Should other eurozone countries show Germany the door?

With its world-beating export economy, Germany isn’t the sick man of Europe – but it is making the eurozone sick. By way of a remedy, France’s president Emmanuel Macron recently unveiled far-reaching proposals about how a budget for the euro area could help harmonise its members’ economies. Berlin has made only the smallest of steps towards the French position. If Germany is not more forthcoming, its European neighbours might well start to lose patience – and it is not unthinkable that this will result in calls for the eurozone’s strongest economy to leave the single currency.

The mechanism is similar to putting high-performing pupils up a class at school, and to make sure this doesn’t happen, Germany will need not only to end its policy of fiscal austerity but also to make sure wages finally increase by a tangible margin. This necessity also, incidentally, offers the country’s social democrats the perfect opportunity to escape from the cage of neoliberal thought in which they have so long been trapped and to link more social justice with salvaging the European project.

For far too long, Germany’s workforce was sold a line about its wages being too high to compete internationally; the actual problem, however, is that internal demand is not sufficient. Put another way: it’s not that Germany’s workers are too expensive; it’s that, for years now, their wages haven’t been rising to match their productivity.

As such, the least of German workers’ worries should be that wage growth will make them less competitive – even less so for those on the lower end of the salary scale, who do not produce tradeable goods and therefore are not in global competition. Rather, the weight of international competitiveness falls on the shoulders of workers in export industries, and it is precisely these industries in which employment is booming and there is a growing shortage of qualified labour.

The European project in jeopardy

In recent decades, Germany’s eurozone partners have seen wages rise to match gains in productivity and to keep pace with the 2 per cent inflation rate posited by the European Central Bank; German workers, however, often haven’t even been given pay rises pegged to increases in productivity. The result of this is a trade deficit for Germany’s European neighbours, leaving their governments little other recourse than to alleviate the effects of unemployment with state-funded initiatives; these in turn have to be financed by debt. This means that German jobs are created by the readiness of its eurozone partners to take on sovereign debt.

What becomes clear is that Germany has turned southern Europe into a periphery that it exploits to keep its export industries running.

In this way, Germany’s own fiscal austerity has placed the European project in serious jeopardy: the states affected are mired in debt, forced to deregulate their employment markets and implement cuts to their social security systems, and afflicted by youth unemployment.

All of this has contributed to the current populist destabilisation. As such, German economic policy has run contrary to the inalienable essentials of its post-war foreign policy: ‘never again, never alone’ – in other words, never acting in international isolation, never acting aggressively. Hints from Berlin that it may be willing to make changes to its economic formula are too hesitant and too late.

What becomes clear is that Germany has turned southern Europe into a periphery that it exploits to keep its export industries running; Berlin has created an EU that is split between a highly productive export economy at its centre and stagnant activity on its southern rim.


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