Have a heart for Germany

The tide is turning. For several years now, national and international media have presented the Euro crisis as a soap opera, pitting lazy, profligate, scheming Greeks against honest, thrifty, industrious Germans. Yet as austerity continues to bite and in light of the demands of the fiscal compact treaty, created for the most part to appease Germany, these roles are changing. Germany is now cast as the wealthy villain. Over three days at a recent Brussels seminar for Euro-area financial journalists, I watched a German journalist be torn to pieces over the policies of his government.

It is understandable why Angela Merkel and her country are being targeted. The controversial 0.5 per cent structural deficit limit included in the fiscal compact treaty essentially represents an effort to assuage German discomfort with giving further economic stimulus packages to those struggling states that Germans perceive as reckless. Yet Germany, along with France, was one of the first Eurozone countries to breach the deficit rules of predecessor the Stability and Growth Pact, by running up a budget deficit of more than three percent of GDP in 2002 and for the following three years.

The inflation issue has also become a real source of anger. Germany has been hyper-competitive for the last ten years and normally this would result in significant inflation, but German inflation has stayed around or below 2 per cent over this period and continues to remain artificially low, kept there as a result of low productivity in other EU countries. At present the German inflation rate is 2 per cent, actually lower than the Eurozone average of 2.6 per cent. This low inflation keeps Germany competitive and makes it harder for peripheral EU countries to compete. The Bundesbank refuses to relax its hawk-like view of inflation and the German people are terrified of any indications otherwise; last week, after the International Monetary Fund called on Germany to accept higher inflation, Das Bild ran a full-page cover story screaming 'Inflation Alarm!'

Germany's emphasis on austerity also comes up for criticism as it becomes clearer just how exposed it is unless naughty countries like Spain and Greece toe the line. A controversial advertisement launched recently by the conservative British magazine Spectator declared, 'Most Germans own a second property. It’s called Greece.' Despite the vitriol this campaign received, the Spectator is not alone in holding that a large portion of Greek-based assets and debts are owned by Germans. German banks are the second largest holder of loans to Greece, to the tune of €34 billion. Before the crash Germany lent huge amounts to the countries who bought its exports, disregarding the quality of the loans and prospective inflation. As it demands harsh cutbacks in from those member states that want money in part to pay their loans back, the international community is less and less amused.

The poor German journalist at my seminar made three very valid points in an effort to defend the actions of his people. He pointed to the historical reasons for Germany's fear of inflation, a legacy left behind by the hyper-inflation of the 1920s Weimar Republic, itself a result of the government's mass printing of money to pay off reparations imposed after the first world war. Because of this memory, he said, inflation for Germans is like corporation tax for the Irish; they are simply unwilling to move on it. He also pointed out that Germans resent criticism as they provide such a large part of Europe's bailout fund, second only to Luxembourg; Germany has a 27.1 per cent share in the ECB and 6 per cent voting rights in the IMF, and pays out accordingly. Finally he made the point that, a mere ten years ago, Germany was called 'the sick man of Europe.' It struggled in the late 90s, after growth slowed following high spending during the first decade of reunification. In response Chancellor Gerhard Schröder introduced painful labour and market reforms and despite enduring the worst recession since 1945, Germany managed to return to growth and keep unemployment remarkably low. German people, said the embattled journalist, feel that Europe ignores where Germany's success has come from, those painful years of harsh reform.

Ultimately journalists would do well to remember that there are no singularly villainous or righteous countries in this crisis. Unfortunately it is playing out as more of a thriller than a soap opera, as everyone has so much to lose.

A new day for European nationalism

It is ironic that the creation of a single European currency, sold as a step towards unity, integration and the tearing down of boundaries, has resulted in a wave of support for nationalist political parties to a degree not seen since before the second world war.

This was aptly demonstrated in the recently inconclusive Greek elections, which saw the far-right Golden Dawn party gain seven per cent of the vote after winning a mere 0.2 per cent in 2009. The Greek political system is in turmoil for the same reasons that all the rest of the Eurozone is in trouble - bad banks and big debts as a result of loose policies following the introduction of the Euro. And now the spotlight shines on a party that had previously existed on the fringes, consistently accused of anti-semitism.

EU Council President Herman Van Rompuy gave an articulate warning to the Union at the end of 2010 when in Berlin he spoke out against growing nationalism and populism in Europe. 'Fear leads to egoism, egoism leads to nationalism, and nationalism leads to war,' he said. 'Today's nationalism is often not a positive feeling of pride of one's own identity, but a negative feeling of apprehension of the others. Fear of 'enemies' within our borders and beyond our borders.'

Here is a snapshot of Europe's nationalist political parties, many of whom combine nationalism with anti-immigration policies. Much has changed in the past four years. In France, Marine Le Pen's National Front won a record 18 percent of the vote in the recent presidential election. It is predicted that the National Front will gain further traction in June's parliamentary elections. In Austria, the Freedom Party currently controls 34 of 183 seats in parliament and is the second most popular party according to opinion polls. In Sweden, a county renowned for fair policies and good governance, a far-right nationalist party won parliamentary seats for the first time in the 2010 elections. The Sweden Democrats, known for its anti-immigrantion and anti-Islamic stance, received 6 per cent of the vote. In the June 2010 Dutch elections, Geert Wilders’ nationalist party more than doubled its share. It is now the third largest party in The Netherlands. In Finland the True Finns received 19.1 per cent of the vote in last year’s election compared to 4.1 per cent in 2007.

I won't harangue you with more statistics but the list goes on. In some countries there is mass public suspicion of the most extreme nationalist parties, as with the BNP in Britain or the NDP in Germany, but overall it cannot be denied that this brand of politics is gaining support across the Europe.

The same has happened at home. In the last four years Sinn Féin has built a strong campaign against further European integration and as a result has gained ground at an unprecedented pace. Every day as I drive to work I pass more Sinn Féin 'NIL to the Fiscal Compact Treaty' posters than the 'Yes' posters erected by all of the other major parties. I don't mean to create links between Sinn Féin and parties like the BNP, but Sinn Féin is undeniably Ireland's most prominent nationalist party. It is also the fastest growing party in Ireland. February 2011 saw its best ever result in a Dáil election in modern times and more than trebled its number of representatives over the 2007 election. An Irish Times poll taken at the end of April showed that Sinn Féin is now the second most popular party in the state with 21 per cent of the public now behind the party.

After World War Two, European integration was seen as an escape from the extreme nationalism which had devastated the continent. One of the stated aims of the European Coal and Steel Community, the predecessor to the European Union and the first step in the federation of Europe, was to eliminate the possibility of further wars between its member states by pooling national heavy industries and thus preventing domestic protectionism. For fifty years this aim was successfully and peacefully achieved, and the strength of many nationalist parties ebbed and died across Europe. Few would have predicted that the backlash created by the instability of the Euro, that shiny, happy currency marketed as a crucial tool in breaking down national borders, would allow for their resurgence.