[JanezStupar]

Wishing growth on Italy and Greece is a noble cause.

But it is not really Germany's fault that Italy's and Greece's leadership decided to push their heads into the sand for so long.

These issues were known for decades, the core of EU spent a lot of effort trying to bring up the subject and the usual response from the fringe was that: "We are sovereign nations, this is strictly our business and you can kindly fuck off!"

It is not Germans fault that people across south decided to vote for populist governments, while they were busy reforming their economy.

The way Germans see it probably is that if they succumb to pleas for unconditional help from south - the EU is certainly doomed in the long run. If they do not, the Euro might be doomed, but the EU has a chance of rebirth in the long run.

Europe is on a sort of crossroads the Yugoslavia was on in the late 70's, early 80's - when the Yugoslav leadership decided, that we can borrow our way out of this, the aftermath is well documented I believe.

[nhaehnle]

Beware of the Fallacy of Composition.

A lot of the "virtue" of Germany is actually a vice when extrapolated globally. The current position of power of Germany can be traced back to its net exports. Quite often in the last two or three years, you could hear commentators proclaim that if everybody followed the path of net exports, the crisis would be over. There are only two problems with that:

1. It is simply impossible for everybody to be a net exporter. That's the fallacy of composition.

2. The way Germany became a net exporter was by savaging real income of the majority of the population. If you look at data for how the quotient of (real income / labor productivity) developed in the Eurozone, you will see that while the majority of countries had a reasonable development (the quotient is around 1), Germany's quotient for this development is much lower. German workers are being cheated out of their share, which means Germany is essentially price dumping in the global market.

Right now, Germany is essentially sending presents (real goods) into the rest of the world in exchange for promises (financial claims on the ROW). The majority of Germans are working their ass off and not getting anything in return, just so the top 0.01% of the population can increase its power base by accumulating financial assets.

To say that other European countries should follow this path is deeply cynical, and probably comes from not seeing the whole picture.

[mafribe]

This description, while not being without merit, omits an important part of the picture: while it is true, that the majority of german workers had to live through an extended period of no/low wage growth, or even wage reductions, german wages are still substantially higher than greek wages. So by your (implicit) argument that all that matters here is wage levels, Greece should be doing much better than Germany. But clearly it is not. So other factors must be at play. It is quite clear what these other factors are: higher labour productivity, higher education, less corruption and so on. Printing money is not going to help with any of those . So really your position is not seeing the whole picture.

[nhaehnle]

We are actually largely in agreement. If you reread my comment that you replied to, you'll see that I was writing about the "real income / labor productivity" quotient.

The point is that the exchange rate with which countries adopted the Euro was more or less appropriate when it was set. Since then, the different development of the countries has changed the level of the exchange rate that would be appropriate if the countries still used different currencies.

So the question is: has the picture of corruption in Germany vs. Greece changed significantly in the last 10 years? Has the unit labor cost (which is real income / labor productivity) changed significantly between Germany and Greece?

Those are the questions you need to ask to understand where the differential is coming from.

[JanezStupar]

The Germans spent last decade reforming their pension system and labor market. They did it in the middle of economic boom. They urged everyone else in EU to do the same, especially the weaker economies.

They managed to secure a consensus and everyone (labor, capital and the state) is reaping the rewards.

In southern and eastern Europe, the unions an "leftist forces" managed to blow a hole in any attempt to reform pension and labor markets.

The key argument is that Germany giving in to these forces would mean a perpetuation of the root problem.

The way I see it this is a family issue, where father refuses to support one of his crack addicted kids, while the mother pleads "Please, you are breaking the family apart." Forgetting that there were previous confrontations in which she sided with the kid and didn't support the fathers demand that the kid goes on a rehab.

[nhaehnle]

The Germans spent last decade reforming their pension system and labor market.

Keep in mind that "reforming their pension system and labor market" is neoliberal code for "reducing the share of national income that goes towards workers and employees". So it is disingenuous to claim that labor is reaping the rewards these days. [1]

I mean sure, if you cut social safety nets and retirement systems, and pass the savings on to foreigners who are buying your export goods, then that will boost your exports. That doesn't make it good policy.

As for your metaphor, two can play that game.

Germany is more like the father who doesn't give a damn about the kid, thinks it's the kid's own damn fault - despite him regularly beating him/her (that's metaphor for Germany undercutting everybody else in the market, in case it's not clear), and is happy to see the kid end up unemployed, homeless, and with an abysmal life expectancy (all of these things are already literally reality or are starting to become so in Greece).

The rehab route would be to stop the insane domestic policies in Germany, install a bureaucracy that can do proper tax collections and fight corruption in Greece, and simultaneously stimulate the hell out of their economy.

Hey, nobody said rehab is easy - it requires both discipline and compassion.

[1] In terms of real income this is obvious from even a very cursory glance at the data. In terms of unemployment, the picture is admittedly not quite so obvious. Unemployment rates are lower than in the southern countries, but even the official numbers are still very high by any reasonable standard. It gets worse when you consider marginal work (part time etc.).

[JanezStupar]

Nice bait and switch you did there.

We were talking about economy as a whole, while you only fixate on labor market and capital market.

Greece had a plenty of raise in wages - see how well it worked out for them.

Beware of the Marxist fallacy. Nowadays in Europe anyone can join the ranks of "Evil capitalist" and secure a "bigger piece of pie" for themselves.

[polshaw]

The question is not 'is it Germany's fault' but rather what is in the best interests of germany. The Euro failing is surely not. Particularly as Germany has unprecendented strength within the EU today.