs is a now a “mini-job,” earning workers a maximum 400 euros a month tax-free. For nearly 5 million, this is their main job, requiring steep publicly-funded top-ups.

“Regular full-time jobs are being split up into mini-jobs,” said Holger Bonin of the Mannheim-based ZEW think tank.

And there is little to stop employers paying “mini-jobbers” low hourly wages given they know the government will top them up and there is no legal minimum wage.

As the New York Times astutely reported,

But hidden behind the so-called German economic miracle is an underclass of low-paid employees whose incomes have benefited little from the country’s stability and in fact have shrunk in real terms over the last decade, according to recent data.

And because of government policies intended to keep wages low to discourage outsourcing and encourage skills training, the incomes of these workers are not likely to rise anytime soon.

That, in turn, means they are likely to continue to depend on government aid programs to make ends meet, costing taxpayers billions of euros a year.

The paradox of a rising tide that does not lift all boats stems in part from the fact that Germany has no federally set minimum wage. But it also has its roots in recent German politics, which have favoured measures to keep unemployment low and win support from employers . . .

The Confederation of German Employers’ Associations says the introduction of a minimum wage would push up labour costs and lead to more unemployment. Jobs would simply move out of Germany and to Eastern Europe or Asia.

An ILO report, Global Employment Trends, 2012, shows the connection between these policies and the euro-zone crisis.

For they have not only taken a toll on German workers, they have also greatly contributed to the crisis in Europe. The low wages and insecure employment conditions have enabled German employers to boost exports and limited imports.

The ILO report concludes:

The rising competitiveness of German exporters has increasingly been identified as the structural cause underlying the recent difficulties in the Euro area. Crisis countries had not been able to export enough of their goods to Germany as domestic demand there was not strong enough because of low wages. 

German policies to keep down wages had created conditions for a prolonged slump in Europe as other nations on the continent increasingly saw only even harsher wage deflation as a solution to their lack of competitiveness.

The report called on Germany to enact swift changes.

“An end to a low-wage policy would create positive spill-over effects to the rest of Europe and restore a more equitable income distribution . . . An end to a low-wage policy would create positive spillover effects to the rest of Europe and restore a more equitable income distribution.”

As the chart shows, German wages have been stagnating for more than a decade. No wonder Germany has been exporting so successfully and other countries in Europe have found it difficult to compete.

While German politicians blame these other countries for their problems, the fact is that German growth has depended on the high consumption and borrowing in those other countries.

Thought for the day

“Germany offers assistance—yet is demonised by people who swindled their way into the monetary union and have driven it to the edge of the abyss. They are using the fine principle of solidarity as a means for extortion. The EU has no future as such an extortion community.”

—Frankfurter Allgemeine Zeitung (Frankfurt), 14 February 2012

Good riddance, Herr Stark!

The unwelcome intervention by Jurgen Stark, departing member of the Executive Board of the European Central Bank, in Ireland’s budget debate, calling on the Government to cut public-sector pay and social welfare, displayed an extraordinary arrogance on the part of an unelected German official. His intervention met with an uncharacteristic rebuff from Éamon Gilmore that underlined the anger felt even in pandering Government circles. “Our agreement is with the institution,” Gilmore told reporters. “It’s not with individuals within it.”

Since the beginning of the year Ireland’s sponsors in Europe and the IMF have approved the release of loans totalling €30½ billion. Tens of billions more are to come. Stark warned that sentiment could suddenly turn against Ireland all over again. To guard against that, he said the Government should quicken its austerity drive and tackle no-go topics such as public and private-sector pay and welfare entitlements.

In doing so may simply have been a stalking horse for the EU and IMF—an influential man about to hand in his notice.

Nevertheless, this should be a timely warning for workers, welfare recipients, and their families, who must begin to resist the accelerating rounds of austerity that threaten to reverse the meagre gains of the last couple of decades and land us back in 70s-style poverty once again.

Euro rebellion heats up in Germany

 For the first time ever, a clear majority (60 per cent) of Germans no longer see any benefits in being part of the euro zone, given all the risks, according to an opinion poll published on 16 September. In the age group 45–54 this jumps to 67 per cent. And 66 per cent reject aiding Greece and other heavily indebted countries.

Ominously for the chancellor, Angela Merkel, 82 per cent believe that the government’s crisis management is bad, and 83 per cent complain that they’re kept in the dark about the politics of the euro crisis.

Hang our heads in shame and pay the German bondholders?

The EU commissioner for energy, Günther Oettinger of Germany, in an interview with the German tabloid Bild, suggested that the flags of countries with excessive deficits should fly at halfmast in front of EU buildings.

In his comments he referred to “deficit sinners,” who needed “unconventional” treatment to help them mend their ways— possibly through officials appointed by Brussels and imposed in recalcitrant capitals. “There has been the suggestion too of flying the flags of deficit sinners at half-mast in front of EU buildings. It would just be a symbol, but would still be a big deterrent.”

Would it? Really?

Another tactic for pulling a debt-stricken country out of crisis could be replacing “the obviously ineffective administrators” there, he said. Because Greek officials have failed at collecting outstanding taxes and selling state-owned assets as planned, Oettinger alleged, experts from other EU countries should be sent in to do their jobs instead.

Oettinger later denied suggesting that the flags of “deficit sinners” should fly at half-mast and said he was merely referring to a notion he heard in the office of a German tabloid. Asked how it had come about that Oettinger made such remarks, his spokeswoman said, “It just came out.”

But in a letter to the president of the Commission, José Manuel Barroso, 151 MEPs said that Oettinger’s comments “imply the symbolic humiliation of European nations. Mr Oettinger should retract and recant his words, or resign from the European Commission.”