While Horst Köhler’s resignation cannot be directly attributed to the euro crisis, it certainly epitomizes the clash between the post-war political configuration in Europe and the increasingly impatient Germany.
In the past, Germany has always provided the passive sheet-anchor stability that allowed Europe to work. Occasionally a Schmidt or a Kohl would find partners and a surge of European integration would take place. But now Germany has no idea of what to do next. It will not admit that its economic weltanschauung, based on relentless exports and damped-down internal demand, is now part of the European and world crisis of capitalism.
The new Germany would like to behave as a normal nation and certainly has national security on its mind. Both domestic and European-wide politics have yet to catch up with it, even when the question of military interest is framed within the scope of expanding and protecting its economic interest.
Köhler made the point that German military capability was relevant to German interests, including German economic interests. As the world’s second biggest exporter after China, Germany has a self-evident interest in keeping the world as open as possible for the free flow of trade and commerce, and to help defeat the growing scourge of piracy. This is so worrying Nato policymakers that an entire session at the Nato parliamentary assembly’s spring session this weekend in Riga was devoted to the question of how to ensure peace and free traffic on the high seas.
Some political and business leaders are quietly applauding the continual slide of the euro as one of the tools to stimulate exports in the region, others argue that a weak euro do more harm than good in eroding business confidence in the region, which may prove to be the worst legacy resulting from this ongoing fiasco.
The biggest worry for European business, however, is not so much the decline of the euro itself but rather what it says about the European economy. European governments will have to reduce public spending dramatically to allay the market’s fears. Spain has already announced that it is cutting public-sector wages by 7% and Greece by 16%. This will inevitably remove spending power from the European economy and so dent its short-term prospects.
… The introduction of the single market and the single currency were supposed to spark a glorious period of innovation and productivity growth. This has not happened. The European economy remains dependent on long-established corporate champions such as Daimler and on public-sector jobs. The old continent has dismally failed to create local equivalents of America’s Microsoft and Google.
The FT has an interesting piece that questions the impact of fiscal austerity on a continent that, for the past few decades, consistently prioritized lifestyle and the ubiquitous work-life balance ahead of economic growth.