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Finger-Wagging Germany Secretly Accumulating Trillions In Debt

While giving the rest of Europe lessons on austerity, Germany has quietly been accumulating debt, a situation that will worsen with the planned social reforms and tax cuts.

Do as I say, not as I do (Ken Teegardin)
Do as I say, not as I do (Ken Teegardin)
Dorothea Siems

BERLIN - German Chancellor Angela Merkel appears intractable on the subject of austerity measures in Europe. And yet when it comes to budgetary rigor, Germany is actually not setting a good example, according to a report from the Berlin-based Stiftung Marktwirtschaft (Market Economy Foundation).

Instead of using the country's strong current economic situation to consolidate its position, "the federal government is planning a number of expensive gifts," says economist Bernd Raffelhüschen, noting in particular planned reforms of child care and health care, as well as pension and tax reforms.

The German debt has reached a record 83.2% of gross domestic product (GDP). To that must be added hidden implicit social security and pension debt. At 147% of GDP, this hidden debt significantly exceeds the official debt. If the government had to produce a profit and loss statement the way businesses do, it would have to create reserves amounting to the entire debt, which represents 230% of GDP.

However, as the government is not making the necessary provisions, that leaves them with a "sustainability gap" of 5.7 trillion euros, according to Raffelhüschen. "Before we rescue other countries we should rescue ourselves from ourselves," said the Chairman of the Stiftung Marktwirtschaft, Michael Eilfort.

Despite record revenues from taxes and social security payments following higher growth rates and the on-going jobs boom, the German government has not been able to put together a balanced budget. Because of the good state of the economy, however, the figures in Raffelhüschen's report show a decrease in total national debt for the third consecutive year. But the next recession will reverse the up trend – and the more paid out for benefits the stronger that reversal is.

Expensive reforms

The economist claims that the planned reforms to cut taxes --which have been blocked by the Bundesrat (the federal legislative body that represents Germany's 16 states)-- would have increased the total debt from 230% of GDP to 243%.

Raffelhüschen also says that healthcare reforms are not being financed. While contribution rates will be raised in 2013, the increased revenues will not be enough to cover a broader range of healthcare, for example for dementia patients.

The planned pension reform will be expensive long-term, particularly if the introduction of a "top-up" for low earners goes through. "It would represent a break with one of the basic principles of our social state, that is that all poor people should be treated equally," says Raffelhüschen. With a "top-up" of 850 euros a month, a poor senior would be getting better treatment from the government than a poor youth whose resources would be subject to review before benefits could be granted.

Also financed by debt would be the daycare money to be paid from January 2013 to parents whose toddlers do not go to a daycare center. "If you want this measure, it should under no circumstances be financed with borrowed money," Raffelhüschen says, because doing it that way means the children will end up paying for it.

Free Democratic Party (FDP) economist Hermann Otto Solms shared skepticism about the planned reforms. "If we expect other European countries to implement severe austerity measures, we have to set a good example in Germany," he said in reference to the daycare and "top-up" benefits. Consolidation should be our top priority right now, he added.

Read the article in German in Die Welt.

Photo - Ken Teegardin

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Shame On The García Márquez Heirs — Cashing In On The "Scraps" Of A Legend

A decision to publish a sketchy manuscript as a posthumous novel by the late Gabriel García Márquez would have horrified Colombia's Nobel laureate, given his painstaking devotion to the precision of the written word.

Photo of a window with a sticker of the face of Gabriel Garcia Marquez with butterfly notes at Guadalajara's International Book Fair.

Poster of Gabriel Garcia Marquez at Guadalajara's International Book Fair.

Juan David Torres Duarte


BOGOTÁ — When a writer dies, there are several ways of administering the literary estate, depending on the ambitions of the heirs. One is to exercise a millimetric check on any use or edition of the author's works, in the manner of James Joyce's nephew, Stephen, who inherited his literary rights. He refused to let even academic papers quote from Joyce's landmark novel, Ulysses.

Or, you continue to publish the works, making small additions to their corpus, as with Italo Calvino, Samuel Beckett and Clarice Lispector, or none at all, which will probably happen with Milan Kundera and Cormac McCarthy.

Another way is to seek out every scrap of paper the author left and every little word that was jotted down — on a piece of cloth, say — and drip-feed them to publishers every two to three years with great pomp and publicity, to revive the writer's renown.

This has happened with the Argentine Julio Cortázar (who seems to have sold more books dead than alive), the French author Albert Camus (now with 200 volumes of personal and unfinished works) and with the Chilean author Roberto Bolaño. The latter's posthumous oeuvre is so abundant I am starting to wonder if his heirs haven't hired a ghost writer — typing and smoking away in some bedsit in Barcelona — to churn out "newly discovered" works.

Which group, I wonder, will our late, great novelist Gabriel García Márquez fit into?

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