Current account balance FRG – Eurozone
The systemic contradictions of the collapsing capitalist world system are mirrored in the Eurozone teetering on the brink of collapse. Crisis of Capitalism – Part 3
Does the EU only lead the existence of an institutional zombie?? Although the last Euro Summit was able to avert the political and economic collapse of the Eurozone, at least for the time being, the idea of European unification seems to have suffered irreversible damage, at least in Germany. The EU is still alive, but the European idea is dead.
Part 2: Who is to blame for the outbreak of the crisis??
An unbridled and resentful rage against "Europe", The crisis of capitalism against financial speculators and the southern euro states has taken hold of large sections of the German public. This widespread resentment is reflected in corresponding headlines and press outpourings, which repeatedly warn that Europe is now following "our money" will take hold, a "Debt union" or that speculators must be seen as the real beneficiaries of the euro crisis.
After the German austerity dictate in Europe suffered a first setback, opinion-leading German blatants now see a "Europe without rules" that will be brought about by a veritable "Horror show" The fact that the euro crisis was pushed through by the southern European heads of government at the Brussels summit meeting. about a tangible "Erpreng" of the German chancellor on the part of the South Europeans is complained meanwhile not only on right-heavy Newssites.
The crisis of the Eurozone thus provides unvarnished chauvinism with a renaissance. How could it happen that the process of European unification, which was always seen as a consequence of the mass murders of the Second World War, could contribute to the flare-up of nationalism throughout Europe?? The European debates on the crisis policy are characterized by uncompromisingness and hardened fronts; the previously usual compromise finding within the European Union no longer works. The terminology used by the public has also changed accordingly, with Europe-wide talk of battles won "battles" and ongoing "Kriegen" is fabricated.
Germany became the winner in the location competition
The former "Harmony" like the current disputes in the Eurozone, have their roots in the specific structure that has been given to this area of truth. Countries with different levels of productivity found themselves in a common space that did not implement any structures or measures to compensate for these differences. On the contrary: In the most noble neoliberal tradition, the "Location competition" the lowest tax rates and wage costs between the individual euro states. This location competition for the lowest wages and corporate taxes was won by the Federal Republic of Germany. While the economic imbalances in the euro zone have worsened, the interest rate levels in the entire currency area have also converged. From "benefited" especially the southern European euro countries, which had to shoulder a much heavier interest burden before the introduction of the euro.
In the end, this European monetary union, which was limited to purely monetary policy, led to the formation of gigantic imbalances in the intra-European current account balance, of which Germany must clearly be named as the main beneficiary. The current account is a broad trade balance that includes trade flows as well as services and financial flows.
The German export industry was able to generate increasingly large trade surpluses vis-à-vis the euro zone because the other, economically inferior euro countries were no longer able to respond to the export offensives of German industry with currency devaluations. In addition, lower interest rates in Southern Europe made it easier to raise debt. Everyone seemed to benefit from the monetary union, as Germany opened up new markets and the countries of Southern Europe experienced a deficit economy due to low interest rates – increasing debt also had a stimulating effect on the economy in Southern Europe. Germany, however, clearly became the eurozone’s gross beneficiary, as illustrated by the following chart, which shows Germany’s current account balance with eurozone countries:
It is clear to see how Germany’s current account surplus vis-à-vis the euro zone has exploded since the introduction of the euro. In addition, the chart already visualizes how Germany’s current account surpluses rapidly dwindled in the early 1990s due to reunification and the currency devaluations of the European countries – these opportunities for currency devaluation were no longer available from 2002 onward. Germany’s current account surpluses are almost a mirror image of the current account deficits of the European crisis countries Greece, Ireland, Portugal, Spain and Italy.
Eurozone is a "Transfer Union" in favor of the German export economy
Germany’s surpluses logically represent the deficits of the euro countries concerned. If the Federal Republic of Germany permanently generates high trade surpluses against the Eurozone, then a process of indebtedness naturally sets in in these Eurozone states in order to compensate for the German current account surpluses by means of deficit formation. The euro zone is therefore already a "Transfer Union" in favor of the German export industry, which has been able to achieve enormous surpluses – at the expense of the eurozone states, which are becoming increasingly indebted.
The amount by which Germany’s aggressive export orientation has contributed to the European debt crisis can be precisely specified. In the first quarter of 2012, Germany’s current account surplus with the eurozone since the introduction of the euro amounted to 824.3 billion euros. This sum is – as shown in the chart – permanently growing. In the fourth quarter of 2011, Germany had a current account surplus of 24 billion against the eurozone; in the first trimester of 2012, it was 17 billion (thanks to Steffen Bogs and his blog Querschusse for the figures).
The Eurozone thus continues to represent a "Transfer Union" in favor of the German export economy – whose surpluses continue to contribute to the creation of deficits in these countries. In addition to the increasing indebtedness of today’s crisis states, this German export orientation also brought about the gradual deindustrialization of Southern Europe, as the industry there was no longer competitive and "from the market" as discussed by the internet portal okonomenstimme.
This extreme export fixation of German industry was massively and deliberately demanded by German politics. On the one hand, shortly before the introduction of the euro, the red-green government of Chancellor Gerhard Schroder introduced a tax reform that provided massive tax relief for companies and corporations in particular, and for a time even resulted in a negative corporate income tax for the Federal Republic: In 2001, the state paid billions in corporate income tax to corporations, insurance companies and banks due to the excessive expansion of depreciation options "War chest" on the eve of monetary union. On the other hand, the Hartz IV labor laws enforced by Red-Grun led to a massive precarization of working life and to a collapse of the real wage level in Germany.
German industry, which already had a productivity advantage over the southern euro countries, was thus able to gain further significant competitive advantages – on the backs of Germany’s wage earners, who for Europe were the center of the crisis "Germany’s" Export successes insistently had to tighten their belts. These competitive advantages of German industry, which resulted from the pauperization strategy in Germany, were reflected in a very advantageous development of German labor costs – that is, the share of wages in the cost of a commodity:
The chart above illustrates the huge divergence in wage costs in the eurozone. It is thus absolutely clear that Germany’s export successes have been achieved with increasing precarization, increased labor prere and declining wage levels in Germany. So there is indeed a connection between the "painful labor market reforms" in Germany and the debt crisis in southern Europe – there is a causal link between the two. The precarization and impoverishment strategy in the Federal Republic of Germany prompted Germany’s high current account surpluses vis-à-vis the Eurozone, which contributed to the European debt crisis. In other words, Agenda 2010 and Hartz IV could only be successful because the collapse of domestic purchasing power in Germany was compensated by export surpluses (and thus deficit formation) in the Eurozone.
It is therefore downright absurd to attribute the "Southern Europeans" Now the Germans are accusing them of having plunged into an orgy of debt, rather than having a similar "Painful labor market reforms" to be carried out like Germany. Without Europe’s debt-making, the Hartz IV labor laws had failed miserably in a recession due to the collapse of domestic demand. And, of course, the same neoliberal whips against Southern Europe – such as Hans-Wener Sinn – who previously acted as leading apologists for Agenda 2010 are now turning against Germany. But it is really not the fault of the Southern Europeans that the wage earners and trade unions in Germany did not resist Agenda 2010 and Hartz-IV, but lamely submitted to all the impositions that went along with it.