When Germany wants to understand Greece and the crisis afflicting Europe it not only looks south to the Continent’s periphery but also turns inward, to the former East Germany, still struggling more than two decades after German reunification.
To an extent not often appreciated by outsiders, the lessons provided by that experience — with the nation pouring $2 trillion or more into the east, by some estimates, to little immediate benefit — color the outlook and decisions of policy makers and the attitudes of voters, a majority of whom would like to see Greece leave the euro zone, polls show.
Most economists agree that Germany could do more to help revive growth throughout the euro zone, and there are reports that Chancellor Angela Merkel is preparing to propose a major European Union plan to accomplish that. But the German reluctance to underwrite the economies of Greece and other struggling countries is not just a matter of the parsimonious Germans hoarding their funds, as it is so often portrayed, but a sense that subsidies do not breed successful economies.
“Money alone doesn’t help,” said Simon Huber, 44, out for a stroll recently near Sendlinger Gate here. “You’re only saved when you save yourself.”
Though regularly lectured by their colleagues across the Atlantic about the need for stimulus measures to reverse the sagging fortunes of countries like Greece and Portugal, German experts believe they have a lot more experience trying to revive uncompetitive economies locked in currency regimes after nearly 23 years of dealing with the former East Germany.
“We performed a real-life experiment,” said Hans-Werner Sinn, president of the Ifo Institute for Economic Research here.
While unemployment in the former West Germany is 6 percent, it remains stubbornly higher, at 11.2 per cent, in the east. In 2010 gross domestic product per capita was more than $40,000 in the former West and just under $30,000 in the former East, compared with 1991 figures of $27,500 in the West and about $12,000 in the East. But much of the narrowing in the gaps between east and west, experts say, is attributed to the migration of job seekers westward as much as to any significant improvement in the east.
There have been success stories in the revival of cities like Dresden and Leipzig, and some regions, especially on the southern edge of the former East Germany, are doing better. But the eastern part of the country today is known for perfectly rebuilt town squares that sit empty for much of the day and new stretches of autobahn with few drivers on them.
“Germany made huge investments in infrastructure in East Germany,” said Klaus Adam, a professor of economics at the University of Mannheim. “The hope that the rest would follow has not been fulfilled. You need to get the productivity figures up.”
While much of Europe follows the lead of President François Hollande of France in calling for jointly issued debt, or euro bonds, as the solution to Europe’s troubles, a vast majority of Germans reject the idea.
To German ears, the demand for euro bonds sounds less like a technical solution to the crisis than a way to use Germany’s good credit rating to push off difficult but necessary reforms.
“You don’t entrust your credit cards to anyone if you can’t control the spending,” said Jens Weidmann, president of the Bundesbank, Germany’s central bank, in an interview Friday with the French newspaper Le Monde. “Pooling debt is not the right tool for growth,” said Weidmann, a former economic adviser to Chancellor Merkel. “This would pose both legal and economic problems. I don’t think we’ll be successful in trying to resolve the debt crisis with more debt outside the regular budgets.”
Merkel dominated the political decision-making in Europe for much of the crisis, culminating in the signing in March of the fiscal pact to reduce budget deficits by 25 of the 27 European Union countries. But countries like Greece and Spain have underperformed economically and been unable to rein in their deficits as quickly as promised.
Mr. Hollande’s victory this month over his predecessor, Nicolas Sarkozy, and his aggressive support of new spending measures to increase growth have put Merkel on the defensive. The long-awaited growth plan for Europe from Merkel is being debated in the Chancellery and the ministries of finance and economics. The answer from Berlin is not so much, as Ms. Merkel is fond of saying, “more Europe,” and it is definitely not substantially more money, but instead more Germany. It is clearer than ever the degree to which Germany wants to remake Europe in its own image.
The magazine Der Spiegel reported that a six-point plan is in the works that includes incentives for midsize companies, a loosening of protections against firing for workers, special economic zones and even a version of Germany’s system of dual training divided between vocational school and hands-on work at companies. State-owned enterprises would be sold in a process similar to that of the Treuhand, the agency that helped privatise East Germany.
“The Mediterranean area should become like the Federal Republic, only with better weather,” the magazine said.
Yet the one-dimensional portrayal of Germans as heartless austerity taskmasters is only part of the story. A basic sense of thriftiness is also coupled with a strong belief in social safety nets; this is not unchecked capitalism, but a model known here as the social market economy.
“In many ways I agree that countries that are up to their ears in debt should make the necessary cuts,” said Jonas van Westen, 22, a media consultant who lives in Munich. “But those cuts should be deeper in other areas besides social welfare.”
A great deal of talk centers on undemocratic moves against the will of the people in Greece, but the same could be true for Germany, where a majority opposed entering the euro zone in the first place precisely because of the fear that other states would raid the country’s treasury. Euro bonds could be a step too far for the German public.
This week the populist provocateur and best-selling author Thilo Sarrazin published a book titled “Europe Doesn’t Need the Euro.” Mr. Sarrazin, a former board member of Germany’s central bank who made headlines two years ago with a book critical of Muslim immigrants, said a German reflex of “penance for the Holocaust and the world war” would not be satisfied until “our money is laid in European hands.”
The anti-euro agitating by the often outrageous Mr. Sarrazin has won less attention — and agreement — than his broadsides against foreigners did, but he may just be ahead of his time.
“The limit of German brotherhood extended to East Germany, and they saw what happened with two trillion euros over the past 20 years,” said Michael C. Burda, an economics professor at Humboldt University in Berlin. “And these are people they love. They don’t consider the Greeks their brothers.”
