Angela Merkel’s tenure will be remembered as Germany’s, and Europe’s, cruelest paradox. On the one hand, she dominated the continent’s politics like no other peacetime leader — and is leaving the German chancellery considerably more powerful than she had found it. But the way she built up this power condemned Germany to secular decline and the European Union to stagnation.
by Yanis Varoufakis
Part 1 - Wealth-Fueled Decline
There is no doubt that Germany is today stronger politically and economically than it was when Merkel became chancellor back in 2005. However, the very reasons Germany is stronger are the same reasons why her decline is assured within a stagnating Europe.
Germany’s power is the result of three massive surpluses: its trade surplus, the structural surplus of its federal government, and the inflows of other people’s money into the Frankfurt banks, as a result of the slow-burning, never-ending euro crisis.
Germany’s power is the result of three massive surpluses: its trade surplus, the structural surplus of its federal government, and the inflows of other people’s money into the Frankfurt banks, as a result of the slow-burning, never-ending euro crisis.
While Germany is swimming in cash, courtesy of these three surpluses, this cash is mostly wasted. Instead of being pumped into the infrastructure of the future, public or private, it is either exported (e.g., invested abroad) or used to buy unproductive assets within Germany (e.g., Berlin apartments or Siemens shares).
Why can’t German companies, or the federal government, invest these rivers of money productively within Germany? Because — and here lies part of the cruel paradox — the reason these surpluses exist is that they are not invested! Put differently, under Mrs Merkel’s reign, Germany made a Faustian bargain: by restricting investments, it acquired surpluses from the rest of Europe, and the world, that it could then not invest without forfeiting its future capacity to extract more surpluses.
Why can’t German companies, or the federal government, invest these rivers of money productively within Germany? Because — and here lies part of the cruel paradox — the reason these surpluses exist is that they are not invested! Put differently, under Mrs Merkel’s reign, Germany made a Faustian bargain: by restricting investments, it acquired surpluses from the rest of Europe, and the world, that it could then not invest without forfeiting its future capacity to extract more surpluses.
Looking deeper into their origin, the massive surpluses that empowered Germany under Mrs Merkel are the result of forcing German and, later, European taxpayers to bail out Frankfurt’s inane bankers on condition of engineering a humanitarian crisis in Europe’s periphery (Greece in particular) — a means by which Merkel’s government imposed unprecedented austerity upon both German and non-German workers (disproportionately, of course).
In short, low domestic investment, universal austerity, and turning proud European peoples against each other were the means by which successive Merkel governments transferred wealth and power to the German oligarchy. Alas, these means also led to a divided Germany that is now missing out on the next industrial revolution within a fragmenting European Union.
In short, low domestic investment, universal austerity, and turning proud European peoples against each other were the means by which successive Merkel governments transferred wealth and power to the German oligarchy. Alas, these means also led to a divided Germany that is now missing out on the next industrial revolution within a fragmenting European Union.
Three episodes offer insights into how Merkel exercised her power across Europe to build up, step by step, the cruel paradox that will be her legacy.
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