Germany has elected a new Bundestag at the 24th of September. Now there is only one possible coalition, since the social democrats (SPD) will not pursue the coalition with the conservatives (CDU/CSU). The new coalition if it was formed would consist of conservatives, greens (Bündnis 90/die Grüne) and liberals (FDP). One may wonder how this changed constellation will influence the economic situation in Europe, particularly the precarious situation of Greece?
von Marco David Schmandt
The Case of Greece
Despite less media interest, the current situation in Greece is worse than ever before. The economic development in the last decade is incomparable to any other recession ever seen. Indeed, there has been no case of a country facing a shrinking economy for ten years in succession during the Great Depression. The only cases of real GDP growth have been noted when nominal GDP sank with deflation being high enough to boost GDP in real terms.
Alternatives to Austerity?
Surely, there are alternatives to this internationally isolated policy regime of austerity. Indeed, facing the experience of the last decade with Greece losing virtually half (46%) of its annual economic activity should convince one to eventually deviate from these policies. However, looking at Germany, one will rather hear phrases like the Greek need “to be teached a lesson” or “to do their homework”. Nevertheless, especially German officials can be found proclaiming some alleged “solidarity”. Effectively they are obviously forcing Greek torture for a decade now.
Eventually, it is quite obvious that Greece will never pay back its debt; also, any economic progress can only be achieved when returning to increased government intervention.
The Positions of the new Coalition
Angela Merkel besides Wolfgang Schäuble is the most responsible for Greek austerity. There is not much hope that she will entirely change her mind after ten years of promoting exactly this policy regime. Also, the conservative party has been in power for the whole time, particularly demanding this policy for the very decade.
Thus, there can if at all only be change when one of the smaller parties (Grüne/FDP) fights for a policy change. Christian Lindner the head of the liberals recently not only demanded for a debt relief for Greece but eventually wants Greece to leave the Euro. While this later claim is at least very hazardous for living conditions in an economy that depends on imports, it should also be noted that the liberals at least want to change anything which may promote any development for the Greek economy apart of the recession of the last years.
Finally, the Greens being the leftmost power in the new government traditionally regard government investment and structural reforms more apt than austerity. They also want Greece to remain in the Euro in any case which ist opposed to the liberal’s position.
It will be difficult
The Greens obviously have the most comfortable position for the Greek. Provided that one really wants to remain in the Euro, it is obvious that there need to be some change on the European level. Common European financial policies need to be established. It is only that this, maybe also fiscal integration, can provide the balances that are needed to compensate the nationally diverging productivities and resulting creditor and debtor relations. Those common policies, however, so far are impossible to promote with the liberals that have already proclaimed that they do not want a European financial ministry. Nonetheless, it is surely only possible to go on “rescuing” Greece when there is some change in the construction of the currency.
Once again, one may end up finding solutions, or the main problems, on European level. The German election is obviously highly influential for the present situation in Greece as well as for its future prosperity. German politicians are indeed not at all responsible for the Greek peoples’ interests. However, none of the Greek people has been able to elect the German government. The Greek have long ceased having autonomy and self-determination. While being so highly integrated and stuck together, it may be necessary that the European citizens eventually get some more direct impact on European institutions so that those institutions than really can have the greater good of the whole European people as their goal.