How clueless Irish pundits misrepresented Germany
One of Ireland’s few growth areas during the recession has been in ill-informed commentary about our largest euro-area neighbour
The German journalist and satirist Kurt Tucholsky, who flourished between the World Wars, once remarked that you have to love the French to understand them – and you have to understand the Germans to love them.
There has not been a lot of love lately in Ireland – particularly in the Irish media – towards the Germans in Ireland and not a lot of understanding, either.
Indeed, one of Ireland’s few growth areas in the recession has been in ill-informed German experts. On the airwaves and in print they moan about Chancellor Angela Merkel and shout about her finance minister, Wolfgang Schäuble. Though the voices vary, the rhetoric never changes: the Germans dominate Europe; and the Germans demand austerity.
To lend their limp punditry an air of crisp authority, they toss about German words like croutons into a tired salad: Bild, Bundestag and even the mouthful that is the Bundesverfassungsgericht, the constitutional court.
For anyone who has any clue, it’s like watching a piano teacher who is one lesson ahead of the student. The pundits owe their success to a vicious circle of lack of interest and lack of information in Ireland about its largest European partner.
While many Irish people understand how the US president is elected by an electoral college of federal states, many are perpetually surprised to hear Germany, too, is a country of federal states.
This gap has allowed three fallacies dominate mainstream Irish understanding of Germany in the euro crisis.
The first and most insidious is the notion of Germany as the crisis villain. My first experience of this came a few years ago when a researcher called to say a well-known Irish pundit was coming to Germany to film a segment for a crisis documentary.
The pundit was anxious to talk to an elderly couple about how German savers fuelled the Irish boom. The aircraft tickets had been bought, now the pundit just needed some pensioners to put a face to their precooked thesis.
Hibernocentric crisis narrative
That Germans saved and Irish spent in the past decade is one of those sweeping statements rarely challenged from which pundits have extrapolated their Hibernocentric crisis narrative. The Germans were effectively buying the drinks for the Irish, they say, and should thus share the blame, the cost and the consequences for the car now wrapped around the tree.
The trouble is that the financial data to support this argument is at best complex and patchy and at worst far less compelling than you might think.
Last March the Central Bank supplied The Irish Times with previously unpublished data showing that when the music stopped in 2008 it was Britain, not Germany, that was by far the biggest source of funding for Irish banks.
Even the infamous bondholders were, according to consolidated data sets, a quarter Irish and two-thirds non-euro area. The entire euro area, including Germany, held just 13 per cent of total Irish bank bonds. While the data available is far from complete or perfect, it presents a different reality from that peddled by the pundits.
Remember the outrage over the list of 80 Anglo bondholders published by blogger Paul Staines? On his list a third of the institutions named were German. When I contacted Staines out of curiosity last March he admitted his list presented only a selection of the total Anglo lenders.
Browsing the spreadsheets together, he acknowledged his Anglo bondholder document was “not a great conspiracy list” because it contained the name of every major institutional investor one would expect to find.
Finally, he acknowledged there was “more British money than German [in Anglo], which didn’t exactly serve my argument that Ireland was bailing out the euro zone”.
His admissions caused far less ruckus than the original Anglo list. Why should they? The narrative was already fixed: of reckless German lending and Dr Merkel as the Manchurian candidate, activated by big German banks to claw back their reckless, disproportionate investment in Ireland.
The second crisis fallacy is the assumption that everyone thinks, or should think, that it is up to the state to start spending in a downturn to cushion the private-sector slump. The German economic mainstream, however, believes the opposite: that some measure of state financial pruning is necessary in a downturn to reduce borrowing and eventually return to sustainable growth.
Whether you spend or save your way out of a recession is the crux of the euro crisis and the German view – that you cannot solve a debt crisis with more debt – is deeply frustrating to those who believe otherwise. But trying to win over Germans to your economic thinking, particularly when your economy is on the skids, is like trying to convince Martin Luther about the virgin birth during the Reformation.
Your options: portray yourself as an abused spouse in an abusive marriage; file for divorce and leave the mutual euro zone home; or – the pragmatic option – admit that sharing a currency is a more challenging interfaith marriage of economics than anyone anticipated, and get on with finding a compromise.
The path to compromise, however, requires discarding a third fallacy: expectations of German leadership in Europe. In Ireland and elsewhere one camp argues Germany is showing too much leadership in the crisis, exploiting the economic weakness of others to ram through its fiscal rule book. The other camp says Germany needs to lead more but in a direction of which it – and not Germany – approves: towards mutualised sovereign debt-buying to mutualised bank rescue funds.
Speaking to German officials – as the Irish pundits don’t – they blanch at the idea of German leadership in Europe, where the ideas of führen and Führer still have terrible connotations. Instead they see a necessity for euro countries to learn to borrow less before, as Berlin admits, a new era of mutualised euro finances become reality.
As their federal election looms, understanding this core concern is a far better way of getting to grips with the Germans than heeding Ireland’s cottage industry of crisis pundits.
Derek Scally is Berlin Correspondent