Wednesday, 18 May 2011

Merkel to Southern Europe: work more, play less

Workers in Southern Europe shouldn't enjoy more vacation and earlier retirement ages than their Northern European counterparts, German Chancellor Angela Merkel told a meeting of her Christian Democratic Union party last night. The comments, highly surprising coming from this usually cautious and analytical politician, have been greeted by applause from the right-leaning papers in Germany today.
"People in countries like Greece, Spain and Portugal should not retire earlier than in Germany. We should all make the same efforts, this is important," German press agency DPA quotes Merkel as saying. "We cannot have a common currency where some get lots of vacation time and others very little. That won't work in the long term."
The notoriously early retirement ages in Southern Europe have been a cause of serious griping in Germany since the country was forced to foot most of the bill to bail out Greece and Portugal over the past year.  In Greece and Italy, a person can retire as early as 57. In Germany a person can't retire earlier than 65, and Merkel's government has voted to raise that to 67 over the next three years. Part of the conditions of Greece receiving its EU-IMF bailout was that it introduce reforms to raise the retirement age to 63.

Merkel is under serious pressure to defend the highly unpopular bailouts of Greece, Ireland and Portugal. Her coalition partner, the free-market Liberals, had to hold their nose in voting for the rescue package - and they want serious reassurances before they would support any more. Merkel is still in danger of having her government collapse over the unpopular bailouts. Germans, whose economy has proven resilient during the crisis, increasingly have a perception that the rewards of their hard work are going to 'loafers' to the South.

But the common currency made the bailouts impossible to escape. Germany's rise to the dominant economic position it is in today is in large part owed to the euro's introduction, since the key to their success has been an increase in exports. So when countries on the fringes of the eurozone started to implode, it was up to Germany to step in and rescue them in order to save their own economy. Because of the current circumstances, many Germans are now seeing the euro as the cause of their problems (forcing them to give bailouts) rather than the cause of their success (without the economic success it brought them they wouldn't be in the position to give bailouts). Memories are short-lived with these kinds of things.

There is also a fear that if Southern Europe doesn't dramatically change the way it collects taxes, works and spends on benefits then Northern Europe is just going to have to keep giving them money with no end in sight. In recent weeks it has become clear that despite the €110 billion in aid given to Greece in 2010, the government may need more. The German taxpayers want guarantees that this isn't a never-ending process.

It was for this reason that Merkel, with support from French president Nicolas Sarkozy, proposed the "pact for competitiveness" in February that would force eurozone members to excercise fiscal discipline and coordinate national policies on issues like benefits, wages, taxes, holidays and retirement ages. Merkel would never say this, but at the time we all knew what it meant - everyone was going to have to be a bit more like Germany. The chancellor's comments yesterday were the first time she has come close to suggesting this reality, and the first time she has echoed some of the more populist strains of discourse now happening in some corners of Germany and elsewhere in Northern Europe.

Certainly, her words were intended for a domestic audience. But they will still be heard by the Southern Europeans she was referring to, and I doubt they will be flattered. There is also a political sensitivity to this as well, since Southern Europe is the last remaining refuge of the Socialist parties of Europe. This is not only North telling the South what to do, it is also the Conservatives telling the Socialists what to do.

Still, the governments of the South may not have much choice other than to take the advice. They signed the competitiveness pact, albeit a watered-down version, in March. Effectively, they are going to have to submit their national budgets and economic plans for Germany's approval. For the Socialist governments of Greece, Portugal and Spain, this is going to be a tough pill to swallow. Particularly when it was the preceding conservative governments in those countries that got them into the mess that they're in today.

5 comments:

Tom said...

Well... you can't say that she's entirely wrong... :)

Séan-Pól said...

There was a book called turning peasants into Frenchmen... this could be turning Latins into Anglo saxons, will never happen...

Alexandre said...

It sounds a bit like the N. sarkozy's slogan : "Travailler plus pour gagner plus". With the well known results...

Chris said...

Work more, play less.......and the killer.... DECLARE MORE!!!

Captain Kid said...

Of course, she's entirely wrong. The German Financial Times has shown the actual nunbers of retirement ages and vacation days and the result was, that German people retire earlier than Portuguese ones, for example, and work only slightly more than a Greek person (0.5 years). Besides, Germans have more vacation days (around 30) than the rest of Europe.