Financial Crisis: Germany's Role in the European Union
While the majority of European countries are experiencing the “nightmare” debt crisis, Germany is actually in an optimistic mood and is pleasant about its extraordinary trade surplus. Although Germany was hit hard initially by the global financial crisis, its exports helped the country's economy recover the by dropping unemployment to 3 million in 2012, the lowest level seen in 20 years. Its fast economy rebound left the rest of the European world in envy, and therefore triggered an argument on its role in the European Union (EU).
Germany has showed great sympathy toward Greece, the heart of the sovereign debt crisis, by giving away the bailout cash. However, it is still accused of destroying Europe’s economy. The excessive savings in the German national treasury actually inflated real-estate bubbles in Ireland and Spain. Now that the bubble has burst, wages have gone up. Also, as Germany increased its exports to boost its manufacturing sector by selling more cars and machine tools to the peripheral European countries, it left the southern countries with unaffordable external deficits. In 2009, for instance, Germany exported 6.7 billion euros worth of goods to Greece, but imported only 1.8 billion euros worth in return. Many have thrown a question to Germany, “How are Spain, Greece and Italy to grow their way out of trouble if they cannot export more to you?” Has Germany really thought about its role in the EU? We cannot deny the fact that the external surplus has dragged Germany’s economy out of stagnation, but at the same time, Germany should also think of its responsibility in the EU.
The serious problem laying in front of Europe now is the disagreement about how to solve the crisis. While the European Central Bank (ECB) announced that it would buy some government bonds from Euro-zone countries to help them pay off debt, Germany is still holding onto its “ordoliberal” ideas . This German mindset embraces independent monetary policies with an emphasis on establishing competitive markets. Troubled Euro-zone countries want Germany to agree to the “Eurobonds” plan, or at least come up with some other schemes to mutualize the debt of countries that share the single currency. Germany left with no comments.
While Germany, one of the richer countries in the EU, is faced with the anticipation of making huge contributions to save the debt-ridden countries, the way in which its economy grows drives Germany in the opposite direction. How to balance its responsibility in the EU and its economic growth becomes an urgent matter in Germany. What role do you think Germany should take in this financial crisis? Do you think Germany is helping out the EU or making things worse?