Sunday, June 3, 2018

Yes indeed, Germany is to blame for much of what's gone wrong in Europe. And that very much includes the German social democrats.
The Germans have very efficiently stamped out any and all attempts to reform the Eurozone and loosen the fiscal straightjacket that has blighted the economic prospects of many countries and heightened social conflicts, particularly around immigration. The rise of populism has been the predictable result, the latest manifestation of which we see in Italy today.
And the German social democrats, a party with deep historic roots in the struggle for social justice, have been complicit in Germany's intransigence every step of the way. How on earth did this happen?
The best explanation I have seen of this comes from Ashoka Mody, formerly deputy director of the IMF's research and European departments. He has a new book coming out, EuroTragedy: A Drama in Nine Acts, which looks like a must-read. Here's an excerpt from a lengthy article on the German social democrats he just published on the openDemocracy site:
"When the global financial crisis erupted in 2007, nations of the Eurozone ­– those sharing Europe’s single currency, the euro – were faced with a crucial test of European solidarity. Tied together by the single currency, would the strong nations support the weak?
The SPD’s Peer Steinbrück, as German finance minister, nixed proposals to create European financial firewalls to limit the spread of financial crises. Moreover, by then, Germans had overcome their temporary turn-of-the-millennium economic funk, and Steinbrück returned to the traditional German insistence on fiscal austerity. At the height of the global financial crisis in 2008, he mocked British prime minister Gordon Brown’s impassioned plea for globally coordinated fiscal stimulus. So poor was Steinbrück’s judgment that Merkel overruled him and joined the essential stimulus effort.
In the 2009 election, with nothing to offer by way of either national or European ideas, the SPD’s vote share plummeted to a historic low of 23 percent.
As the eurozone’s never-ending crisis dragged on, weary citizens in member nations looked again to social democratic parties to jump-start an equitable growth process. Thus, the 2012-2013 election cycle gave Europe’s social democrats an opportunity for political revival. In a wave that started in France and then continued into Italy, the Netherlands, and Germany, social democratic parties either gained government leadership or emerged as important coalition partners. Besides promising domestic economic relief, social democratic leaders – French president François Hollande, Italian prime minister Enrico Letta, and German vice chancellor Sigmar Gabriel – stirred the hope that they would help reinvigorate an agenda of European unity.
But notwithstanding their rhetoric, the social democrats did not deliver. The SPD’s failure is noteworthy. At home, in coalition with the CDU, the SPD did little to bring back its former supporters, many of whom, feeling abandoned, had stayed away from the polls. Although the German economy performed much better than other eurozone economies, real wages stagnated for too many Germans and economic inequality increased inexorably.
On European matters, the CDU-SPD coalition remained an unrelenting advocate for fiscal austerity. French president Hollande and Italian prime minister Matteo Renzi did put up a brave fight against the grinding austerity, but they fought for minor concessions rather than challenging German orthodoxy. With the European Central Bank offering only grudging monetary policy relief, the overall policy squeeze delayed economic recovery, which severely hurt Europe’s most vulnerable citizens.
The SPD’s intellectual influence was particularly insidious in the area of “labor market reforms.” In October 2014, Renzi announced what was to be his singular achievement: the Jobs Act. Much like the Hartz reforms, the act weakened workers’ rights and, despite claims of protective provisions, reinforced the tendency toward jobs with insecure tenures. Italian governments before Renzi’s had implemented similar reforms, which indeed increased employment. But the evidence from the past reforms was that they dulled the incentives for employers and employees to increase productivity and, hence, contributed to the steady decline in Italian productivity growth. Renzi’s Jobs Act seems destined to prolong Italy’s near-zero productivity growth.
Social democrats thus threw away the opportunity presented to them in the 2012-2013 electoral cycle. They failed to promote a domestic agenda that brought hope to globalization’s losers, especially those who lacked necessary education and skills. Unsurprisingly, social democratic parties were clobbered at the polls in 2017-2018. They lost to protest parties that spoke more directly to voters’ economic and cultural anxieties."
'Tis a sad tale indeed.
Unable to generate a domestic consensus and powerless to counter the priorities dictated by the euro, social democracy must continue to fail at home while divisions among EU nations deepen.

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