Is Germany falling prey to the eurocrisis?

Signs emerge that the German economy is faltering

After months of Germany playing reluctant parent to Europe through its financial woes, there are emerging signs that the German economy may be taking a hit itself.

Business Insider has reported that the latest manufacturing Purchasing Manager's Index (PMI), which measures major orders of goods and services by firms in manufacturing and non-manufacturing industries in the private sector, is showing a 36 month low, having fallen by 1.6 per cent this month.

This fall in Germany's PMI measure has been accompanied by an increase in the Spanish Exchange Traded Fund (ETF), the EWP against the German ETF, the EWG. These measures show that Spain's EWP has increased by 1 per cent whilst Germany's has fallen by 1 per cent.

Joe Weisenthal also points out that the Ifo Business Climate Index, a key measure of business confidence in the country, fell:

The Index fell to 105.3, below the 105.6 that was expected, and well below last month's 106.9.

Weisenthal explained this data as showing:

First of all, Germany's economy, as we've been writing about is cracking (finally) as all of its export markets are deteriorating.

More importantly, there's a growing sense that Germany is going to be on the hook, in some way or another, for the debts of its peers.

So even if the economy deteriorates, the Spanish market benefits from the fact that it may not go completely bust.

With the German economy begining to falter, he offers one final note of optimism:

An optimist might say that this is the best thing that could happen to Europe. After all, until Germany's economy weakens, it really has no incentive to see any kind of change, let alone economic stimulus, in Europe.

That said, Matt Yglesias at Slate has doubts:

The fact that a nation specializing in capital goods exports is vulnerable to shocks from abroad was eminently predictable so I'm not super-keen on the theory that German prosperity accounts for its political class' attitude toward the situation.

However the German public responds to the slow-down in its economy, these signs suggest that they may not be in a position to act as sole parent to Europe for much longer.

The German economy falters. Photograph: Getty Image

Helen Robb reads PPE at Oxford University where she is deputy editor of ISIS magazine.

Getty
Show Hide image

By refusing to stand down, Jeremy Corbyn has betrayed the British working classes

The most successful Labour politicians of the last decades brought to politics not only a burning desire to improve the lot of the working classes but also an understanding of how free market economies work.

Jeremy Corbyn has defended his refusal to resign the leadership of the Labour Party on the grounds that to do so would be betraying all his supporters in the country at large. But by staying on as leader of the party and hence dooming it to heavy defeat in the next general election he would be betraying the interests of the working classes this country. More years of Tory rule means more years of austerity, further cuts in public services, and perpetuation of the gross inequality of incomes. The former Chief Secretary to the Treasury, Seema Malhotra, made the same point when she told Newsnight that “We have an unelectable leader, and if we lose elections then the price of our failure is paid by the working people of this country and their families who do not have a government to stand up for them.”

Of course, in different ways, many leading figures in the Labour movement, particularly in the trade unions, have betrayed the interests of the working classes for several decades. For example, in contrast with their union counterparts in the Scandinavian countries who pressurised governments to help move workers out of declining industries into expanding sectors of the economy, many British trade union leaders adopted the opposite policy. More generally, the trade unions have played a big part in the election of Labour party leaders, like Corbyn, who were unlikely to win a parliamentary election, thereby perpetuating the rule of Tory governments dedicated to promoting the interests of the richer sections of society.

And worse still, even in opposition Corbyn failed to protect the interests of the working classes. He did this by his abysmal failure to understand the significance of Tory economic policies. For example, when the Chancellor of the Exchequer had finished presenting the last budget, in which taxes were reduced for the rich at the expense of public services that benefit everybody, especially the poor, the best John McConnell could do – presumably in agreement with Corbyn – was to stand up and mock the Chancellor for having failed to fulfill his party’s old promise to balance the budget by this year! Obviously neither he nor Corbyn understood that had the government done so the effects on working class standards of living would have been even worse. Neither of them seems to have learnt that the object of fiscal policy is to balance the economy, not the budget.

Instead, they have gone along with Tory myth about the importance of not leaving future generations with the burden of debt. They have never asked “To whom would future generations owe this debt?” To their dead ancestors? To Martians? When Cameron and his accomplices banged on about how important it was to cut public expenditures because the average household in Britain owed about £3,000, they never pointed out that this meant that the average household in Britain was a creditor to the tune of about the same amount (after allowing for net overseas lending). Instead they went along with all this balanced budget nonsense. They did not understand that balancing the budget was just the excuse needed to justify the prime objective of the Tory Party, namely to reduce public expenditures in order to be able to reduce taxes on the rich. For Corbyn and his allies to go along with an overriding objective of balancing the budget is breathtaking economic illiteracy. And the working classes have paid the price.

One left-wing member of the panel on Question Time last week complained that the interests of the working classes were ignored by “the elite”. But it is members of the elite who have been most successful in promoting the interests of the working classes. The most successful pro-working class governments since the war have all been led mainly by politicians who would be castigated for being part of the elite, such as Clement Atlee, Harold Wilson, Tony Crosland, Barbara Castle, Richard Crossman, Roy Jenkins, Denis Healey, Tony Blair, and many others too numerous to list. They brought to politics not only a burning desire to improve the lot of the working classes (from which some of them, like me, had emerged) and reduce inequality in society but also an understanding of how free market economies work and how to deal with its deficiencies. This happens to be more effective than ignorant rhetoric that can only stroke the egos and satisfy the vanity of demagogues

People of stature like those I have singled out above seem to be much more rare in politics these days. But there is surely no need to go to other extreme and persist with leaders like Jeremy Corbyn, a certain election loser, however pure his motives and principled his ambitions.

Wilfred Beckerman is an Emeritus Fellow of Balliol College, Oxford, and was, for several years in the 1970s, the economics correspondent for the New Statesman