When primary-school teacher Vanessa Kuhn-Baumann opens her pay statement every month, she thinks dark thoughts about Spain and Greece. Despite the prosperity of her country, her bank statements and tax returns feel like a constant reminder of the price of European solidarity and economic unity.
Like all Germans, Ms. Kuhn-Baumann has a 5.5 per cent “solidarity surcharge” on top of her income tax withdrawn from her paycheques – a fee imposed in 1991 to pay for the reunification of Germany after the communist German Democratic Republic ceased to exist. East Germany at the time looked like Greece does today: broke, unemployment-stricken, inefficient, debt-burdened and in need of outside help.
Meant to be a temporary measure to get the poor and indebted East Germans back on their feet and convert their worthless currency to deutschmarks, the “Soli,” as the tax is known to Germans, has been extended for more than two decades (it is set to expire in 2019) and has cost taxpayers more than $2.2-trillion.
“The last time we Germans bailed someone out was 21 years ago, and look, I’m still paying for it today – I’ve been paying for my entire working life,” says Ms. Kuhn-Baumann, 34, a Bavarian who, since she moved to eastern Berlin, now lives in the former East Germany, a region that remains mired in high unemployment and dependency. “I look around me here, and I wonder what we got for all that money.”
In many ways her attitude, possibly shared by a majority of Germans today, is Chancellor Angela Merkel’s biggest political problem. Any solution to the euro crisis – which this weekend pushed Spain to ask for a continent-wide rescue for its banks – will be expensive for Germany, though nowhere near as expensive as the collapse of the euro or one of its larger member states. But Ms. Merkel faces voters who believe, deep in their hearts, that a euro bailout will be a repeat of the disappointing project of German reunification.
“I think the German taxpayers realize that it’s quite difficult to support another area. They fear that Greece will be a never-ending story like we’ve had with the eastern part of Germany,” says Matthias Kullas, an economist with the German Centre for European Policy. “They’re still making payments for that today, and they look at the Mediterranean and they see another place that looks like East Germany. So, naturally they’re wary.”
It is that wary electorate, rather than her own beliefs, that has caused Ms. Merkel to avoid taking decisive and large-scale action to rescue the euro, say senior officials in her conservative Christian Democratic Union. It is the prospect of a voter revolt that has caused her to talk exclusively of austerity and cutbacks at a moment when economists and other European leaders increasingly agree that an inflationary policy designed to boost demand, led by Germany, is badly needed. Facing a series of knife-edge state elections this year and a national election in 2013, she feels she must avoid statements or actions that could turn public opinion against her party.
That opinion was visible this weekend, as European finance ministers met to bail out Spain’s collapsing banks with a €100-billion ($129.3-billion) loan from the continent’s bailout fund, when a poll for the Bild newspaper showed that 66 per cent of Germans are unwilling to do anything to support Spanish banks, and only 26 per cent are worried about the stability of the euro.
Underlying it all is the dead weight of tens of millions of German voters who, like Ms. Kuhn-Baumann, see the poorer members of the 17-nation euro zone as another set of East Germanys – and note that the former GDR, even after $2-trillion in taxpayer aid, is faring more poorly, by several measures, than neighbouring Poland.
Part of this is the fault of the German media and think tanks, which have constantly repeated the misleading idea that the euro crisis was created by excessive government spending in the periphery, and that Germany is simply paying for the irresponsible profligacy of others. One influential German commentator, the historian Arnulf Baring, has gone so far as to call the euro bailout “Versailles without war” – a reference to the crushing reparation payments imposed on Germany after the First World War.
While this was true of Greece during the pre-crash years, the much larger economies of Spain and Ireland were, in fact, less profligate and more fiscally sound than Germany, and ran government surpluses while Germany exceeded the EU’s spending limits. While other Europeans have understood that the crisis was not created by debt but by trade imbalances between the export-led core and the import-dependent periphery, this has never been part of mainstream German understanding.
But Ms. Merkel’s aides insist that she has a more sophisticated understanding of the crisis than her actions would indicate. As the first chancellor to have grown up in the now-defunct communist GDR, they say, she understands that its economic logic is not at all the same as that of the euro zone.
That started to become apparent last week, when Ms. Merkel declared that the solution to the crisis is “more Europe,” calling for a tighter fiscal and political union between the 17 states with the euro as their currency - - and saying almost nothing about austerity. Those close to Ms. Merkel say that this was a window into the German leader who will emerge after the next election- - far too late to save the euro.