Germany and Greece: A Mapping of Their Great Divide and Its EU Implications

Abstract

The economic constitutions of Germany and Greece have resulted in the postwar period in two economies that are based on two vastly different philosophies. Germany has built a highly competitive, outward looking economy based essentially on the principles of the so-called "Social Market Economy", whereas Greece has set up a "state-managed economy" by drawing on the principles of central planning and administrative controls. This divide is equally stark, if assessed on the basis of the performance of the two economies. For, as it is known by now, Germany has become once again the powerhouse of Europe while Greece has gone bankrupt. As to the implications of this great divide for the future of the EU, its identification and mapping helps understand why convergence criteria on the basis of economic performance and living standards should be abandoned in favor of criteria based on the widening and deepening of the four European freedoms. A multispeed Euroland enmeshed in these freedoms is going to be more democratic, more cohesive and a much happier union for the European citizens to call homeland. JEL Classification: E02, F02, P51, H1, L5