In Germany, a tipping of the scales

BERLIN -- From precarious bailout packages to civil unrest, European woes are poised to hit home in the continent's largest economy.
Written by Shannon Smith, Correspondent (Berlin)

BERLIN -- Tear gas and tanks in Rome, tens of thousands of street protesters from Madrid to Athens, and union strikes that grounded planes and stalled trains across Europe gave a sense Wednesday of the frustration pervading the ailing Eurozone nations.

While Greece waits in the wings, its troika of creditors - made up of the International Monetary Fund (IMF), the European Central Bank (ECB) and the 16 Eurozone countries led by Germany - is hashing out the best way to move forward in sidestepping what has been feared as the Euro's impending collapse.

But as officials focus on saving the continent's currency, northern European countries such as Germany, Belgium and Holland are also reflecting signs of looming economic challenge.

Following the declaration of Wednesday as "Solidarity Day" by the European Trade Union Confederation (ETUC), a 24-hour Belgian railroad strike brought public train transport to a standstill there, forcing Germany's Deutsche Bahn to run buses to complete certain routes. Head of the Confederation of German Trade Unions (DGB) Michael Sommer simultaneously called for a policy change in fighting the economic crisis in a talk with Berlin's RBB Inforadio.

"A plan that brought more wealthy citizens to shoulder the costs of the crisis and to get the financial markets back in order would be sufficient," Sommer said.

Meanwhile, economic experts monitoring Germany's economic growth index are forecasting slowed growth prospects for November. Although a small margin of positive GDP growth is expected for the entire fourth quarter, the prediction seems poised to confirm the economic interdependency of Eurozone economies.

The Center for European Economic Research (ZEW) said the index fell from minus-11.5 in October to minus-15.7 in November in what ZEW economist Marcus Kappler called a "sign that Germany cannot be decoupled from the recessions around it," according to the Wall Street Journal.

The news presents the possibility that Germany could technically slip into a recession; although experts surveyed say slowed growth is more likely than a GDP decrease for this and the next quarter.

Should things indeed take a turn for the worse, unanimity on the question of how to deal with the situation within Germany could prove difficult. Despite Chancellor Angela Merkel's push for European austerity, Germany's center-left SPD party supported much of Wednesday's strike activity, along with the country's leftist party, Die Linke. Critical of austerity, politicians say the strict measures create a catch-22 that has already proven counteractive to economic growth.

SPD representative Sigmar Gabriel told Germany's Abendblatt Wednesday in Berlin that unemployment, poverty and national debt in southern Europe would only continue to worsen along this path, suggesting instead an integrated growth and employment program for Europe.

Europe's left isn't alone in their general assessment of the situation: the Washington-based IMF also appears to have grown weary of austerity measures, asserting that they have caused more problems in Europe than they have fixed. Instead of a 2-year extension of the timeframe allowed for Greece to meet its debt-reduction targets, the institution prefers a write down of large portions of Greek debt. This solution is controversial among Eurozone members, since this would mean no chance of repayment of loans made thus far. Furthermore, a write down could cause Germany problems in balancing future budgets.

Meanwhile, the country's Die Zeit newspaper brought the realities of austerity measures home to Germany by commissioning experts from the OECD to redraw the situation as if it were happening on Teutonic soil.

As an example, the scenario cites Greek pubic sector workers and pensioners, who in 2010 and 2011, shouldered cuts amounting to 2.5 percent of Greece's GDP, or some 5.5 billion Euros. The entire Greek government only reduced its budget by a total of 8.2 billion Euros in 2010, meaning public workers and pensioners paid a disproportionately high price for austerity cuts over the past three years.

That same program in Germany would see public workers such as teachers, police, fire fighters and pensioners take a 13.5 percent cut to their income.

"Those would be some serious adjustments for Germans to have to make", Claude Giorno, OECD's Greece expert, told Die Zeit.

PHOTO: PK Fotogafie / Flickr

This post was originally published on Smartplanet.com

Editorial standards