In These New Times

New Europe

2nd May, 2010

The issue around the indebtedness of Greece and the painstaking efforts by EU and IMF to save this country from a possible credit default, have managed to divide…Germany.  However, Let’s take one thing at a time. The huge industrial sector of the largest economy of Europe wants a cheaper euro to support its export. Traditionally the German economy has been export driven and its machine and auto car sectors effectively supported the well being of its people. Over the past two decades however, the financial sector of the western economy, in North America and Western Europe gradually pushed the manufacturing to second place. Unfortunately this was not without cost. Two crises; one in stock exchanges towards the turn of the millennium, and the other in credit sector during 2008 have shaken the entire world. In any case the financial sector is irrevocably the prime sector of the developed economies, while manufacturing slips bit by bit to the developing regions in China, India, Brazil and elsewhere. Germany however, has managed to maintain a very special position in up-market manufactured products, like machines and cars. Its financial sector has developed exponentially and has spread all over the world. The strong euro was, over the past ten years , a very strong base on which the German banks took global dimensions and expanded to New York, London and the other financial centers.

Those were the good old times all over the world, for German manufactured products too, because a strong economic growth supported their sales despite being expensive. Now though, those manufactured products are expected to face difficulties on two accounts. Firstly because the world economy will need many years to attain the growth rates of the period 2004-2007, and secondly, because the German manufacturers will meet increasingly strong competition from quality produce of developing countries. In short, the German financial industry and the manufacturing caste of this country have directly conflicting interests concerning the foreign value of the euro. Obviously German banks need a strong and stable monetary unit to offer a safe haven, in order to attract capital placement from all over the world. On the contrary German manufacturing needs a cheap and reasonably devalued means of transaction, in order to support its sales on world markets.
This deep contradiction within the largest economy of Europe is behind the diverging proposals on the issue about who and how to save the Greeks from their sins. On top of this, Deutsche Bank has a direct interest in the Greek issue because it holds a large part of this country’s debt. In case of a Greek default, those debt papers will lose large parts of their value. This is an additional reason why Germany is so deeply divided over the Greek issue.
Another aspect in this front has to do with the strong opposition of the German public opinion, to any help to “negligent” Greeks.  All over the German media Greece is ridiculed for the easy going character of its inhabitants. It is a fact that Greeks care much less for the future than the Germans. Such sociological and historic characteristics however cannot be dealt with in the first page of tabloid newspapers or prime time TV shows. Those differences between the Germans and the Greeks were there, from time immemorial. The same theory can be applied to the entire Eurozone. There are distinct differences between the northerners and the Southerners of the zone. Those differences though did not obstruct almost all the nations of Western Europe to have ruled at times the Old Continent and the Mediterranean for centuries.  In any case the different characters of those nations are exactly the strong not the weak point of Europe.  At the end of the day it seems that the time has come again for the European to solve their differences. And the outcome will be another fight, or the final reconciliation.