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December 20, 2010

Few other places in the world can claim the heap of wealth Germany considers normal. A nation physically devastated by repeated wars, reparations, occupations and division, it somehow always managed to maintain a standard of living less turbulent nations worldwide would be envious of. Since reunification alone, the country has spent nearly 2 trillion EURO stabilizing the former east, settling old scores and integrating millions of refugees and destitute citizens. On top of all this it set out to balance its national budget by 2016, making it essentially illegal for the federal government to run deficits.

Germany has a strong tradition of saving and investing, growing and cultivating wealth; it regularly runs massive trade surpluses and provides extensive social safety nets. In 2010 Berlin was called upon to support its weaker EU neighbours (Greece & Ireland) and perhaps another one or two in the New Year.

While the press in Germany continues to attack these “frivolous loans” to what they are calling “ungrateful and lazy” (probably pointed more directly at the Greeks than the Irish) nations, anyone who is educated or economically inclined understands the necessity of these actions. Germany is wealthy, and has only become more so over the last ten years with the introduction of the euro. Its export machine is booming because of the euro and most recognize this. While most in Germany will chide the recipients of its hard earned money, we believe most people genuinely see the virtues of helping a neighbor out in a time of crisis… especially if you have the ability to do so.

All of this generosity is not coming without a price however. It now seems certain that Merkel will be forced, for the sake of political expediency with upcoming state elections, to insist on imposing some Germanic fiscal restraints on the EU’s so called “PIGS” nations. Otherwise the average German who under “Agenda 2010” introduced by Gerhard Schroder in 2002 has put up with a decade of austerity and wage restraint will wonder why others continue to benefit from their sacrifices.

So with this money will undoubtly come strings, a whole bundle of them, and that seems to be the catch. Germans are only complacent with helping other EU nations out if they gain some degree of influence in budgetary issues and are making rather heavy-handed demands when it comes to future expenditures. It may seem to be arrogance, perhaps a bit of “I told you so” but in the long term the bailout of 2010 will be seen as an important step towards a EU that doesn’t jus share a common currency but also shared fiscal and political policies.