This is an excellent blog from the FT. The author, Albrecht Ritschl, is professor of economic history at the London School of Economics and a member of the advisory board to the German Ministry of Economics. It’s well worth a read. Check it out!
Professor Ritschl is responding to an article by Hans-Werner Sinn, recently published in the New York Times. Mr. Sinn is the president of the Ifo Institute and the director of the Center for Economic Studies at the University of Munich. Mr. Sinn, in response to a recent criticism of German policy by President Obama, argues that German support to Greece has so far exceeded the benefits that Germany received from the original Marshall Plan (officially the European Recovery Program, ERP, in 1947).
Personally, I found both article extremely interesting in their historical comparisons. As a long time advocate of a Marshall type plan for the Mediterranean countries, it has made me reflect.
I think that both articles miss the point that Germany received enormous amounts of foreign investment post World War Two and because of German exchange rates, Germany was able to rebuild its industry and create its own economic miracle – let’s not underestimate the achievement. On the other hand, because of the Euro, Greece and the Mediterranean countries have artificially high costs which makes them uncompetitive in World markets. The pro-austerity lobby want the Mediterranean countries to reduce their costs with pay cuts etc. and meanwhile Germany and Northern Europe are not prepared to stimulate greater inflation to generate economic activity. For me, if the Euro is to survive with its present membership, the pro-austerity lobby will need to soften their position and stimulate growth in Southern Europe – perhaps with direct or international investment in major capital projects.
The economic crisis is about stimulating jobs and creating capital investment not just sovereign and bank debt.
What do you think?
- Germans put their wealth into property – FT.com (dralfoldman.wordpress.com)
- Why Berlin Is Balking on a Bailout (nytimes.com)
- Opinion: Europe Needs a German Marshall Plan (nytimes.com)
- The euro crisis: More like fail-out | The Economist (dralfoldman.wordpress.com)
- Blair calls on Germany to stand by euro – FT.com (dralfoldman.wordpress.com)
- Debt crisis: Germany signals shift on €2.3 trillion redemption fund for Europe – Telegraph (dralfoldman.wordpress.com)