Germany, the Eurozone’s largest economic engine, finds itself in a very unusual spot, namely that of the black sheep that is being blamed for all the economic and social mishaps that continue to pester the 17-member Union.
This time, the dispute is not related to sovereign debt risk and exposure of some of the Eurozone members.
It centers on union labor contracts, labor cost and ultimately economic advantages and/or disparities between the smaller economies and the Club Med countries on one hand and the economic Clydesdale, Germany, on the other.
This new phenomenon is certainly not talked about extensively in the press but it is nevertheless interesting to find the roots of such new crack in the Eurozone.
What is more interesting about this social and economic debacle early 2011 and only one year after the major euro crisis of March and May 2010 is when one looks at the history of and the role Germany played in the creation and the stability of the euro.
Germany has gone overcome major economic obstacles since the end of WWII that many outsiders thought was impossible.
What was certainly experienced as a Herculean task did not stop the determination of Germany to succeed domestically, socially, economically and within the grand scheme of the EEC.
A few examples of Germany’s determination have to be mentioned in order to place its role within the Eurozone into context and certainly for outsiders.
-It only took Germany 10 years to rise from the ashes in the aftermath of WWII to restart its engines and stabilize a country that was utterly destroyed. That achievement alone stands in stark contrast with its neighbors, who took much longer to recover.
-With fall of the Berlin Wall in 1990, Germany took sole responsibility to not only unify East and West Germany but also to pay for any cost to achieve that goal. There was no help from the IMF or the ECB, nor was there a need for an extensive bailout plan. The German people and taxpayers took the sole responsibility to accomplish what they envisioned to become the foundation for their future.
-In 2010, Germany again rose to the occasion to support the IMF/ECB bailout packages for Greece but has since been extended to Ireland and Portugal knowing very well that German taxpayers would foot the largest portion of such in comparison to their 16 fellow members.
Today, Germany finds itself in the awkward position of being accused of undercutting the competitiveness of its neighbors because it carefully crafted union labor collective bargaining agreements that were based on loan increases reflective of real inflation rather than nominal calculations as is primarily the case in Belgium and Portugal.
The other interesting fact is that the plaintiffs complain about inter-Eurozone competition while Germany’s exports are directed towards Asia, China and the US because of the world’s demand for their well engineered and high durability of their exported products.
The fact that Germany is only one of very few export and manufacturing economies that realize an annual trade surplus should be testimony to the efficiency of their production infrastructure.
Asking the Clydesdale to slow down the pace because the ponies cannot follow is not an option for the Eurozone and certainly not when one remembers that the Euro and its exchange rate was created based on the GDP growth of Germany and the value of its legacy currency, the Deutsch Mark.
If the tempo is too high for small economies to follow suit then such should be attributed to the fact that neither one of the complaining countries really understood nor adhered to the Lisbon Treaty prior to the creation of the euro.
As long as Germany leads the way and forces others to step up and fulfill their respective obligation, then the Eurozone will survive and strengthen.
Many smaller economies may complain behind the scenes but when Ms. Angela Merkel speaks the ponies listen very carefully.
Written by Nick Doms © 2011, all rights reserved.