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Analysis
 Germany’s recipe for EMU success: Don’t say what your objective is

Germany’s recipe for EMU success: Don’t say what your objective is

Berlin concessions likely at Brussels summit – but, otherwise, the show is going the Germans’ way

by David Marsh

Mon 13 Dec 2010

The London Financial Times last week took a bravely optimistic line on German public opinion and the turbulence affecting economic and monetary union. ‘Apart from a handful of hostile articles in newspapers traditionally sceptical about the single currency – such as the conservative Frankfurter Allgemeine Zeitung, the mass-circulation Bild Zeitung, and the left-of-centre weekly Der Spiegel – the media have not  reflected the alarm apparent in other eur ozone states,’ the FT told us helpfully.

‘Indeed, an increasing number of newspapers have run articles calling for Germany to do more to ‘save’ the euro.’

Well, perhaps that’s not so helpful – because the three news outlets the newspaper mentioned are actually the three most important and influential bits of the German media. If FAZ, Bild and Spiegel jointly come out against any possible action – whether the election of a certain politician or another bail-out plan for Greece, Ireland and Portugal - then you can bet your bottom dollar that it will not happen.
In fact, the German debate on the euro is hopelessly confused – which is one of the reasons why no-one knows precisely how the German government will react to rising pressure from the debtor states (including France) for an increase in bail-out facilities to help the struggling euro members.

Of course a great deal, economically, politically and psychologically, is at stake. The chances are that the Germans will make concessions to demands for more funding when EU leaders meet in Brussels for their pre-Christmas summit on 16-17 December. But that will do no more than protract the long agony of EMU into 2011, when more pain and anguish are in store.

One of the factors adding to the cacophony is that Chancellor Angela Merkel and her finance minister Wolfgang Schäuble are both under extraordinary pressure at home to take a tough line on errant states. Criticism that Schäuble has been too soft in failing to agree automatic sanctions on miscreant EMU members has come from two political parties that always in the past would be relied upon take a comfortably pro-European line – the Opposition Social Democrats and the liberal Free Democrats , junior partners in Merkel’s centre-Right coalition government.

Other countries within EMU who in the past would slavishly support European integration, such as the Dutch, now ruled by a minority government, are also now a great deal less docile.

Compounding resentment on all sides, Germany may complain a lot about how it’s keeping the euro ship afloat – but everyone knows that the Germans themselves are doing almost embarrassingly well out of the euro. Thanks to the single currency, Germany this year is achieving the ‘golden scenario’ of low interest rates, low inflation, a competitive exchange rate and above-average growth. With only very few exceptions in the 1950s and 1960s, this is, in German economic history, a uniquely favourable policy constellation.

One of the reasons why the Germans have been startlingly successful in meeting their economic aims in EMU is because they have never been stated too precisely. No German politician has ever stood up in public and spelled out that a central reason for EMU is to boost German exports.

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