Germany and the two-tier EU

Plans for a fiscal-stimulus programme will open old wounds.

Tarric Brooker

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Topics Politics World

Ever since the Eurozone debt crisis began in 2009, Germany, as the most powerful EU member state, has consistently asserted that austerity is the only way forward for deeply indebted EU nations. If such nations want to revive their economies, so the reasoning goes, they have to get their budget deficits under control.

In the years since the Eurozone crisis broke, member states on the southern periphery have undergone varying degrees of social upheaval and political turmoil as a result of EU-enforced austerity policies. Indeed, with EU citizens growing tired of cuts to everything, from government-pension payments to essential health services, populist political parties, such as Italy’s Five Star Movement (M5S) and Greece’s Syriza, have ridden into government on the back of anti-austerity messages that have resonated strongly with their electorates.

In recent months, however, Germany has encountered economic problems of its own. Its manufacturing sector has entered recession and analysts predict that the slowdown in growth may drag the German economy as a whole into recession by the end of October.

Given the potentially severe effect of the slowdown on the German economy, there have been growing calls from within Chancellor Merkel’s own ruling coalition, and across the political spectrum, for the deployment of a fiscal stimulus programme to insulate the economy from the impending downturn. There are even suggestions the programme is already in play.

Berlin certainly has the means to run a large government stimulus programme. After five years of budget surpluses, and one of the lowest levels of sovereign debt in Western Europe, it has built a substantial fund ready for just this sort of eventuality.

But for the citizens of southern Europe still reeling from almost a decade of austerity enforced by the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), German politicians’ claims that ‘we are different’ are likely to ring hollow.

To many observers of German or EU politics, Berlin deploying a government stimulus is rather the non-event. Which it is. No rules are being broken, EU or otherwise. A nation as wealthy and powerful as Germany is obviously going to try to protect its economy.

But in a Europe that has become increasingly divided by austerity, accusations of a ‘two-tier’ EU are likely to grow even louder. After all, Germany is planning on doing what it has told poorer EU members they cannot do: spend vast sums of public money.

Italy, for example, is in recession. And the Italian government isn’t allowed to protect its economy in the same way as the German government can, due to EU regulations on budget deficits. Berlin’s actions, therefore, will only rile the economically weak members of the EU.

Yes, the EU is meant to be a union of equals. But Germany, as the preeminent political and economic power in the EU, has continued to drive policy on everything from Eurozone debt to the response to the ongoing migrant crisis. As a result, it isn’t hard to understand the anger and frustration of those nations that didn’t sign up to consistently follow wherever Germany led.

German plans for a stimulus programme ought not to be a problem. But in the context of an austerity-ravaged Eurozone they could quite easily become one.

Tarric Brooker is a journalist.

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