Germany under attack

Thomas Sajan Titto Idicula | Updated on March 09, 2018

Ruling the roost... for how long?

Is something seriously wrong with the German economic model?

Even before the row over the phone surveillance of Chancellor Angela Merkel by US agencies has settled, Europe’s economic powerhouse has come under a new ‘attack’. In its recently released semi-annual currency report, the US treasury has sharply criticised Germany’s export-driven economic policy by suggesting that it is subverting economic recovery in the Euro Zone.

What bothers American treasury pundits is Germany’s burgeoning current account surplus at the expense of its debt-stricken southern European neighbours. The German economy, in which every second industrial job hinges on exports, is alleged to trigger a deflationary bias for the Euro Zone by slowing down domestic demand growth. The IMF also joined hands in criticising Germany. The European Union on November 5 issued a probe of Germany’s record-high trade surpluses.

Berlin retorted by calling the criticism “incomprehensible”. “The German economy is competitive with record-low unemployment — so it’s really not understandable why we are being blamed for this success,” saidMichael Meister, deputy parliamentary chairman of the Christian Democratic Union party.

Is there anything seriously wrong with the German economic model? Or does the American disapproval emanate predominantly from Washington’s annoyance over increasing German ascendancy in the EU?


Germany is experimenting with a nuanced capitalist arrangement that refuses to abide by welfare state commitments. In spite of being the poster-country for economic success in Europe, Germany has a deregulated labour market with highly exploitative employment practices. It is one of the few European countries that doesn’t have a federal minimum wage.

“It’s not a model of economic growth that’s brought steady improvements in the real levels of income and earnings,” says Damian Grimshaw, a leading expert on minimum wages at the University of Manchester, UK.

According to the 2012 OECD report, Germany is the only EU member that has witnessed growing inequality in labour earnings in the last decade or so. Recently, EU Social Affairs Commissioner László Andor urged the German government to raise wages from its current level and establish a nationwide minimum wage. The presence of a large-sized, low-paid sector is a major factor behind the weak German domestic demand.

“There are only part-time and temporary jobs. Most jobs you get offered are 40 hours per week. You are lucky if you manage to get 600 or 700 euros a month,” a young man revealed in Berlin.

Though Germany has no military basis or master plan to “occupy” the Europe — as sociologist Ulrich Beck commented — it has actually created an “accidental empire”. Saving Europe from the ongoing sovereign debt crisis now rests in the hands of its new paymaster and political taskmaster. “Germany may soon accomplish peacefully what it failed to do in two world wars: gain effective control over the rest of the continent,” said Kelly McParland, a columnist for the National Post.

Chancellor Merkel stays confident that her successful economic model will sooner or later set off growth and prosperity all over Europe. However, despite being the biggest contributor to the Euro Zone bailout funds, Germany is not importing enough to boost up the debt-stricken economies of southern Europe.

It remains to be seen whether US will strike “new deals” with the ailing Euro Zone countries disgruntled about the growing German dominance.

(Sajan is a social anthropologist at University of Bergen, Norway. Idicula is a consultant neurologist and researcher at the Norwegian University of Science and Technology, Trondhiem, Norway.)

Published on November 15, 2013

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