Once upon a time, a former World Bank colleague from Mexico asked me why European nations fight so much among themselves and still speak so many different languages. To a citizen of Mexico, this doesn’t make sense because Europeans share a common culture and history that goes back over 2000 years and are basically the same people thanks to a constant mingling of their genetic code.
But, you see, she doesn’t understand. The culture and mentality of modern-day Europeans is still very much defined by the borders of the former Roman empire along the Rhine river nearly 2000 years ago:
North and east of the Rhine live the Teutonic peoples, roughly covering modern-day Germans, Austrians, the Dutch, English, Finns, Swedes, Norwegians, and Danes. The territories south and west of the Rhine belong to the Latin peoples including modern-day France, Italy, Spain, Portugal, Greece, and the Balkan countries. While Teutons were (and still are) considered less civilized, rough, and physically and mentally hardened (barbarians), Latins are viewed as highly cultured and courteous peoples with a taste for gourmet food, fabulous wines, elegant clothes, and beautiful, musical dialects. And just like Asterix, Obelix and his village of indomitable Gauls tirelessly fight Roman occupation, modern-day Latins desperately try to resist the teutonic usurpation of their life styles. Meanwhile, the Teutons fight against what they perceive as a Latinization of their rough but highly successful economies.
The most recent fight took place at the European Central Bank (ECB) whose Italian president Draghi and the ECB board decided to cut the benchmark interest rate from 0.5% to 0.25% due to the risk of deflation looming over Southern Europe. Disregarding the fact that the deflationary conditions in the South are largely the result of the austerity and competitiveness policies imposed by the capital-rich North, the capital-surplus teutonic countries prefer rising interest rates so they can earn a higher return on their substantial savings. The final ECB vote showed a clear split between the teutonic hawks, including two Germans, an Austrian, and a Dutch board member, and the other 17 board members who voted for the cut in the benchmark interest rate.
Instead of just yielding to the majority decision, the Teutons - true to their reputation - reacted rough and nasty: Hans-Werner Sinn (popularly named Un-Sinn for non-sense), the director of the Munich-based economic research institute Ifo attacked ECB-President Draghi (who single-handedly saved the €uro), accusing him of abusing the Euro system to provide cheap credit to the Southern European countries. Un-Sinn added that these countries need higher interest rates instead so they can save more and implement needed reforms. This, he recommends to countries with unemployment rates of over 25% and close to an economic and humanitarian collapse ! To further add insult to injury, the chief economist of the “Wirtschaftswoche” called the ECB rate cut a “Diktat from a new Banca d’Italia, based in Frankfurt.”
This rhethorical diarrhea from our German 'elite' leaves me speechless, but I suddenly feel an urge to bang my head against the wall.
Fittingly, Hans-Werner Un-Sinn’s attack appeared in the popular “Bild” newspaper, a tabloid akin to the trashy National Enquirer in the U.S. or the U.K.s The Sun. Fortunately, Germany also has more sensible economists who commented that Un-Sinn’s statements would lead to a failed grade in their economics courses. Un-Sinn’s economic incompetence, however, seems to be shared in the German banking community which is constantly fretting about not just inflation, but hyperinflation in Germany ! In Q2/2013, while Germany registered a CPI of 1.6% (see table A6 of the IMF World Economic Outlook, October 2013), the banking magazine “Die Bank” published an article entitled “Hyperinflation – in a downward spiral toward currency devaluation.“
I sometimes wonder whether these people live on another planet or suffer from a case of Germanic economic mythology.
