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
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