Many in Germany are haunted by memories of inflation and the costs of reunification.
LIKE US ON FACEBOOK
Read this story at The Economic Times; Read it at the International Business Times.
By Sabil Francis
BERLIN/LEIPZIG: Kathrin Swcharz is a sweet 90-year-old grandmother who lives in the sleepy town of Osmünde, just 30 kilometers away from Leipzig,the second biggest city in Saxony. "Don't get too used to your money," she says. "It changes. And sometimes, you will regret saving it."
Not a surprising statement coming from a woman who was born in 1921. The German currency has changed five times during her lifetime.
Understanding this attitude of Germany is key to understanding German resistance to the European Central bank becoming a lender of last resort, or in layman's terms, being allowed to print an unlimited amount of Euros.
It is little wonder that French leader Francois Hollande's proposal calling for the firepower of the euro zone's permanent bailout fund, the European Stability Mechanism, to be expanded by allowing it to access liquidity from the ECB, like a bank, is unpopular in Germany.
The memory of the hyperinflation of the Weimar period, from June 1921 to July 1924, when 50,000,000 (50-million) Mark banknotes were printed, remains a dark undercurrent in the forging of German policy. When the 1,000-billion Mark note came out, few bothered to collect the change when they spent it. By November 1923, one dollar equalled one trillion Marks.
"I voted for Der Linke (the far left) in the last elections, but I think Merkel is doing the right thing," says Andreas König, a baker at the city's popular chain Lukas. "Why should Germany give unlimited credit to everyone else?"
Köning, who works a shift from 6 a.m. to 3 p.m., sums up the popular attitude of many Germans, who think that southern Europeans don't work as hard.
That statement falls short of reality, though. According to the Organisation for Economic Co-operation and Development, an average Greek worker logs 2120 hours per year - which is 690 more hours than a German worker.
On the other hand, tax evasion is a massive problem in Greece. The country's shadow economy is estimated to be around 30 per cent of the economy. The Orthodox church, extremely rich, is exempted from taxes, and the rich often evade it.
In contrast, given the general tendency to adhere to laws and the stiff penalties involved, various methods have estimated that the size of the black economy in Germany is less than 10 per cent.
Another stumbling block is the lingering legacy of unification. It is estimated that 1.3 trillion euros (id="mce_marker".9 trillion) was shifted from the West to the East after re unification in 1989. Yet, unemployment in the East stubbornly remains at double that of the West, and there are some at least who wonder whether it was all worth it.
"In the old days, if you did not go against the system, the system took care of you," says Alexander (he declined to give his last name) who is 50 years old and worked as a research chemist in the former East Germany.
For Alexander and others like him, the workplace was the centre of their lives, the place where in a country where the state guaranteed everyone a job, one made lasting friendships, met one's partner, and was taken care of, or in other words, a second home.
Today, the landscape in the East is dotted by these former factories, doors sagging in the wind, the walls covered with graffiti, birds making nests in empty windows. Some have become underground clubs and dance halls but most lie abandoned, fallen leaves rustling in the autumn wind.
"The Government can't take care of me, why should we spend money on Greece?" adds Alexander who now ekes out a living selling Kippe, the street magazine of Leipzig.
For many Germans, bailing out the rest of Europe in effect means going through the whole re-unification process again, without the political unity that came with it. While Merkel and Sarkozy call for closer fiscal union, many Germans are worried about the costs that would come with it.
It is no coincidence that Der Linke, a far left party made up of left radicals and old communists from East Germany, and the far right, both of which advocate populist and protectionist measures, have become increasingly popular.
In a fast changing world, Germany remains one of the few countries where old-fashioned values like thrift still have a place, even as the world of finance moves at a dizzying pace and people all over the world are hit by the after effects of cheap credit, as one clambers out of the roller coaster ride the '90s was.
It is still difficult to get a bank loan to buy a house unless you can show an ability to repay the loan, buttressed with an healthy balance sheet stretching several years, and are ready to pay at least 20 percent upfront. Renting remains the most popular option with cities like Berlin, even though property is cheaper compared to other major cities in Europe.
In cities in the east, such as Leipzig, it is still possible to rent a three-bedroom apartment for 500 to 600 euros per month, a price that could get you a tiny hole in the wall in Paris.
Finally, for many Germans it is a question of damned if you do, damned if you don't. "If we had intervened in Libya, we would have been told that the Afrika Korps was marching again," says a banker at the local Sparkasse. "Now that we did not, we are told that Germany has failed to rise to its international responsibilities. If Germany refuses to prop up the Euro we are blamed for being the China of Europe, profiting from an undervalued currency. On the other hand, if we do intervene, the Greeks will say that we want to take over Europe."
For many Germans, haunted by historical memories of inflation, the obstinate costs of a reunification more than twenty years old, and a belief in the German work ethic, bailing out the weaker economies of Europe is a frightening prospect, with the rewards a chimera on the horizon. (Global India Newswire)