Monday 22 January 2018

Germans 'hurting EU with undue influence'

Respected author says economic giant is 'neo-colonial' in approach

Kieran Fagan

A respected Jesuit magazine has accused Germany of "neo-colonialism" over its approach to the financial crisis affecting Ireland and other EU members.

The hard-hitting essay entitled 'Merkel's Folly' in the autumn 2011 issue of Studies, a quarterly published by the Irish Jesuit community, accuses Germany of protecting its own banks, particularly its provincial banks (landesbanken) from the consequences of unwise overseas investments, including loans to Irish banks, and more significantly the US subprime lending fiasco, in which mortgages were advanced to people who had no chance of paying them back.

When the losses attached to those loans became too great, rather than refinancing its own banks, Germany insisted on "rescue packages" like the €85bn EU-IMF loan for Ireland. In effect the EU, dominated by Germany, lent countries funds with which to bail out Germany's banks, says author Richard Whelan, an Irish accountant who writes on geo-political affairs.

He maintains that over time Germany has abandoned its post-war role as co-architect of a united Europe, and is now putting its own economic and political interests first and last.

Through its economic dominance of the eurozone, it is slowly imposing a "one-size-fits-Germany" regime. By keeping domestic demand low and relentlessly promoting its exports, it has played "beggar my neighbour" with fellow EU members who cannot compete with an economy which the International Labour Organisation says had a 4.5pc reduction in real earnings over the last decade. (This accusation mirrors that made by US manufacturers who complain they can't compete with artificially low-priced Chinese imports).

The circle was completed when the landesbanken and other German banks unwisely invested their surpluses, and when those investments failed, as they did in the US subprime market, Iceland, Ireland and other EU peripheral states, Germany imposed EU and IMF "rescue packages" to protect its own banks. In effect, Germany played 'Ten Little Indians' with its weaker neighbours, and one by one, starting with the weakest, their economies came under intolerable pressure.

"We missed signals of major change in Germany," says Mr Whelan.

"Germans take pride in their economic success, and they fear the damage entanglements like the EU pose. German economists have fed the myth that their economic model is better than anyone else's and invulnerable. Deep down there's a lingering resentment at having to continue to eat humble pie after losing two wars, and a new willingness to say no, feeding into the political system in a more powerful way since re-unification."

Mr Whelan cites international authorities to show that European banks were responsible for 50 per cent of the failed US subprime lending, and that the eurozone failed to learn the lesson when Britain and the US speedily tackled the problem in their banks.

"I'm not anti-German. Nor do I think Ireland can or should avoid its share of the blame for the crisis we are in", Mr Whelan said.

"However, I do believe that Germany now has undue influence and control over the weakened economies of a number of states in Europe.

"I hope people will read the Studies article and realise that we have been looking at the symptoms and have missed the bigger picture."

Sunday Independent

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