At the still eye of the storm

For months now, the prospect of federal elections in Germany at the end of September have put a halt to making hard choices about the continuing Eurozone crisis. But now that the elections are near, domestic debate about policy choices is oddly muted. There seems to be a resigned acceptance in Germany that Merkel will lead the next government, and that her policies are not really open to serious challenge.

Maybe domestic contentment makes voters oblivious to the wider world – after all, unemployment in Germany is actually lower now than before the crisis. But Germany’s political choices at home can’t be separated from its role as the largest and strongest European economy. It has a massive European current account surplus that closely mirrors the deficits of the European ‘periphery’ – most of the EU’s trade takes place within the EU itself. But in the Eurozone, relative cost adjustment is heavily one-sided, requiring that all the adjustment must take place in the ‘periphery’, while Germany’s real effective exchange rate is held down.



Then again, it isn’t as if all is rosy in Germany either. Low unemployment is made possible by a tough-minded strategy of cost containment, which has give rise to new form of ‘precarious’ jobs, rising inequality, and static real living standards. Tight spending controls have resulted in an ongoing decline in investment in skills and education which threatens the sustainability of the export-led model itself. Yet the European dimension of German politics seems to have fallen entirely from sight. Since decision-making in the Eurozone now hinges almost entirely on the German government’s preferences, this matters a great deal.

So it’s quite entertaining to see the ad by the largest trade union, IG Metall (here with subtitles, courtesy of The Guardian), encouraging people to turn out and vote. It’s clearly meant as a last-ditch effort to remind people that they don’t have to sleep-walk to an inevitable electoral outcome. Whether that’s enough to energize a change of mood is probably doubtful.