Germany and the European and Global Crises

Abstract

Moving from the current global and European imbalances and crises, and from the consideration of the German reaction to them, the paper explores the political economy origins of the conservative German policy stance. It emerges that an export-oriented economy was a deliberate decision of the German elite after WW II and that the external constraint may be regarded as appropriately designed for internal discipline and efficiency (and vice-versa) in a self-reinforcing process. The conclusions illustrate some possible future scenarios for Europe.

Financial crisis and corporate governance in the financial sector: Regulatory changes and financial assistance in Germany and Europe

“…This sentiment is demonstrated by the European Commission (EC) in its recent Green Papers on corporate governance and external audit ( EC, 2010a( EC, , b, 2011. Nevertheless, corporate governance short comings contributing to the crisis of confi dence are not uniquely American as one might expect by looking at Lehman Brothers or Bear Stearns ( Hellwig, 2009 ); fi nancial companies in Germany also had their own shortcomings ( Hau and Thum, 2009 ;Cesaratto and Stirati, 2010 ). These included severe shortcomings in risk management ( McShane et al , 2011 ), insuffi cient capitalization of the entire banking system ( Hellwig, 2009 ), and defi ciencies in banking regulation and supervision ( Hufner, 2010 ), among others.…”

“…German banks were sitting on an enormous amount of debt from the European periphery, particularly from those that had begun to be offensively dubbed the ' GIPS ' countriesGreece, Ireland, Portugal and Spain ( Cesaratto and Stirati, 2010 ) -and recently Italy ( Agarsisti and Arnaboldi, 2011 ). As a reaction to these developments, the Euro Area Member States created the EFSF following the decisions taken on 9 May 2010 within the framework of the Ecofi n Council.…”

The Euro: An International Invoicing Currency?

“…On the one hand, the euro crisis seemed far from over, and on the other hand, substantial growth of the EU budget and its redistribution within the fiscal union, namely, the most commonly accepted solution to save the single currency, was dismissed by the previous European Council. 10 No plan had been forthcoming to end the "monetary mercantilism" that exacerbated the internal imbalances of the Eurozone (Cesaratto and Stirati 2013). The sustainability of the euro seems therefore to be increasingly questioned.…”

The economics of deflation in the euro area: a critique of fiscal austerity

“…As Cesaratto and Stirati (2011) explained, this phenomenon is connected, historically, with the decision by the German establishment to adopt an export-led regime for economic growth based on prolonged wage repression in order to reduce unit labour costs in real terms and thereby improve German competitiveness against all other EMU countries (Bibow 2013a;Rossi 2013). Now, persistent inflation differentials in a single-currency area elicit persistent trade deficits in those countries where the inflation rate is higher than the area-wide average rate of inflation, owing to the deterioration in their price competitiveness, which also causes an accumulation of foreign debt for them (Fleming 1971).…”