The New York Times (via ACUS) describes a joint proposal from German Chancellor Merkel and French President Sarkozy to the EU leaders as a "German diktat." That's the first weird assessment in this Germany bashing editorial. Here are three more:
Mrs. Merkel wants all 17 countries that use the euro to fall in line with German ideas of fiscal austerity in return for limited additional financial support for countries in trouble. She expects them to run deficits no higher than Germany's (3.5 percent of G.D.P.), allow retirement no earlier than Germany (age 67), and raise or lower their tax rates as required to match Germany's.
a) Has the NYT forgotten what the EU agreed on two decades ago? According to the Maastricht Treaty of 1992 deficits should be below 3 percent and debt below 60 percent of GDP. Most countries broke the rules. For some this caused more serious economic problems than for others. Now Germany is asked to help them.
b) Germany's current strong economic growth is the result of tough, painful and unpopular reforms like the increase of the retirement age. Therefore it's not politically feasible to provide help to Eurozone countries, whose workers get to retire earlier than Germans.
c) Regarding matching tax rates with Germany: As far as I know, Merkel has only proposed more harmonisation of taxes, but not a "German diktat." After all, most economists keep reminding us that a monetary union requires a fiscal union as well. Moreover, let's also remember that countries like Ireland were booming since in the mid 90s because of extremely low corporate tax rates: Big multinationals created or moved jobs to Ireland, while Germany had high unemployment. Ireland's politicians could have used their economic success to create a more sustainable tax system. But they did not. The media did not help either, at least when looking at this editorial from Ireland's Independent in 2004:
This country's low-tax regime has been a proven winning formula; otherwise, why have so many other of the new EU member states from central and eastern Europe copied it in a bid to emulate Ireland's economic performance? In business, one does not change a winning formula. Low taxes, whether corporate, capital or income, have been central to the Irish economic success story.
Yes, never change a winning formula because summer never ends. And if it does, the EU will always bail you out. Sounds like the fable of the ant and the grasshopper, does not it?
The Economist's Charlemagne got it right:
WHEN Germany and France disagree, everybody complains about paralysis in Europe. When they agree, the protest is about unacceptable diktats. So when Angela Merkel and Nicolas Sarkozy pushed an EU summit in Brussels to approve their "competitiveness pact", which calls for closer co-ordination of economic policies among countries using the euro, an outcry was only to be expected. Yet its vehemence took them aback.
Over a long and bad-tempered lunch, almost every other EU leader railed against something. Ireland rejected the idea of aligning EU corporate taxes (or at least the tax base) as a danger to its low-tax growth model. Belgium and Luxembourg resisted calls to abolish their system of index-linked wages. The Baltics said they should not raise their pension age as fast as west Europeans because their people tend to die younger. Poland denounced plans for separate summits of euro-zone leaders for being divisive. From Stettin to Trieste, many easterners feel, a curtain is descending again. This time it bears the symbol of the euro.