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#Merkel & #EU need to learn the lessons of Germany’s own economic renewal

12 Apr
adenauer

1957 Adenauer Election Poster: No Experiments

Yesterday (Thurs April 11th) the Irish Times ran a story saying that the German chancellor Angela Merkel is facing mounting political pressure at home to demand fiscal concessions from Ireland in exchange for granting extra time to repay crisis loans.

It seems that once again Germany is insisting that it not merely have an input into EU talks and discussion, but that it have a veto on the outcome. It is the ‘he who pays the piper calls the tune’ school of political thought.  While the approach is not unfamiliar in politics, it flies totally in the face of democratic process and accountability. But even more than that, in this instance, it contradicts the history of Germany’s own economic revival and the important role played by one of Ms Merkel’s most illustrious predecessors: Konrad Adenauer.

Germany’s Wirtschaftswunder – the economic miracle of the 1950s – was based in large measure on a generous programme of debt forgiveness given to Germany by its 33 debtor countries (including Ireland). The 1953 London Agreement on German External Debts, effectively wrote off half of Germany’s total mountain of debt and gave it additional time to repay the monies it owed. These debts included war reparations from both first and second world wars, plus the massive German 1930’s debt default, which was just as significant as the 2008 European financial crisis.

The West German CDU Chancellor, Konrad Adenauer realised that there would be no growth or revival of the West German economy for as long as it had to make huge annual payment to the Allied and other powers. These hefty payments, many of which Germany was even failing to make, were draining the West German economy of the ability to rebuild itself.  He recognised that the only way to achieve growth was to get some relief from this debt burden, hence the London conference on German external debts.

Adenauer managed to convince the others sitting around the table that the only way that Germany could recover and rebuild was for them to ease the burden on it – he managed to convince them to stop doing to Germany what Germany is now doing to Ireland, Spain, Portugal, Greece and Cyprus.

Easing the burden of West Germany’s debt did not make the country lazy and profligate, quite the opposite. The Agreement, along with the Marshall Plan very quickly enabled the West German government and industry to use the resources freed up by the easing of the debt burden to generate domestic economic activity and growth.

Not only did the London Agreement write off 50% of Germany’s debt it removed the requirement that interest be paid, though did say that this proviso would be revisited in the event of German reunification. The collapse of the Wall in late 1989 triggered that proviso but it was never implemented due to Chancellor’s Kohl’s protestations that demanding such interest payments would make it almost impossible for Germany to meet the considerable costs of re-unification. So, once again, Germany’s partners allowed it to walk away from its financial commitments in the greater good.

Kenny MerkelAs we know, both Enda Kenny and the Fine Gael party is deeply proud of its strong association with the CDU and Ms Merkel via their shared membership of the centre right European grouping: The European People’s Party EPP. Indeed, they regard the linkage as so important and significant that Mr Kenny manged to include a quick visit to Berlin and photocall with the Chancellor in the first week of the February 2011 general election campaign.

Perhaps the next time An Taoiseach meets up with the Chancellor in either Dublin, Brussels or Berlin he might gently remind her that her countries economic resurgence and dominance is due, in no small part, to the fact that 33 other countries, including Ireland, had allowede Germany to ease its burdens when it mattered and that it may now be time for Germany to allow others the facility they once extended to it.