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Post-Locomotive Germany

EARLY in 2011, when Germany had just finished a year with 3.7 percent growth and a big leap in job creation, Angela Merkel’s economics minister described the upswing to the Bundestag as “no short story but a serial novel” of success. Germany JobsThis Germany, said Rainer Brüderle, “is very conscious of its great responsibility for Europe,” And, he insisted, “We are ready to make considerable contributions.” Nine months later, Merkel claimed Germany was once again “Europe’s locomotive.” The hour was one for XXL doses of confidence, munificence and assertions of Germany’s power. How time flies. Now, with the Bundesbank predicting that the economy will expand by just 0.4 or 0.5 percent this year, Germany’s big growth-spurt looks in hindsight like the bungee-jumping upside of its strong recessionary decline in 2009. Portrayed as ultimate truth here, though less accepted these days as gospel by many of its European neighbors, the German conviction that rapid debt and deficit consolidation could be concurrent with meaningful economic growth and getting people back to work looks more and more like a falling idol. Even Merkel, her German locomotive days behind her, admitted this month that, “We don’t have the strength to set up a big stimulus program for a second time without losing international confidence,” according a news agency report. In an election year, growth is clearly not her priority. With five months of campaigning ahead before putting her chancellorship on the line Sept. 22, Merkel hardly points to its absence, a de facto acknowledgment to Europe of German economic retreat. Check these chapter headings emerging over the last month: Frankfurter Allgemeine Zeitung, on the basis of its own compilation of statistics from employers, wrote that more German jobs were being killed than created in the first quarter of the year. A research institute reported that real average wages in Germany have declined by 1.8 percent since 2000. New car registrations in Germany were down by 17.1 percent in March, much worse than the month’s average decline across Europe. If this isn’t the stuff of German example or German leadership in Europe, how does Merkel the candidate handle hard reality both in terms of her German and wider European constituencies? First, by making clear to German voters that they won’t have to shell out for the rest of Europe by stimulating German demand. Then, by telling Germany’s European Union partners that they must face (low) growth rates of 1 to 1.5 percent for the foreseeable future, but that more debt and deficit consolidation is the only way forward. Indeed, Finance Minister Wolfgang Schäuble has gone further. He was reported as asserting that whoever expects greater growth in Europe runs the risk of endangering their future. That says: No stimulus solutions at the expense of continued rigor. Less publicly, German officials have told reporters that 1 to 1.5 percent growth is quite acceptable. The explanation I got here insisted that those figures represented a “strong and sustainable” German economy. But that supposition isn’t necessarily transposable elsewhere. In conversations with Organization of Economic Cooperation and Development economists, Spain was described to me as “needing much more than 1.5 percent growth to drag itself out of its hole toward some kind of equilibrium.” The organization projects that Germany — without major structural change — will average 1.1 percent growth over the next four decades. Growth of 1.1 or 1.2 percent was said to be insufficient to create jobs in France. And then the O.E.C.D. offered this calculation: Taking in the rate of labor productivity it expects in Germany, the German growth rate of 1.2 percent the organization foresees over the period 2018 to 2030 means German jobs will actually be declining. This suggests that the “stability” template that Germany has created for Europe is hardly sure of getting it where it wants to go. All the same, the immediate reality is that Germany, with its declining population, remains enamored of its own low-growth ground rules in a European Union that has never been able to make an ambitious growth program stand up. Add to that the widespread notion that says nobody gets elected in Germany by proposing tough change. A survey by the Allensbach Institute research organization argues that a good way for Merkel to risk losing in September is to make Germans worry about some kind of difficult economic transformation ahead. The most threatening changes would be to say Germany needs to export less and increase imports, to break down the closed segments of its economy to outside competition, and tear apart its wasteful, politically protected public-banking system. Those would be classic, structural steps toward the probability of new growth. But not to Merkel’s re-election. Helmut Kohl masterfully steered German reunification while staying in office for 16 years as a chancellor who proposed no important changes for a stagnating economy. Gerhard Schröder did and lost to Merkel largely as result. Growth, jobs, a new mood rising beyond today’s despair? The bet here is on Germany’s voters sustaining their stability model. And that means a bleaker status quo in Europe. Source: http://www.nytimes.com/2013/04/26/opinion/global/in-an-election-year-growth-not-a-priority-for-germany.html?_r=0#h[]

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