Does the German government simply hate British economist John Maynard Keynes? Or does it just have an enduring and passionate love for US president Herbert Hoover?
Faced with a once-in-a-generation recession, the government of German Chancellor Angela Merkel knows what it is not going to do: spend money like it is going out of style.
At a time when the global benchmark for decisive leadership boils down to the number of zeros that are attached to economic stimulus packages, Germany has taken a different path.
Merkel, displaying a defiant streak that in the French news media has earned her the sobriquet “Madame Non,” refuses to crank up the printing presses in earnest. By contrast, British Prime Minister Gordon Brown has slashed his country’s value-added tax and is spending more freely.
Even Merkel’s own council of economic advisers has criticized her for not spending more as the German economy, Europe’s largest, careens into a severe contraction that — and here is the real sticking point — threatens to export even greater misery to the EU’s weaker economies.
On Tuesday she pledged to come forth with a new spending plan next month and speculation in the German news media put the total at close to US$28 billion, on top of a US$44 billion stimulus package announced earlier. All in all, it struck many experts as an inadequate response from the world’s greatest exporting country.
Jeers about Merkel’s economic strategies have become de rigueur, rankling the corps of German politicians who worked feverishly to pass a US$700 billion banking bailout package within a single week in October and have, after all, promised a good chunk of change already.
“What was urgently necessary for the banks was done, as well as in any country,” said Kurt Lauk, head of a business group closely affiliated with Merkel’s Christian Democrats. “And there was a first stimulus package. So we don’t need to hide from France or Britain.”
Still, the stimulus packages offered so far pale in comparison to plans floated in the US by the transition team of president-elect Barack Obama for a program of US$700 billion to US$1 trillion.
Lauk says Merkel will not be a new Hoover, who seemed to do his best to drain the US economy of its remaining lifeblood even as the country tumbled into the Great Depression.
But her reluctance to follow other Western countries’ lead has puzzled many allies and struck some of Germany’s critics as oddly ascetic.
Peer Steinbrueck, the German finance minister, has indicated concern over budget deficits and has characterized the British effort to kick-start its moribund economy as “crass Keynesianism.” In his view, European pressure for greater spending masked a desire to exploit the German taxpayer for the benefit of the country’s neighbors.
To the question of why Germany did not simply spend its way out of recessions, as Keynes, the great British economist, suggested, Steinbrueck shot back: “Just because the lemmings chose the same way does not make it the right one.”
Berlin appears to have other grudges against its European neighbors, often tinged with a measure of contempt for what it sees as their failings.
In its view, other countries scream for more German spending — some of which would go to Italian shoes, for example, or French wine — because they refused to make the hard choices in recent years that reinvigorated the German economy.