[A-List] Germany: political crisis

["Michael Keaney" <michael.keaney@xxxxxx>]

Do we have Guardian lurkers on the A-list? On 4 November I wrote:

"Recent events in Germany are leading me to draw certain parallels between
what is happening there now and Britain in the 1970s."

see http://archives.econ.utah.edu/archives/a-list/2002w45/msg00006.htm

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Notebook
Sick man of Europe finds little solace in the euro

Echoes of Britain's 1970s malaise

Friday January 17, 2003
The Guardian

Germany is not yet the Britain of the 1970s, but is becoming more like it by
the day. There is the same harking back to the glory days of economic
supremacy, the same evidence of current failure, the same sour mood among
the trade unions, the same debilitating mood of cynicism. With growth of
just 0.2% last year, Germany was the tail-end Charlie of the eurozone. It
is, officially, the sick man of Europe.

Some of Germany's problems are structural, some are not. It may well be
overtaxed and overregulated, but the deutschemark was overvalued when it
entered the euro and rates of 2.75% are too high for an economy where growth
is zero and inflation only 1%. Attempting to abide by the 3% ceiling imposed
by the stability and growth pact is an act of economic stupidity that may
have both economic and political consequences.

Economically, Germany is dragging down growth in the rest of the eurozone,
hindering the necessary process of global economic rebalancing that would
see Europe and Japan take up the slack as demand in the US moderates.

Politically, there is the message a floundering Germany sends to the voters
in Sweden who will vote in a euro referendum in September, and to the
British government agonising over whether to risk a plebiscite here.

Although pro-euro supporters in both countries are tying themselves in knots
to prove that the single currency has nothing to do with Germany's problems,
all the antis need do is pose a simple question. Why, if the euro is such a
good idea, is Germany doing so badly?