OBSERVER NEWS

Is the German Stance as Moral as they Think?

by SHUJA MALIK

BOLOGNA — To a varying degree everyone realizes that Germany needs to increase its public spending to help Eurozone out of this crisis. Even the Germans know it. They have a decaying infrastructure and the austerity is hurting their own economy. According to a recent Washington Post article “Germany’s economy shrank at a 0.8 percent annual pace in the second quarter. Its exports and industrial production just fell 5.8 and 4 percent, respectively, the most either has since the depths of the crisis in January 2009. And, after accounting for wear and tear, its net government investment in the economy has been negative the past 12 years.”

So the debate is not whether to spend more or not. The disagreement is over which pot of money will Germany use to increase its spending. Do they want to tax their own income at this point or should they use money borrowed on a negative real interest rate?

The argument that Germany does not want to borrow, for it is irresponsible and possibly even immoral, needs to be addressed.  Germany also wants not to set the precedent of being the one to called upon for the irresponsibility of others. Fair enough. But is it also not irresponsible towards their own citizens to demonstrate stunted growth. Why is the German leadership insisting on taking the road that may prove to be the harder pathway for its own citizens? Is it also not immoral to not afford your citizens with the opportunities that come with money that has a negative real interest rate tied to it? With the Chinese economy in that state that it is in and Russian actions in Ukraine, does Germany want to create a situation where in their attempt to teach other European governments about fiscal  responsibility may lead them to hurt European unity and expand the influence of external players. German leadership needs to look at this issue not just from a economic perspective but also from the political costs and long term sociological impact it will have on the continent. If Germany does not demonstrate leadership to keep the European markets competitive, it will not only hurt others but itself along the way.

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