Re: Potential wage cuts for rebuilding workers.
Here's one more, just for completeness sake:<br /><br />Germany and France are the new sick men of Europe<br />With paralysis following the German election, the EU's claim to be the world's leading economy looks increasingly absurd<br /><br />Timothy Garton Ash<br />Thursday September 22, 2005<br /><br />Guardian<br /><br />The Indian restaurant owner in Berlin said this kind of post-election confusion was quite normal where he came from. The politicians would sort it out eventually and form some kind of coalition government, he reassured the German television reporter. His smile implied: relax, and have another drink. "Well, that's interesting ... Indian conditions!" commented the fiercely competent German studio anchor, with unconscious ethnic condescension. And her tone implied: have we really sunk so low? Indian conditions, here, in Germany?<br />To which I would say: "If only..." If only Germany had anything like the economic dynamism of the world's largest democracy - a democracy, incidentally, slightly older than that of the Federal Republic of Germany. Just to remind you, India's growth rate over the past 12 months was 7%, while Germany's was 0.6%.<br /><br />The result of the German election - if one can call it a result - will not help to close that gap, or address the chronic problems of stagnation and mass unemployment in what is still Europe's largest economy. We are in uncharted territory, with the leaders of both main parliamentary parties, Angela Merkel and Gerhard Schröder, staking their claims to lead a coalition government as federal chancellor. (Schröder has broken with established political precedent, which calls for the leader of the largest parliamentary group to have the first crack at putting together the parliamentary coalition needed to be chancellor.) However, article 63 of the federal republic's meticulously crafted constitution lays out a series of stages by which, over the next couple of months, the parties can, under the general tutelage of the federal president, attempt to form either a coalition government with an absolute majority in parliament or a tolerated minority government. If none of that works, the president can dissolve this hung parliament and call a new election.<br /><br />In my view, that would be much the best outcome. The process will waste six months, but any likely coalition government will waste much longer. Any of the now possible coalitions will be alliances of chalk and cheese, if not of fire and water. They will involve extraordinarily painful compromises on policy. They will be plagued by personality clashes and parties jockeying for position in an election everyone will expect to come sooner rather than later. The results in economic and social policy - and probably in foreign policy - will be more of that soft fudge in which German attempts at reform have been suffocating for more than a decade. This will be bad for Germany, bad for Europe and bad for the world economy.<br /><br />The most likely fudge-factory would be a so-called grand coalition between Social and Christian Democrats. Schröder has said he won't serve under Merkel, nor will Merkel under Schröder, so that (unless they change their tune) a double decapitation would be needed before the grand coalition could even begin. With the parties having diametrically opposed policies in areas such as health-service reform, fudge mountains would be called for.<br /><br />The last time there was a grand coalition, in 1966-69, it prompted a strengthening of the left- and right-wing extremes, since the established mass parties were both in government. Harold James, a distinguished historian of modern Germany, argues that the time before that when Germany had something that might be described as a grand coalition was in 1928-30. This had the disastrous effect, under the impact of the great depression, of sending voters off in herds to the communists and Nazis, hastening the end of the Weimar Republic. If one accepts his interpretation then, it would seem that Germany has an impulse to reach for a grand coalition roughly once every 35 years. But few people are suggesting this one would have anything like the same disastrous consequences. More likely, it would represent an unstable transition period between one reasonably stable coalition government and another, as it did in the 60s. In which case, better to shorten the agony with new elections.<br /><br />There's always a danger of over-interpreting such a result. If Merkel had been a more effective television performer, and her campaign had not been compromised by tax proposals that many Germans found threatening, we might now all be explaining why the Germans had voted for change. Moreover, the party that saw the largest increase in its share of the vote, the Free Democrats, was the one that most clearly favoured free-market economic reforms. None the less, the net effect of this election can be summarised as a nein to the free-market liberalisation for which German business leaders have been pressing.<br /><br />The French communist newspaper L'Humanité crowed that the Germans have shown a red card to neoliberalism. Just as the French did in the referendum that killed Europe's constitutional treaty earlier this year. Nein and non to neo-liberalism, to any radical change to the old "social market economy" that they feel has served them so well; nein and non to innovation, risk, immigration and Turkey's membership of the European Union; nein and non to America, or what they take for America. That is the characteristic Franco-German refrain today.<br /><br />Between them, these two nations central to any version of the European project have achieved one great thing: they have made a war between France and Germany, and hence in western and northern Europe, unthinkable. (I would not be quite so confident about eastern or southern Europe.) And for half a century, France and Germany have together been the motor of European integration. Now, however, the Franco-German motor has become the Franco-German brakes.<br /><br />This election is just one more proof of what we have seen for some time. Instead of the new start hoped for in London, Warsaw and Jose Manuel Barroso's Brussels, with a "black-yellow" coalition between a reforming chancellor in Merkel and the free-marketeering Free Democrats, followed in 2007 by a like-minded French president in Nicolas Sarkozy, we face a further period of stagnation and confusion. The so-called Lisbon agenda of economic reform will continue to be stalled. The EU's always vainglorious claim that it will become the world's most competitive economy by 2010 will look ever more absurd.<br /><br />In these circumstances some, particularly in Britain, will call for European countries with more competitive economies to throw off the Franco- German brakes. Let's go back to a simple single market, they will say, and make our own profitable way in the world. Quite apart from the fact that going back to a single market is far more complicated than it appears, and the unravelling of the European Union would probably not stop there, this is short-sighted advice. In a world of economic giants, with America and Japan already being joined by China and India, dwarves do not have a rosy future.<br /><br />Though Britain, France and Germany are still among the world's largest economies, their comparative growth rates make them at best shrinking giants. Only Europe as a whole has the capacity to hold its own in such a world. So this is no time for schadenfreude. We, their fellow Europeans, need the sick men of Europe to recover almost as much as the French and Germans themselves do.
Here's one more, just for completeness sake:<br /><br />Germany and France are the new sick men of Europe<br />With paralysis following the German election, the EU's claim to be the world's leading economy looks increasingly absurd<br /><br />Timothy Garton Ash<br />Thursday September 22, 2005<br /><br />Guardian<br /><br />The Indian restaurant owner in Berlin said this kind of post-election confusion was quite normal where he came from. The politicians would sort it out eventually and form some kind of coalition government, he reassured the German television reporter. His smile implied: relax, and have another drink. "Well, that's interesting ... Indian conditions!" commented the fiercely competent German studio anchor, with unconscious ethnic condescension. And her tone implied: have we really sunk so low? Indian conditions, here, in Germany?<br />To which I would say: "If only..." If only Germany had anything like the economic dynamism of the world's largest democracy - a democracy, incidentally, slightly older than that of the Federal Republic of Germany. Just to remind you, India's growth rate over the past 12 months was 7%, while Germany's was 0.6%.<br /><br />The result of the German election - if one can call it a result - will not help to close that gap, or address the chronic problems of stagnation and mass unemployment in what is still Europe's largest economy. We are in uncharted territory, with the leaders of both main parliamentary parties, Angela Merkel and Gerhard Schröder, staking their claims to lead a coalition government as federal chancellor. (Schröder has broken with established political precedent, which calls for the leader of the largest parliamentary group to have the first crack at putting together the parliamentary coalition needed to be chancellor.) However, article 63 of the federal republic's meticulously crafted constitution lays out a series of stages by which, over the next couple of months, the parties can, under the general tutelage of the federal president, attempt to form either a coalition government with an absolute majority in parliament or a tolerated minority government. If none of that works, the president can dissolve this hung parliament and call a new election.<br /><br />In my view, that would be much the best outcome. The process will waste six months, but any likely coalition government will waste much longer. Any of the now possible coalitions will be alliances of chalk and cheese, if not of fire and water. They will involve extraordinarily painful compromises on policy. They will be plagued by personality clashes and parties jockeying for position in an election everyone will expect to come sooner rather than later. The results in economic and social policy - and probably in foreign policy - will be more of that soft fudge in which German attempts at reform have been suffocating for more than a decade. This will be bad for Germany, bad for Europe and bad for the world economy.<br /><br />The most likely fudge-factory would be a so-called grand coalition between Social and Christian Democrats. Schröder has said he won't serve under Merkel, nor will Merkel under Schröder, so that (unless they change their tune) a double decapitation would be needed before the grand coalition could even begin. With the parties having diametrically opposed policies in areas such as health-service reform, fudge mountains would be called for.<br /><br />The last time there was a grand coalition, in 1966-69, it prompted a strengthening of the left- and right-wing extremes, since the established mass parties were both in government. Harold James, a distinguished historian of modern Germany, argues that the time before that when Germany had something that might be described as a grand coalition was in 1928-30. This had the disastrous effect, under the impact of the great depression, of sending voters off in herds to the communists and Nazis, hastening the end of the Weimar Republic. If one accepts his interpretation then, it would seem that Germany has an impulse to reach for a grand coalition roughly once every 35 years. But few people are suggesting this one would have anything like the same disastrous consequences. More likely, it would represent an unstable transition period between one reasonably stable coalition government and another, as it did in the 60s. In which case, better to shorten the agony with new elections.<br /><br />There's always a danger of over-interpreting such a result. If Merkel had been a more effective television performer, and her campaign had not been compromised by tax proposals that many Germans found threatening, we might now all be explaining why the Germans had voted for change. Moreover, the party that saw the largest increase in its share of the vote, the Free Democrats, was the one that most clearly favoured free-market economic reforms. None the less, the net effect of this election can be summarised as a nein to the free-market liberalisation for which German business leaders have been pressing.<br /><br />The French communist newspaper L'Humanité crowed that the Germans have shown a red card to neoliberalism. Just as the French did in the referendum that killed Europe's constitutional treaty earlier this year. Nein and non to neo-liberalism, to any radical change to the old "social market economy" that they feel has served them so well; nein and non to innovation, risk, immigration and Turkey's membership of the European Union; nein and non to America, or what they take for America. That is the characteristic Franco-German refrain today.<br /><br />Between them, these two nations central to any version of the European project have achieved one great thing: they have made a war between France and Germany, and hence in western and northern Europe, unthinkable. (I would not be quite so confident about eastern or southern Europe.) And for half a century, France and Germany have together been the motor of European integration. Now, however, the Franco-German motor has become the Franco-German brakes.<br /><br />This election is just one more proof of what we have seen for some time. Instead of the new start hoped for in London, Warsaw and Jose Manuel Barroso's Brussels, with a "black-yellow" coalition between a reforming chancellor in Merkel and the free-marketeering Free Democrats, followed in 2007 by a like-minded French president in Nicolas Sarkozy, we face a further period of stagnation and confusion. The so-called Lisbon agenda of economic reform will continue to be stalled. The EU's always vainglorious claim that it will become the world's most competitive economy by 2010 will look ever more absurd.<br /><br />In these circumstances some, particularly in Britain, will call for European countries with more competitive economies to throw off the Franco- German brakes. Let's go back to a simple single market, they will say, and make our own profitable way in the world. Quite apart from the fact that going back to a single market is far more complicated than it appears, and the unravelling of the European Union would probably not stop there, this is short-sighted advice. In a world of economic giants, with America and Japan already being joined by China and India, dwarves do not have a rosy future.<br /><br />Though Britain, France and Germany are still among the world's largest economies, their comparative growth rates make them at best shrinking giants. Only Europe as a whole has the capacity to hold its own in such a world. So this is no time for schadenfreude. We, their fellow Europeans, need the sick men of Europe to recover almost as much as the French and Germans themselves do.
