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Germany

End-Of-Growth Radicalism And The Perils Of Merkel’s “Protestant” Economics

Op-Ed: German Chancellor Angela Merkel, daughter of a Lutheran pastor, thinks Europe should save its way out of the current crisis. What the continent should do instead is grow its way to prosperity, even if that means passing along some debt to the next

Alan Posener

BERLIN -- There is more than just a kernel of hostility to consumption and growth in the fiscal radicalism of Angela Merkel, a vicar's daughter. Her policy takes one back to the early days of green fundamentalists. Who doesn't have unpleasant memories of their sermons urging repentance, their preaching about polluting the Earth if you used electricity, killing trees if you drove a car, and abetting trash dumps and climate change if you weren't against industry?

For these doomsday prophets, the Club of Rome's 1972 "The Limits to Growth" serves as a type of Holy Scripture. The hair-shirt crowd responsible for the text seemed to take a perverse pleasure in painting the end of a world that "we just have on loan from our kids." The mostly well-heeled wearers of home-knit socks thought asceticism would heal the planet.

But now -- by phasing out nuclear reactors in what has turned out to be a very comfortable here and now, thank you – Angela Merkel has actually managed to outdo the greens. And she's applying her end-of-growth ideology to budget policy via her European austerity measures. Europe shouldn't grow out of a crisis that is primarily a crisis of productivity, says Merkel. It should save itself out of it.

And Europe should do so, furthermore, under German supervision.

This all makes about as much sense as trying to heal the planet by renouncing progress. Yet the chancellor has a following of commentators singing the old hymns. Earlier they served to appease the earth goddess Gaia. Now they're supposed to satisfy the gods of the financial markets.

Gone the unbearable lightness of being of early retirement in Mediterranean countries! Gone the low taxes of those Irish show-offs! The fun and games are over. Even that old chestnut about the kind of world we're passing on to our children has been pressed back into service, only this time it's egotistical consumers who shouldn't be passing down debts to future generations.

A policy without alternatives is not a policy

There is something very German, more exactly Protestant, about this dour rigidity. It's no accident that Protestantism came out of Germany in the first place, or that Mrs. Merkel is a Protestant minister's daughter. In Merkel-speak, Luther's "Here I stand, I can do no other…" reads: "There are no alternatives to my policy." But anything without alternatives is regrettable – and a policy without alternatives is not a policy. That's what computers are for.

By comparison to the new fiscal radicalism, the old eco-radicalism actually had a rational core. Treeless forests, oceans empty of fish, poisoned coastlines, extinct species, a changed climate: those are pretty irrevocable. Debts on the other hand are basically book-keeping, even if creditors wouldn't be particularly happy to hear that.

No, you can't eat money, as the radical ecologists sneer. But you can manipulate it. And of course you can leave some debt for later generations. Germany paid the last reparation payments from World War I on Oct. 3, 2010 – that's today's living paying for the craziness of long-dead politicians and military leaders. Compared to that, future generations should be glad to pay debt accumulated by a government that shelled out for unemployment benefits, pensions to mothers, health costs for the poor or college educations – even if it was a little dilatory about tax collection.

That Europe – which remains the biggest economy on the planet – "is living above its means' by promising basic security to its citizens is a myth of the new prophets of doom. Europe is working on avoiding future debt crises in a number of ways, not least the fiscal pact for stricter budget discipline and the European Stability Mechanism (ESM).

Just as the eco-radicals called for an end to growth because they couldn't imagine how growth and environmental protection could work in tandem, Merkel and the fiscal radicals are calling for a stop to growth by sticking rigidly to their austerity plans. Future generations will be paying the bill for that. The 40% youth unemployment afflicting Spain amounts to a lost generation. Not everybody owns an apartment in Madrid or Barcelona that they can rent out to help finance a new life in Berlin. The situation hardly looks much better in other southern European countries.

Resistance starting to build across Europe

Meanwhile, even the head of the IMF delegation in Greece, Denmark's Poul Thomsen, has warned against "excessive fiscal consolidation." Small wonder, because the social democratic Pasok party charged with implementing the austerity measures has, according to polls, lost support to the Communists and other far left parties.

Resistance to the Protestant in the chancellor's office is forming all over Europe. And the resistance is unpleasant: anti-German, anti-European, nationalist, socialist. That's why Polish Minister of Finance Jacek Rostowski is saying that while his country will have fulfilled all the requirements to enter the euro zone by 2015, it will not introduce the currency as long as it poses a threat to countries that use it.

Of course Europe needs reforms. Of course Europe needs fewer debts – not least Germany, whose debts amount to 80% of the gross domestic product as opposed to the 60% allowed by the Maastricht Treaty. But the key is not savings. It's growth. The green-Protestant, post-democratic austerity regime could end up destroying Europe.

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