Berlin shows the way!

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Berlin shows the way!

Led by the German locomotive, eurozone is out of recession

By M N Hebbar

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Published: Wed 21 Aug 2013, 1:43 PM

Last updated: Sat 4 Apr 2015, 10:50 AM

Europe is in disarray. Members of the eurozone are pulling in different directions. The idea of a “United Europe” prophesied at the introduction of the euro seems more distant than ever. If there is one thread that runs common in the current state of European economies it’s the phrase once evocative of the Clinton administration — ‘’It’s the economy, stupid”! Lifting the gloom slightly has been the latest news that the longest ever recession suffered by the eurozone has come to an end.

Let’s start with Britain. It has threatened to withdraw from the EU and will hold a referendum on whether to continue its membership after the 2015 elections. Public opinion is against the EU as a result of consistent attempts by the Brussels bureaucracy to marginalise the British economy through hostile regulations. Voters overwhelmingly tell pollsters that they want their government to renegotiate Britain’s membership of the EU.

The Euro-sceptics have gained in strength while holding former premier Margaret Thatcher as a champion of their cause because she stood no nonsense of Europe’s future as a federal super-state. Present indications suggest that a “No” vote is very likely, in which case Germany, France, Spain and Italy may gradually weaken their links with Brussels.

Nations at the core of Europe, France and Germany especially, have a sense of shared destiny. However, the Franco-German alliance, which functioned as the mechanism of the EU’s motor, has shaken lately, with France’s President Francois Hollande overwhelmed by the country’s internal problems and unable to forge ahead with German Chancellor Angela Merkel politically.

Merkel’s resolve to steer clear of profligate economies and her firm insistence on spending cuts and austerity measures to eliminate EU’s enormous deficits have not exactly added to her popularity but drawn appreciation for her grit, and is backed by EU supporters.

With Spain’s floundering economy and a new coalition government in Italy yet to gain traction, the smaller states, led by Greece, have turned anti-German due to the scale of their sacrifices and have blamed the German chancellor for all their woes. But the Germans are sure that had Berlin not had to bail out bankrupt states like Ireland, Portugal and Greece, the banking crisis would have been banished long ago.

It has thus been demonstrated yet again that the damage inflicted by a premature, politically inspired euro illustrates the limitations of closer economic union.

Come September and all eyes will be on Germany where the voters will be stepping up to choose their leader at the parliamentary elections. The current chancellor Angela Merkel will run for a third term. Merkel is still hugely popular and commands respect not only amongst Germans but also among her European colleagues. Germany’s economic success story has turned her into Europe’s economic giant that has become the envy of its neighbours. However, she has always maintained a low profile in the light of her historic past and a strong democratic culture. But a long-term view does throw up some pertinent questions.

Immigration has always been a politically hot potato and successive German governments have treaded carefully on this issue, also mindful of the large number of Turkish residents in the country. Germany’s immigration system remains restrictive, especially to non-EU nationals.

Nevertheless, a bold attempt was made some years ago to address the problem by the issuance of Green Cards, on the lines of their American counterparts, to open the borders to selected, educated and qualified professionals such as in the information technology industry, specialist engineers, doctors, pharmacists and so on for fixed tenures. In the event, the experiment did not prove too successful.

The road to Europe lies through Berlin! Germany’s role in Europe cannot be understated. And European capitals have given informal signals that they would be comfortable with the return of the competent, pragmatic, diplomatic and realistic Merkel back at the negotiating table in Brussels. Led by the German locomotive as usual, eurozone is technically out of recession. There is no cause for celebration, however. The recovery is based on a narrow second quarter result this year that, while bringing a sigh of relief to European policymakers, makes it clear that it is only the start of a slow and uneven recovery.

Olli Rehn, EU’s top monetary policy official, has actually advised governments to refrain from premature, self-congratulatory statements suggesting that ‘the crisis is over’.

M N Hebbar is a veteran journalist and commentator on European affairs



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