As Sabine Beppler-Spahl has observed on spiked, the building of the Merkel cult is based on a turn away from politics and the stigmatisation of political conflict as destabilising or dangerous. Merkel deliberately eschews vision because it leads to conflict. Little wonder that many commentators have noted that no one really knows what Merkel’s political agenda is.
When asked what Germany meant to her, Merkel once replied ‘well-fitting windows’. In a recent meeting, she cautioned senior Christian Democrat politicians not to get carried away by being in power. ‘Now don’t go setting my country on fire’, she was reported as saying.
Leaders without programmes or principles are difficult to hold to account. Germany’s embrace of Merkel, and the European celebration of her dubious qualities, represents a much wider and deeper evasion of responsibility. The support for Merkel speaks to a desire to have parents who look after us as children, rather than leaders with competing ideas who ask for our active support. A state run along the lines of a nursery, with mummy in charge, is far from the principles of democracy. This development is a particularly tragic one in Germany.
Her victory will lead to a significant contraction of the political space in Germany. That space will shrink even further if the Social Democrats (who have lost any left-ish appeal to the German working class) enter into a coalition with her. The overpowering consensus in Germany is for a statist administration in which debate is restricted to small-scale managerial quibbling over taxation, spending and regulation.
The closure of Germany’s political imagination around a culture of ‘mummy will take care of it’ shields German society from the problems it faces. This might be comforting but it is dangerous and backward. Instead of debating, tackling or even recognising difficulties, there is an almost complete abdication of responsibility in the German elite, a flight from reality that is unfortunately echoed in wider German society.
In a country widely celebrated as an economic powerhouse, it is deeply depressing to see how little discussion there is about Germany’s economy and the disappearance of any fight for self-interest among the German capitalist, middle and working classes. Germany’s history of social struggle to improve living standards and its Vorsprung durch technik culture of engineering and progress are long gone.
This development is doubly negative because the German economic model has been generalised across the Eurozone as the one-size-fits-all bureaucratic template for all members of the EU’s single currency, writ large in the dictata of the Troika. While Merkel was absolutely right to refuse writing a Eurobonds blank cheque to pay off Eurozone debts with German money, she was deeply irresponsible to put Germany’s considerable clout behind the self-flattering fallacy that her country is the model for Europe.
Ahead of an election, amid a recession and Eurozone crisis, one might have expected a debate about the economy. But there’s been nothing of the sort, largely because many assume that the German economy is remarkably healthy. But, as the Deutsches Institut für Wirtschaftsforschung (DIW) noted last month, Germany’s economic record is ‘deceptive’. The glossy surface of German success – hailed by Eurocrats as they impose economic disaster on Ireland, Greece, Portugal, Spain and beyond – conceals deep-rooted problems.
As the DIW points out, there is a certain ‘euphoria’ over Germany’s recent economic record. Germany appears to be doing well compared with the rest of the Eurozone: GDP is up, recovering by over eight per cent since the deep contraction in 2009, and 1.2million new jobs have been created during the same period. Germany has balanced its budget, too, with a fiscal surplus of 0.2 per cent of GDP in 2013.
But this picture is misleading. Long-term trends (see the tables below) show that real GDP (adjusted for price increases) is at best average and that wages have actually fallen behind productivity.
Real GDP by country: 1999 - 2011
Real wages by country: 1999 - 2011
The dogmatic adherence to reducing unit labour costs (wages), which has been exported across the Eurozone by the European Central Bank, has not been translated into investment in Germany. In fact, German investment is lower than the Eurozone average, an ominous indicator for Europe’s biggest economy. As the DIW reported in its most recent monthly bulletin: ‘The rate of investment – ie, the ratio between gross fixed capital formation and GDP – in Germany was still at just under 20 per cent in 1999. It is currently only just over 17 per cent. Investment activity (in equipment and construction) in Germany is therefore significantly lower than in many other countries.’ ‘Since 1999, compared to the rest of the Euro area, Germany has recorded an annual investment gap of around three per cent of its GDP on average.’
Gross fixed capital formation by country: 1999 - 2011
Merkel has been more interested in recycling revenues and balancing budgets than strategic public investment, something that would require political leadership. As well as a lack of investment and low wages, there is little honesty over the cost of the Eurozone to Germany.
Germany’s public liability of around €122 billion in bailouts is dwarfed by private losses. Since the creation of the Euro in 1999, and the emergence of a cheap credit bubble, German investors have lost approximately €400 billion (16 per cent of GDP) due to bad foreign investments, according to the DIW. From 2006 to 2012, from the crest to the trough of the Eurozone wave, losses were as high as approximately €600 billion or 22 per cent of GDP. The lure of easy Eurozone money and foreign investments is estimated by the DIW to have wiped one per cent off Germany’s annual GDP. Rather than being open about this and making the case for the Euro, the debate consists of little more than oily flattery about German success in the Eurozone.
Despite the prospect of an annual budget surplus of €28 billion by 2017, and the lowest borrowing costs in Germany’s history (markets are paying to lend money by buying German bonds at a loss), there is little evidence that Merkel will launch a public investment strategy. Germany is recycling itself. ‘We’re living on yesterday’s reserves’, Dieter Schweer, an executive at Germany’s Industries Federation, told the Wall Street Journal the day before Germany’s elections.
Merkel has taken one significant economic decision: she closed Germany’s atomic reactors in the midst of the anti-nuclear hysteria that followed the 2011 Tohoku earthquake and tsunami in Japan. Despite the prospect of a Fukushima-style incident (which killed nobody anyway) being near zero in Germany, Merkel decided once more to hand the comfort blanket to Germans.
So, instead of investing in productivity, she has embarked on a policy of Energiewende, or energy turn, as Germany switches to meet a target of producing 80 per cent of its electricity from renewable, wind and solar power by 2050. Carpeting fields with solar panels (usually made in China) – such as the ghastly installation around Arnstein, one of the world’s biggest – has gratified the green conceits of Germany’s middle class at a terrible economic cost.
To pay for this adventure, surcharges on electricity for private households increased by 47 per cent, or €15 billion, over the past year alone. German consumers already pay the highest electricity prices in Europe and there will be further spikes in cost next year. It is not progress when, as Der Spiegel reports, just a few weeks before the German election, ‘electricity became a luxury good’.
German industry – already investment-starved, sluggish in productivity and reduced to making easy profits from low wages – is in trouble. Energy prices for industry in Germany are 40 per cent more expensive than in France and the Netherlands, and 15 per cent more expensive than the EU average. Germany’s energy-intensive manufacturing sectors, such as chemicals and steel, are among the hardest hit with Energiewende costs of up to €740million a year – a terrible drain on the economy. ‘Leaving it to mummy’ might be good for the risk-averse anti-nuclear lobby, but it is a catastrophe when it comes to economic self-interest.
Low expectations and opportunism combine in the Merkelian doctrine of telling people what they want to hear, be it that they are right to be scared of nuclear power or that Germany is a Eurozone success story. This infantilising approach to the electorate is mirrored across Europe. In France, President Francois Hollande reassured the French that they did not have to change (which was a lie). And in Greece, the far-left Syriza party, beloved of Occupiers and anti-globalisation activists, tells people that Greece does not have to leave the Eurozone in order to rebuild its economy. Like Merkel, both Syriza’s Alexis Tsipras and President Hollande tell the public what they want to hear rather than what needs to be done.
The pan-European flight from reality is intensely conservative. ‘Stability’ and false reassurances are the last resort of a status quo hoping to avoid challenge or contest. As the editor of Die Zeit, Josef Joffe, put it: ‘Europe’s richest and most successful country has opted for a kind of gilded status quo. The unspoken message is: spare me the risk, toil and trouble, never mind rampant technological change and the chaos just beyond Europe’s borders.’
Germany’s flight from reality is destructive at a moment when institutions are failing and ducking difficult decisions across Europe. Germans (and Europeans) need to grow up and confront the social and economic problems in our midst. Mummy not only won’t; she can’t.
Bruno Waterfield is Brussels correspondent for the Daily Telegraph and author of E-Who? Politics Behind Closed Doors, published by the Manifesto Club. He is speaking at Battle of Ideas debates in Budapest and London in October. Read the full schedule here.