August 15, 2020

Germany and double standards in the face of the pandemic


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The German attitude in Europe is summarized in two concepts: austerity and intentional lack of definition. It requires EU states to cut public spending policies and refuses both to pool public debt and to implement investments to trigger economic recovery, unless it enters a recession, as it has just done. occur. However, does not think the same when rescued or rescued. Let’s see some examples of its history.

Behind the First World War, the victorious countries force defeated Germany to pay for war reparations, $ 31.5 billion. Germany was unable, went into hyperinflation, and the international community had to renegotiate the signed agreements. At international conferences, the word “compensation” is literally taboo. The crisis of 1929 forced a moratorium on the payment of the debt, but in 1933 the Nazi party came to power and Adolph Hitler decided to suspend payments on war reparations.

In July 1947, after the Second World War, the «European Recovery Program» began to be negotiated. Marshall Plan, 22,000 million dollars to avoid the ruin of Western Europe and stop the advance of communism. This fact drives the known “German miracle”, with GDP growth of 8% during the 1950s and unemployment falls from 11% in 1950 to 1.3% in 1960.

On February 27, 1953, with the london deal, the pre-war debts of the German Empire and Prussia are reduced, on the one hand, and deferred on the other, while World War II debts are halved and collected by allies through property allocation German industrial and naval industries. Precisely the cancellation of half German debt and the failure to pay interest on foreign loans, even a hypothetical reunification, is the fact that most helps Germany.

On November 9, 1989, the Berlin Wall fell and eight months later, on July 1, 1990, the RFA and the GDR linked their currencies at an exchange rate of one eastern mark for each western mark, despite of the disproportion between productivity and competitiveness of both economies.

The Communist zone’s GDP was just 43% of the West German average. When the GDR joined Federal Germany on 3 October 1990, its five former states became unconditionally part of the EU, which urgently approves credits for the communist “länder”, a total of 3,000 million a year from 1991 to 1993. The costs of this reunification are downloaded to the rest of the EU countries in the form of high interest rates, by the Bundesbank, to avoid inflation and attract foreign investors. Since 1991, the EU Regional Development Fund has invested close to 30,000 million in the former East Germany for the construction of roads, bridges or railway tracks. In addition to the above, we must add the contributions of the European Social Fund, the European Fund for Agricultural Guidance and the Financial Instrument for Fisheries Guidance, a total of 50,000 million in the former GDR without demands for conditionality in return.

In the period 1993-2013, Germany is one of the countries most benefited by the European Regional Development Fund, the European Social Fund and the Cohesion Fund. At the end of 2013, Germany receives more than 80,000 million. Regarding itself, in November 2008 and January 2009, the German government, aside from the rigor it preaches, injects public funds into its banks and also into its economy with two aid packages. The first, for a value of 3.9 million in 2009 and 7.1 million in 2010 (0.2% and 0.3% of GDP) and the second, for an amount of 54.3 billion, to be spent in 2009 and 2010 in “certain permanent measures”.

On March 25, 2020, due to Covid, Germany approves a plan for $ 812 billions, equivalent to almost 22% of GDP and comes to the aid of their companies. And while most EU banks are subject to International Accounting Standards (IFRS), 52% of German banks apply their own national rules. This means that to account for credit losses, IFRS requires a provision calculated for the “expected loss”, while German standards allow more flexibility, when making that provision for the “loss incurred”, that is, not for what could happen, but because of what actually happens. A privilege? All the countries of Europe have obtained advantages of belonging to this space of “de facto solidarity” of which 75 years ago, its promoter Robert Schuman spoke. Of course, also Germany.

Carlos Balado is a journalist and CEO of Eurocofin

Carlos BaladoCarlos Balado

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