The Euro subsidises German industry but it harms Germany

Dr Gunnar Beck

Those who argue that Germany has profited from the euro, almost always rest their case on Germany’s export surpluses. The euro eliminated exchange rate risks; appreciated less than the Deutschmark would have, and thus doubly aided German exports. But has the euro benefited German exports, and does this mean it benefited Germany?
Between 1998 and 2011, German exports grew by 117%, according to the German Statistical Office. German exports rose most – by 154% – to the rest of the world; by 116% to non-euro EU members; and least of all, 89%, to other eurozone members. In 1998, the eurozone accounted for 45% of all German exports; in 2011 that share had declined to 39%. These trends are continuing. The eurozone for German goods and services remains very important to Germany’s export trade, but it is not the motor of growth. Besides, German exports were performing well under the Deutschmark, and Sweden which is outside the eurozone and thus did not benefit from currency stability within nor from alleged low price exports to other markets, recorded export growth which, proportionately, significantly surpasses German exports growth.

Nonetheless, German exports have grown considerably, and the euro probably benefited, not harmed, German exports. German export growth, however, did not translate into economic growth.  According to Eurostat, during 1998-2011 Germany grew at an average annual rate of 1.4%, compared to 1.7% for France, 2% for the Netherlands, 2.8% for Sweden, 2.1% for Britain, and average growth of 1.8% for the EU as whole. Germany also lagged significantly behind the United States at 2.2%. From 1998 to 2011 only Japan, Italy, Portugal and Greece performed worse than Germany. This is not the performance of a euro-winner.

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The German Constitutional Court no longer takes itself seriously, but Germans still believe in the Bundesbank

Gunnar Beck

As I predicted in the Wall Street Journal in July and discussed earlier in the week in the Asia Times, the German Constitutional Court last week deferred to the German government and approved the ESM Treaty subject to minor qualifications. Since the judgment the markets and politicians throughout the eurozone have been in jubilant mood. Even the German ambassador in London lost his guard when, in an interview with the Guardian newspaper, boasted that there was no other country in the world where ‘all but one political party’ would consistently vote to pay out ‘billions and billions’ on euro rescue packages which are  ‘not very popular’, and, he should have added, would cost the German taxpayer hundreds of billions even in the unlikely event that they ‘succeed’.  Germany’s europhile political establishment have not only ‘have quit reason’, they may have rejoiced too early.

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Karlsruhe Capitulates? Hardly – Understanding the ESM Ruling of September 12

Prof. Peter Lindseth

Let me begin by apologizing for the delayed response to the ESM ruling of the German Federal Constitutional Court (GFCC).  I wish I could say I was acting strategically – the crisis, after all, is moving as fast as ever – but that would not be exactly true. Unfortunately it was the day job – teaching and administrative obligations, pure and simple – that kept me from posting something sooner. But even if the delay was not my choice, it still served a nice strategic purpose.  It gave me a little extra time over the weekend to reflect on the decision itself as well as some of the initial commentary, and to consider how I might respond.

 In looking over that commentary in particular, I was struck by an argument that I saw raised in various forms – that the ESM ruling, in effect, represents a kind of capitulation by the GFCC, a sign of its ultimate weakness. I’d like to focus on that argument here, which in my view is based on a misreading of the Court’s jurisprudence, not just recently but over the last several decades, going all the way back to the Maastricht decision and indeed earlier. To borrow the wonderful phrase of Mortimer Adler (in his critique of some ‘legal realist’ claims in the 20s and 30s), this misreading ultimately targets a ‘dummy overstuffed for the occasion’ – i.e., the Court’s purported new-found deference to the functional and political realities of integration (as if deference on this score were genuinely something new). The argument about the Court’s apparent weakness may feel empowering to those who advance it.  But it may also do a disservice to those who seek to understand the import of the ESM ruling, particularly as it relates to the Court’s broader integration jurisprudence.

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Leaving Berlin (Part II): The Power of the European Idea

Prof. Peter Lindseth

This is the second of a two part series of reflections upon the completion of my Daimler Fellowship this spring at the American Academy in Berlin.  The first part, offering thoughts on the constitutional dimensions on the Eurozone crisis in Germany, can be found here.  This second part reflects on the ‘power of the European idea’, not merely in relation to the Eurozone crisis but also my own scholarship on the EU.

I am writing this post at 35,000 feet over the Atlantic, on a flight back from Germany to the United States. While I may be leaving Europe for the moment (in fact I’ll be returning at fairly regular intervals), I will hardly be leaving the Eurozone crisis behind.  Who could? The current crisis is of tremendous significance for the United States and indeed the world economy, as the recent G8 meeting made clear.  People outside Europe obviously ignore it at their peril.

But even if the ramifications of the Eurozone crisis are potentially global, the crisis itself remains, at its core, very much a European phenomenon.  Indeed, in its particulars (I am speaking more of politics and culture rather than technical economics), the crisis is also perhaps something that is not well understood even by close observers outside of Europe. In a commentary last month following a trip to the US, Martin Wolf, the FT’s outstanding economics columnist, noted how even ‘informed Americans’ almost all uniformly believed ‘that the eurozone will not survive’ the current crisis.  The pessimism was based on an appreciation of the very same ‘centrifugal forces’ that Wolf himself so penetratingly described in his column.  But, in contrast with these ‘informed Americans’, Wolf concluded that ‘the eurozone may yet survive’.  Why?

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Understanding the German Constitutional Fault Lines in the Eurozone Crisis: Der Spiegel’s interview with Udo Di Fabio

Prof. Peter Lindseth

Greetings from Germany.  This week I begin a semester as the Daimler Fellow at the American Academy in Berlin. From the truly idyllic confinesof the Academy, I look forward to continuing my blogging on matters European, and more specifically on some of the legal and constitutional implications of the ongoing Eurozone crisis.

To kick things off, I wanted to alert readers to something they may have missed over the holiday break: a fascinating interview with Udo Di Fabio, the outgoing member of the German Federal Constitutional Court (FCC), published in late December in Der Spiegel’s online English edition (the original German version can be found here).

The interview is revealing on a number of levels. Via some of the interviewers’ questions, as well as some of the odd choices of the translator, it reveals a range of common misunderstandings regarding the nature of the integration process as well as the FCC’s attitude toward it. Despite these misunderstandings, however, Di Fabio’s responses are instructive regarding some of the key constitutional fault lines that will undoubtedly shape the FCC’s approach to the Eurozone crisis going forward. The piece is worth the read by anyone interested in the crisis in all its many dimensions, not merely economic, financial, or political, but also legal and constitutional, particularly with regard to the crucial German case.

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