To reassure Germans that the new European currency – the euro -- will be under Berlin’s control, Germany’s former finance minister Theo Waigel said at the time the euro was launched (January 1999) that “Der Euro Spricht Deutsch” (the euro speaks German).
That was an arrogant swipe at fellow Europeans by a reunited Germany (October 1990) some of them opposed and feared. Ultimately, they had to accept it once the U.S. and the Soviet Union agreed to end the WWII partition of a nation that twice set the world on fire and caused the largest loss of lives the humanity had ever seen.
To avoid the German dominance, and to banish the old demons of French-German confrontations, Paris insisted on the monetary union, managed by a supranational European Central Bank (ECB), as an essential step toward a genuine free-trade economic community and a highly integrated single market.
France, in fact, had to do that because it got itself in a situation where the German currency, and the German central bank, were dictating the monetary and fiscal policies for the entire European Union. And that, of course, was politically unacceptable.
German attacks on ECB should stop
Germany, therefore, had to be restrained by an institutional setup of a one country-one vote. In spite of that, Berlin continued to seek ways of imposing its own economic policies. That included unsuccessful lawsuits at the highest German and EU judicial authorities.
Luckily, the ECB still remains Germany’s unconquered battleground. Berlin’s systematically dissenting votes at the ECB’s governing council represent isolated views against the monetary policy the slow-growing euro area needs.
How long that will last is anybody’s guess. Germany’s relentless assaults on ECB policies are widely aired in the country’s media, and they are now finding a broad political support as a result of an inflation rate that has doubled in the second half of 2021.
Indeed, Germany’s inflation accelerated to 5.7% last month from 3.1% in July 2021.
That is above the euro area’s average, which, over the same period, shows an inflation flare-up from 2.2% to 5%.
But, true to form, the German ECB critics are omitting to mention that the soaring energy costs accounted for one-half of the euro area’s 5% inflation rate.
That’s because Berlin bears a major responsibility for the EU’s sky-rocketing energy prices.
Having fought, and won, the battle of the Nord Stream 2 gas pipeline, the outgoing CDU/CSU-led government gave last year to Germany’s new coalition leaders a ready and powerful source of ample energy supplies. But then the whole project was blocked by the German Green Party on the grounds that the pipeline was a controversial geopolitical deal.
Nobody knows now where the certification of the gas pipeline sits in the meanders of the proverbial EU bureaucracy. That procedure is also actively compromised by a virulent (dis)information warfare about an allegedly imminent Russian attack on Ukraine.
Germans should be grateful for a captive EU market
On top of that, the EU’s energy reserves were left half empty before the beginning of the winter. The blame game for that serious policy mistake is being tossed around from national governments to the EU Commission and back. And since neither side is willing to accept the responsibility, they are now blaming it all on Russian market manipulations, even though the EU Commission agreed that Moscow had been fully honoring its contractual obligations.
A typical European mess the Germans are using to criticize the ECB for an inflation rate half of which was made in Berlin and Brussels.
Germans also wish to blame the ECB for structural aspects of their inflation developments. Labor costs, for example, nearly doubled in Germany during the first nine months of last year from 1.5% to 2.6%, mainly on account of the soaring non-wage labor charges.
That put the German labor cost growth above the euro area average, and considerably above the Spanish (1.1%) and French (1.7%) labor cost increases.
The structural aspect of the German inflation has also been underscored by the government’s statement last week that the country needs to import each year 400,000 qualified foreign workers to tackle its demographic imbalances and labor shortages.
All that shows that Germany is getting away with unreasonable attacks on ECB’s credit policies, which are supposed to serve euro area economies with large pools of unemployed labor and considerable development needs. Germany’s stagnant domestic demand is no model for such vibrant European economies.
Germany is benefitting from those economies because the euro area and the entire EU is Berlin’s captive market for annual exports of 825 billion euros that generate half of the country’s net foreign trade income.