The German Side of the Story

By Shlomo  Maital  



As a part-time journalist, blogger and columnist,  I try hard to present strong views, but at the same time offer fair and balanced analysis.  When it comes to Germany’s role in resolving the euro crisis, I fall far short of this goal. 

  Hans-Werner Sinn, president of the Ifo Institute and a Univ. of Munich economist, presents a powerful argument for more sympathy for Germany and Merkel, in an Op-Ed commentary in the Global New York Times today (Thursday June 14).  Taking a long historical perspective, he notes that when American Treasury Secretary Alexander Hamilton had the federal govt. take over the debt of the states, after the Revolutionary War,  “socializing the debt”, this caused the states to over-borrow, leading to bankruptcy of eight states and territories in the 1830s and 1840s and seriously threatening the very existence of the federal United States of America (they weren’t very united).  No-one will bail out California, notes Hans-Werner, today, even though it is nearly bankrupt; it has to find its own solutions. 

   We are in the fifth year of generous liquidity to help Europe’s deadbeats, he notes (he doesn’t call them deadbeats, only ‘uncompetitive members’).  Since 2007, the European Central Bank has given target credit, and Germany chipped in $874 b. worth.  Since May 2010 the ECB gouth over $250 b. in govt. bonds, with another $500 b. coming from emergency programs an the IMF.  Add to that two European rescue funds, “and you have a total of $2.63 trillion!”.  Should Ireland, Greece, Italy Portugal and Spain go bankrupt, he notes, Germany will lose over $1.35 trillion, more than 40 per cent of its GDP!  “Has the U.S. ever incurred a similar risk for helping other countries?” he asks.

   Germany got 0.5 % of its GDP, for four years, or 2% of one year’s GDP, from the American Marshall Plan, in 1947-8.  Greece has received $575 b. in assistance efforts, which amount to a staggering 115 Marshall plans, relative to Greece’s GDP.  And the situation still gets worse. 

    Why, Mr. Obama, asks Hans-Werner, is that not enough?