Wednesday 17 January 2018

Technocrats can't cure Europe's ills – but neither can democracy

German Chancellor Angela Merkel
German Chancellor Angela Merkel
Stephen Kinsella

Stephen Kinsella

THE late Tony Benn had five questions for the powerful. Benn asked: "What power do you have; where did you get it; in whose interests do you exercise it; to whom are you accountable; and, how can we get rid of you?"

Pose those questions to the elite of Europe. Angela Merkel gets her considerable power from the German electorate and the size of their economy relative to the rest of Europe. She is accountable to her electorate and, if she messes up, the electorate can get rid of her in a few years' time. But in whose interests does Dr Merkel exercise her power? In the interests of the German people.

Given that Germany is in a monetary union with 17 other countries, the simple fact of Germany's often-inward focus is a source of huge problems. For example, in the recent Asset Quality Review, some very German banks had their mortgage books exempted from the exercise on the grounds it would be "too costly" for them. This change happened, of course, because of Germany's size and strength. Imagine if Ireland's banks had had the same request. Germany's current account, a measure of its earnings from selling exported goods abroad, was larger than China's at about €260bn. This current account surplus is causing nothing but damage in the eurozone, as the threat of deflation looms ever nearer. Dr Merkel's power to change all of these things relates perfectly to Tony Benn's questions.

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