AN OLDER crowd has gathered in a Berlin bookshop to hear author Thilo Sarrazin read from his book, Europe Doesn’t Need the Euro. The smell of fear is palpable. Sarrazin, a former Social Democrat (SPD) politician and Bundesbank director, says Europe needs to face facts: the euro was never an economic project but a political vision.
His book, which has sold 100,000 copies so far, effectively throws back at German leaders one of their favoured political maxims: “If you’re having visions, go see a doctor.”
Countries such as Greece tricked political leaders to get into the euro zone, he says, while the European Central Bank lacked “both the tools and the concept” to tackle the resulting problems between the core and the periphery. Excessive capital flowed from countries that had surplus, such as “Austria and Germany . . . to southern countries and Ireland, predominantly to fuel a big property boom”.
If the crisis genesis was bad, Sarrazin’s warning for his Berlin audience over the crisis resolution is dire: your euro zone neighbours are after your savings and they will get them, either in bailouts today or by a “secret plan” for greater inflation tomorrow.
“We have no economic benefit from the euro, just the danger of huge risks . . . euro bonds, rescue funds, we’re paying for the overblown spending of others,” he says.
“This is no faulty thinking, this is the case.”
After he finishes, audience members line up to thank him for outlining his appalling vista.
“Dr Sarrazin, your analysis is compelling and incontrovertible,” says one elderly man.
After the event I ask Sarrazin how his thesis of German vulnerability fits in with a view elsewhere in the euro zone of German strength, even dominance, in the crisis.
“People are queueing up for a slice of the German wurst saying ‘please, please please’ and Merkel slices off a piece in exchange for promises that they do this or that,” he says.
“This is a humiliating experience for the countries concerned and has nothing to do with the real spirit of friendship between nations. It can’t end well,” he adds.
And where does he see the crisis going?
“If Merkel continues, in three to four years – and without anything really changing in these crisis countries – we’ll have inflation of 4-5 per cent and will be paying for others’ debts. We will be their hostages.”
The image of Germans as hostages to others’ debts and profligate ways is widespread in media coverage of the euro zone crisis here.
Shot through with equal parts indignation and fear, it is visible from the Bild tabloid through to the conservative Frankfurter Allgemeine. Even the centre-left weekly Die Zeit splashed on a recent cover: “The whole world wants our money. What Germany can afford and what it can’t.”
A particular source of odium is the euro zone’s permanent bailout fund, the European Stability Mechanism. It has been described as a financial “black box” and “political whitewash” by some of Germany’s best-known family-run companies. “The coercion and consequences of a common currency are beginning to divide European peoples permanently,” an association representing 350 such companies has said in a statement. “Not every means is permitted to save the euro – and those who want to save the euro at any price risk that price being Europe.”
This is a new argument in Germany’s European debate: that the road to euro zone crisis hell is paved with good intentions. It has found favour with many prominent economists and managers who present bailout neighbours as unwelcome millstones around Germany’s neck.
Germany should hitch its wagon to China, they suggest, to which exports have jumped more than 200 per cent in the past eight years, compared to 31 per cent to the euro zone. This economic relationship is clearly a political priority: Merkel and nine of her cabinet ministers fly to Beijing on Thursday.
Critics of this argument point out that Germany exports more to Italy than to China. The euro zone will always be Germany’s core market, they say, and its continued economic health remains Germany’s prime interest.
“There’s a huge discrepancy between what is in people’s heads here and what is happening in Europe and the Sarrazins take advantage of that,” says former SPD finance minister Hans Eichel. “People here are sceptical of the euro but . . . they realise this is no sensible alternative to European integration and that, if we give up the euro, chaos will ensue.”
The coming months will be crucial in the German debate. Until now, with the German economy strong, the euro zone crisis has been a phoney war on the nightly news.
But recent weeks have seen headlines dominated by manufacturing job losses because of a plunge in exports, which is responsible for one-third of Germany’s economic output. “Until now the weakness in euro zone demand was compensated by demand in developing countries, but that’s no longer the case,” says Ferdinand Fichtner, head of forecasting and economic policy at the DIW economic institute.
With a black year forecast in 2013, a general election year, the question is whether this will create a chastened mood of solidarity in Germany – we’re less vulnerable together in the euro zone – or put wind in the sails of critics, that a down-on-its-luck Germany can no longer afford bailouts.
The regional Freie Wähler (Free Voters) party from Bavaria has promised to fight the 2013 Bavarian state election on an anti-bailout ticket, and to take that campaign national.
A spooked CSU (Christian Social Union), Merkel’s Bavaria allies, has tried to steal a march on its rivals by stepping up its criticism of Greece and describing ECB president Mario Draghi as “Europe’s counterfeiter”.
Merkel has warned politicians to “weigh their words carefully”, but it is much the same with her other coalition partner the Free Democrats (FDP). As it fights for its political life in opinion polls, desperate FDP leaders may be tempted to co-opt anti-bailout arguments presented by FDP rebels that carefully avoid the politically poisonous “eurosceptic” label.
“The European idea is being damaged by no one sticking to the rules,” said Frank Schäffler, an FDP rebel and bailout critic on German radio yesterday.
“I think we have a kind of European nationalism in Germany that comes before everything else and brushes aside the rule of law, freedom and democracy, all to achieve one goal: the European nation state.”
What started out as bailouts to Greece and Ireland two years ago has returned to Germany as a major debate, challenging the core tenets and sacred cows of its European engagement.
Last April former chancellor Helmut Schmidt warned Germans not to “let ourselves be seduced, based on our economic strength, to demand a leadership role in Europe . . . To protect us from ourselves, Germany needs to be embedded in European integration.”
Sarrazin took issue with Schmidt’s argument in remarkable fashion, drawing a line from the second World War and Holocaust to the euro. The crisis, he suggested, had made clear the danger of “letting German feelings of guilt influence decisions that would be better taken on the basis of economic sense”.
For many Germans, that was an argument too far.
“In the German mainstream Sarrazin has a rubbish reputation, regardless of what he writes,” says Nils Diederich, professor emeritus of political science at Berlin’s Free University.
“Sarrazin’s book has fallen on fertile soil and has amplified prejudice, but I see it as a momentary excitement that will pass.”
Germany’s bailout sceptics face stern opposition from the politician mainstream but they constitute a growing movement in search of a convincing leader. And, like never before, the arguments are hitting home.
TOMORROW:The Irish in Germany give their verdict on us, them and the ties that bind
