Innovation/Global Risk

 EU Debt Crisis: Germany Is Next?

By Shlomo  Maital





Germany and its Chancellor, Angela Merkel, have led the charge in imposing fiscal austerity on Greece (with draconic measures such as slashing the minimum wage by 20%).  Germany will sow what it reaps.  The drip-by-drip Chinese water torture imposed on the Greek people will end when Greece defaults, as it must.  Meanwhile, Germany’s economy is now weakening. And a German expert has admitted that Germany originally supported creating the euro to stop its neighbor Italy from devaluing its lira and competing with VW.

     The German self-interest that created the euro is still very strong.  Only it is now self-defeating.  If you look at the ratio of debt to GDP (see below),  you see that at 82%, Germany is in the top 9 in Europe, roughly equal to Hungary which is in deep fiscal trouble.  All countries with debt ratios over 80% need strong economic growth to enable their fiscs to pay their debts. No European country will achieve such growth, unless the EU works together to stimulate the entire EU economy.  Narrow self-interest, like that practiced by Germany, is failing miserably.   The strong (and justified) anti-German sentiment in Greece will in the end doom the Euro bloc perhaps even more than Greece’s burdensome debts themselves. 

   And incidentally:  Has anyone checked to see how tiny Estonia has kept nearly debt-free, with debt to GDP of only 6 %?  What has Estonia done that other countries (including the arrogant Germany)  can mimic? 

Ratio of Debt to GDP: from highest to lowest

Greece 150% ,Italy 120%, Portugal 110%, Ireland 105%, Belgium 99%, France 85%, Britain 85%, Hungary 83% Germany 82%, Austria 72%, Malta 70%, Cyprus 68%, Spain 66%, Netherlands 65%, Poland 56%, Denmark 49%, Finland 47%, Latvia 45%, Slovenia 44%, Slovakia 42%, Czech Republic 40%, Sweden 37%, Romania 33%, Bulgaria 15%, Estonia 6%