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NYT Criticizes German Leadership

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.


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Marie Claude on :

Sarkozy and Merkel are sold to the banksters, and their medias appearences are ment to reassure them. Though, I predict that the Maghreb revolts will come to Europe too. "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." so did Germany ie 2004-2005, and still even, today, the 60% of GDP aren't respected ! "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." don't forget Germany's results in 2009: -5% of groth, that the today "inflated" 3,5 % of 2010 groth is proportional to 2009 ! besides Germany is a ageing country that need such draconian reforms, not the others, and especially France. Also Germany being the only exportation machine of EU was decided by Schroeder that cut enterprises taxes to put them on workers while blocating their wages. It was easy to make it when he did it, the ambiance was at euphory in the eurozone, and german merchandises found clients as the rest of the eurozone economy was and still is more consumerism orientated. Though this isn't the case anymore, the majority is pressed by markets and has to pay high credit loans, their people can't afford to buy anything anymore, but chinese's ! Merkel's proposition will only lead the other eurozone countries to more poverty, which is already not low in Germany, and is respnding to her low opinion among her party peers, that don't want to give more money away to the PIIGS

Pat Patterson on :

The first link goes essentially to the homepage of CounterPunch and the second goes to the risk of female poverty with no explanation of what are considered the poverty rates for each country.

Marie Claude on :

1rst link: "death of social Europe", Description of the fate that a majority of European countries will encounter soon, through a model, Latvia 2nd link, you may know that single mothers live majoritarly in poor conditions, and as they represent quite a big percentage of our populations now, so mesuring poverty through is relevent !

Pat Patterson on :

No, the first link goes to "The Myth of the Baltic Tigers" and as I mentioned unless there is a description of what constitutes actual poverty then stats such as the second are simply irrelevant. Poverty in the India may mean 1,200 calories a day and no sanitation while in the US that could mean ownership of a house and a car as well as having a retirement account.

Marie Claude on :

désolée, these stats don't measure India's poverty, but Europe's ! y'a know those persons that live on social checks, and Hartz IV jobs !

Pat Patterson on :

Jeez, are you serious? Of course India is not mentioned but I used it as an example of the different levels of povery in the world and how difficult to compare them without setting baselines that are analogous.

Zyme on :

Joerg I would expect you to be more sensitive to how the tone in EU internal relations changes. While I also would rarely ever speak of German Diktats at the moment, the tendency is quite clear: When in the 1990s, the smaller EU members where critical for our foreign policy (for whatever weird reason), in the 2000s this changed significantly up to a point today where not only the German government ceases to give a damn about smaller EU members. Also the German media are now a multiplying factor which allows to get the masses in line when it comes to bashing on smaller countries. Press campaigns on foreign countries? Nothing to be witnessed in Germany since the 1940s I would assume. I do not say that these bashings are not justified. All I am saying is that the tone has changed significantly. From being the most forthcoming neighbour to where we are now is far a bigger step than from now to a situation where we are actually dictating the course of Europe.

John in Michigan, US on :

No need to worry, the NY Times is only calling it a "diktat" because Merkel and Sarkozy are right of center or conservative, and everyone at the NY Times believes that conservatives are secretly fascists. They don't mean to bash Germany; they merely have a more important duty to bash conservatives. If socialists were in charge, they would call the same policy "encouraging fiscal responsibility", in order to correct the misguided impression that socialists are sometimes fiscally irresponsible. Glad I could help clear that up!

Marie Claude on :

'Mubarak is the richest person in world' "London: Ousted Egyptian president Hosni Mubarak, reportedly ailing with cancer may be the richest man in the world, with his wealth estimated to be a staggering USD 70 billion."

Marie Claude on :

sorry, wrong place

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