(no subject)

[ivyfic]

For anyone following the news of the European financial crisis, this is a very interesting podcast.

Right now, Germany is facing a choice over whether to bail out Greece and other European countries. Germany has the strongest economy in Europe right now, in part because they went through austerity measures in the last decade to keep things in order. Greece...didn't. So you'd expect most Germans not to want to bail out Greece. And many don't. But they also talk to a lot of people who do want to bail out Greece, and for idealistic reasons. It's actually very hopeful, to realize that Germans in particular but all Europeans see the EU and the Euro as a promise that they will never have another war like WWII. As the reporter in ths tory says, the euro is a promise that the rest of Europe no longer need fear Germany's strength, that they will use their strength to help everyone.

The EU's still in a pickle right now, but this is at least one spot of hope.

Comments

[wellgull.livejournal.com]

I'm afraid I'm no fan of Planet Money generally, because its analyses tend to be overly conventional & superficial... like this one, unfortunately. I mean, I too am interested in & inspired by the larger point -- that a lot of Germans acknowledge that the larger European project requires greater fiscal integration, and that the EU is a political project first, which might happen to entail an economic (and, soon, fiscal, if the Euro is to survive) union. But there's some seriously faulty assumptions here that better journalism would contextualize and call into question, and which in some ways work against that narrative, or at least... complicate it.

The first interview is particularly egregious; ie basically wrong. He talks about Spain being profligate? Ireland? Spain had a budget *surplus* up until 2008, when the world economy went to DOOM; Ireland was doing great up until then too, when the government decided to absorb its banking sector's debts... and Greece's government has been spending so heavily in an effort to combat unemployment, which Germany's been siphoning off.

Meanwhile, Germany didn't choose austere wages out of some kind of stoic Protestant virtue. It (at least the low wages, which are separate from the government spending piece) was an entailment of the reunification, with the huge influx of cheap East German labor. Reunion also provided a wonderful opportunity for investment, the wellspring of profits.

Austerity had very little to do with it. In fact, the only reason Germany was able to decrease its public-sector spending without tanking its economy is because it's been doing the same thing to the EU, via the Euro, that China's been doing to the US via the dollar peg. In both cases, the exporting country's currency is being kept artificially weak -- propping up the competitiveness of exports at the expense of domestic wages.

But not everybody can do this. The only reason Germany was able to build up export-led surpluses is because other countries -- countries like Greece -- were willing to borrow and become net importers. As a result, the flow of money into Germany (from exports) had to be matched by an outgoing flow of capital -- all those loans German banks made to Greek banks & the Greek government. The bailouts are not, ultimately, of the Greek people, but of the German bankers, whose loans would otherwise be defaulted upon. So to turn around the metaphor that began the PM piece, Greece isn't a stranger asking to borrow money -- it's more like a customer at a car dealership agreeing to take on financing, which was given without regard to his ability to repay... though there are less kind metaphors one could draw.

Sorry to go on about this, but it needs to be much more widely recognized that austerity is contractionary. Needless austerity does not lead to a strong economy; it tanks economies (full argument redacted for zomglength). But the podcast repeating this myth is especially ironic when the lead-off indicator was about how European growth rates are dropping -- in large part because of the austerity programs that the ECB has insisted upon as a condition for bailouts.

...also hi, it's Jeff, btw. I am a very irregular LJer & just now realized this was you...

[ivy03.livejournal.com]

Rather than address this point by point, I'm just going to point you at their other podcasts. They have been doing a series on Germany, and when they're talking about austerity measures, they're specifically referring to the topic of their last podcast.

[ivy03.livejournal.com]

Needless austerity does not lead to a strong economy; it tanks economies (full argument redacted for zomglength).
They have covered this at length. I'd point you to their podcast on Estonia.

And I'm sorry, saying that Spain and Ireland were healthy before the crisis is like saying Lehmann Brothers was healthy before the crisis.

The podcast also does address the fact that Germany needs a strong Europe to have a strong economy itself, since they are exporters. And they were recently talking about Switzerland's ineffective attempts to isolate itself from the crisis, since its economy also depends on trade. I'm just not seeing the lack of context in their reporting here, not if you look at the context of the rest of their reporting.