Germany rebuilt its economy from the rubble of the second world war by setting rules on how market forces should work – and sticking to them. What followed was touted as a Wirtschaftswunder, an “economic miracle” that recreated Europe’s industrial powerhouse. The reality of course, is that there is no such thing as a miracle in finance. Along with the tooth fairy, such claims are made as a cover of where the money was actually coming from.
Germany's industrial dominance today is a direct result of, and benefit from, the gigantic industrial war machine of the Nazi era. The Allies were supposed to dismantle this, however little was actually done post-war, as much of Germany's important industrial assets were just hidden or moved abroad. German firms (by order of the German leadership) pretended that much of their important industry, machines etc, had been destroyed by Allied bombing, so that they would not be forced to give up important industry to the invaders, and not furnish their european victims with the scientific/industrial means to compete with the future Reich.
Add to that mix the huge funds looted from every country Germany invaded; funds never recovered by the Allies and used as post-war development capital for firms such as Thyssen-Krupp, Siemens, BASF, Bayer, and VW, plus the Marshall plan, and the obsurdity that Germany's post-war economy was a divine "miracle" becomes clear. Germans just like to pretend that a miracle happened, rather than admit the fact that the German economy survived by the very looting, genocide, and slave labour undertaken in the 1940s.
Many of the German economists and central bankers of the 1940s, were re-positioned by the mid 1950s. Bankers and economists whom their very theory of banking, was to operate outside of the Capitalist system, and as such destroy Anglo-American influence, and replace it with the German banking outlook - a system designed to make slaves of any nation Germany wanted to conquer, and switch debts owed to Germany into a barter system of labour provision for the German reich (akin to a europe-wide command economy).
That idea still informs the way the country’s mainstream economists approach policymaking; and a mere European financial crisis is not going to change their way of thinking.
As the crisis engulfing the 17-nation bloc escalates, Germany continues to press hard for Greece to pay a high price for 'breaking the rules'. From the federal president down, Germans have denounced the extraordinary steps taken by the European Central Bank to prevent financial meltdown. Jürgen Stark, one of their leading representatives, this month quit the ECB’s executive board in protest. They have also rejected appeals for Berlin to embark on fiscal stimulus measures that would boost growth across the continent.
The result is a standoff between Germany on one side and much of the rest of Europe and the US on the other, where Berlin is seen as the block to a decisive crisis response because it simply is “not getting it”. The trouble is, it is "getting it", just not in the way the west would hope.
The German economists’ conviction that fiscal austerity is Athens’ only option is not unique – it is the position taken by the ECB and International Monetary Fund. But global aid packages combine sticks with carrots and doses of pragmatism. By contrast, German conservatives couple economic arguments with a moral conviction that, if rules are to work, inappropriate behaviour should be punished whatever the impact on other countries - including making the Greek economy shrink for the worse, and risk civil war, despite that German banks helped create the debts in the first place, German businesses were involved in bribery and corruption in the Greek parliament, and Germany herself broke EU fiscal rules on numerous occasions.
Recent economic performance offers Germany little incentive to change its thinking. Since the launch of the Euro, growth has been driven by exports from an increasingly competitive industrial sector. Rivals in the bloc could not keep pace by weakening their currencies as in pre-euro days, to the benefit of Germany. Germans argue that they are financially superior in Europe as they have a strong economy despite taking on the GDR (east Germany) after unification, and all the expenses that entailed. The problem is, careful bankng manipulation, Euro policy dominated by Germany, combined with the ERM of the early 1990s, has meant that the rest of Europe has paid for German reunification. A fact which adds to the questionable motives of current German financial policy, and could be argued to be a major contributing factor to the Euro crisis.
Heiner Flassbeck, a former state secretary in the German finance ministry said this week, in an apparent attack on Schauble's policies;
“European monetary union gave us an opportunity to really go for that model – because other countries could not depreciate ... The small problem with that is that the others are now bankrupt.”
He hit the proverbial nail on the head. But it looks a lot more like purposeful domination and economic warfare, than it does another 'miracle'. Europe goes bankrupt whilst Germany becomes the largest exporter? Funny sort of miracle.
Be aware when economists and bankers talk about a need for "Germanic rules" in banking. They, knowingly or unknowingly, are referring to a system that will only benefit Germany.
Germans are not talking about increased financial controls in the way of sensible laws and regulations. How could they be, when German bank's economists have been ignoring the already established rules and legalities associated with operating in other countries (fraud, bribery, manipulation)?
No, German bankers are talking of nothing less than an attack on Capitalism, and a change of game to make everybody play by their rules. Anti-Capitalist rules designed to benefit Germany.
When the very German system will destroy the City of London, one must ask questions.
For an idea of how German economists would run Europe, read their own document - EEC Doc