The excellent second quarter export and growth results reported by Germany have set that country at an increasing, and increasingly dangerous, distance from the other members of the European Union, with jeopardy to the EU and the euro -- which many in Britain and the United States would like to see fail. Thus Germany's success is tending to encourage market pessimism rather than international optimism, everywhere but in Germany itself, it seems, where complacency reigns, together with a certain amount of what the Germans themselves term "schadenfreude."

There is always a correlation between the national outlook of a society and what may be called its national character, formed in part by its history of religious beliefs and practices. Germany is the land of Lutheranism, a religion committed to belief in the radical corruption produced by original sin, in the punishment of evil, and that only faith, and not good works, justifies. Those who waste the bounty of good times through extravagance and the neglect of duty -- as in the case of the Greeks, and supposedly of the Spaniards, the Portuguese and the French -- can expect no pity. The culturally Catholic Latins are more tolerant of sin, more willing to forgive, and they take a positive view of good works that benefit the poor and laggard.

In June Germany recorded the most spectacular rise in exports since 1984, so that its export-based surplus nears the level that prevailed before the present international crisis. The relative weakness of the euro has been very good for German automobile and heavy industrial exports. At the same time, Germany has been resistant to imports from elsewhere in the euro zone. Greece is selling only 2 percent of its GDP to Germany, and France only 3.8 percent, with Italy, Spain and Portugal trailing France. On the other hand, Austria and the Netherlands are exporting, respectively, 14 percent and 12 percent of their GDP to Germany.

In the EU's overall plan for recovery, Germany insists on deficit-reducing measures across the entire euro zone, even though this has a depressive effect on other national economies and stimulates unemployment elsewhere, with particularly dangerous implications for the weaker economies where, as George Soros has recently written (in the New York Review), "even if budgetary targets [as demanded by Germany] were met, it is difficult to see how the weaker countries could regain their competitiveness ... in the absence of exchange rate depreciation." He says that the demanded adjustment process would require reductions in wages and prices, producing deflation.

Should there be a continuing decline in the value of the euro, which touched a recent low against the dollar in June, this would be good for euro zone exports, but without economic growth, it would also cause "the relative weight of [these nations' debt to] continue to grow" as well. This is true not only for national debt but also for commercial loans held by banks "even more reluctant to lend, compounding the downward pressures."

Germany has been the principal material contributor to the construction of the European Union since the EU's beginning in the Coal and Steel Community of 1951. (France has been the intellectual and political driving force in the construction of "Europe," inventing its institutions and pushing its development).

The present economic crisis has brought out in Germany something that has been feared since the days when the novelist and commentator Francois Mauriac remarked of Germany that he admired it so much that he was glad there were two of them. It is why both Margaret Thatcher, Britain's then prime minister, and France's President Francois Mitterrand opposed Germany's reunification, which the United States successfully pushed for in 1990 -- and which was in any case an inevitability once the U.S.S.R. had foundered.

This united Germany has since acted with prudence and generosity, most of all in its reluctant sacrifice of the Deutschmark to the introduction of the common euro currency in 2001. The present crisis has reignited German fears of inflation, a part of the national emotional heritage. It has also seen a novel arrogance of discourse and condescension in dealing with nations of lesser economic virtue (if more palatable histories, as some Greeks bitterly noted earlier this year, called attention to the fact that Greece has never seen German reparations for the damage done to Greece during its brutal wartime occupation by Germany).

Since the creation of the European community and German rearmament within NATO, good Germans have boasted that they practiced no national foreign policy, only a European policy; and no national military policy, nor do they possess a national high command other than that of NATO. Now, however, under stress, many Germans have found that what amounts to adopting a new national economic policy comes naturally to them. Others, including other Germans, are made uncomfortable by so casual a treatment of the accomplishments of Europe in constructing its Union, and its single market and common currency over the past sixty years, a collective achievement that has no counterpart in modern history, and a value that demands to be preserved.

 

Available at Amazon.com:

The Great Gamble

At War with the Weather: Managing Large-Scale Risks in a New Era of Catastrophes

 

 

(C) 2010 William Pfaff