OPINION:Germany is a crucial ally for Ireland – the potential for closer economic and political co-operation is clear
GERMANY IS the problem and Germany is the solution. That is the somewhat contradictory view of commentators across Europe when considering the euro zone crisis. Often the same commentators hold both opinions, apportioning blame to the largest European economic power for the troubles we face, while expecting and demanding Germany to step in, pay the bills and make everything alright again.
Germany, therefore, is portrayed both as the whipping boy and saviour of Europe. Of course, such simplistic assessments are not accurate. From Ireland’s perspective, a more mature and realistic assessment of Germany’s intentions is desirable, the result of which can lead us towards a more constructive relationship with that state.
Throughout the ongoing euro zone crisis many countries have made grave errors, Ireland and Germany included. Reactions and responses could perhaps have been quicker and more decisive. Certain ill-fated decisions such as linking banking debt to sovereign debt ought to have been avoided.
When, on occasion, Germany gets it wrong, some see a conspiracy theory at every turn. I see a major country with an enormous burden of responsibility which is as prone to error as the rest of us, but crucially has the best interests of its citizens and the rest of Europe at heart. While not responsible for all of our problems, as some might suggest, Germany cannot be expected to solve all of our problems on her own. We need a common effort, where the best ideas and the worst can be scrutinised, and we can arrive at common solutions to the economic and currency crises for the benefit of all citizens, from the smallest member state to the largest. The potential for partnership between Ireland and Germany in our effort to solve this crisis is great. Our two countries have positive political, historical and cultural bonds, which have traditionally led to mutual respect.
Germany has always appreciated and cherished Irish culture and is one of Ireland’s main cultural export markets. Traditional Irish culture, particularly music and dance, remain extremely popular and other forms of music, literature, film and the visual arts also have quite an impact in Germany.
Berlin is a hub for many young Irish musicians and artists and last year I saw the wonderful work our Embassy there does to promote this unique selling point of our country.
Germany is one of Ireland’s most important export markets and our fourth largest trading partner. Irish food exports to Germany are particularly strong, beef and dairy products being extremely popular.
Interestingly, 11 per cent of Germans surveyed for The Irish Times opinion poll thought of Kerrygold butter when they thought of Ireland. The sight of restaurants in Berlin and other German cities boasting that their beef is guaranteed Irish strikes me as a wonderful vote of confidence in the food we produce.
Both countries have highly skilled and innovative workforces. We share a particular ability for innovation and entrepreneurship and we have similar attitudes to work.
Irish employees work hard and productively, a fact recognised and respected by the Germans. Indeed, the Irish Times poll found that a large number of Germans think we Irish work longer hours than they do themselves.
The catchphrase of this summer’s European Championships was “Angela Merkel thinks we’re at work”; so too does the rest of Germany!
We often view the worlds of work, politics and international relations similarly to our German colleagues and while we often fail to recognise this fact, the Germans do not. Therefore there is a great opportunity for more co-operation with Germany on solving the terrible economic mess that Europe finds itself in.
Germany wants Ireland to succeed, not because it needs a good news story but because there is a deep respect and recognition for the sacrifice, work and determination of the Irish people.
However, Germany can do more. There is immense untapped potential in the economic sphere. I recently called on Germany to increase wages in order to boost inflation, as one practical step to assist the struggling economies of Europe. I was immediately berated by some commentators for demanding that Germans reward themselves economically while the rest of Europe suffers pay cuts and increasing unemployment. This was to completely miss the point. Recent studies of European labour forces demonstrate clearly that German wages have been kept well below the European average for the past eight years. A decision to increase wages would bring German pay rates only into line with the rest of Europe. But crucially this would lead to an increase in disposable income for Germans to buy goods and services from other European countries.
As Europe’s largest economy with a population of more than 80 million, this could have a powerful impact on, for example, Irish SMEs, increasing exports to Germany, thus boosting our domestic economy.
Furthermore our domestic tourism market could benefit substantially from a drive towards labour inflation in Germany.
Such action could also make a greater contribution towards easing the crisis. The economic consensus is that in order to correct competitive imbalances in the euro zone, the debtor countries, particularly those in deep economic trouble, will have to reduce wages and prices relative to Germany.
Such action would allow the debtors, us included, to compete internationally. We know all too well how difficult this is as we have already gone a long way towards correcting our own economic imbalances.
In a paper for the Centre for European Policy Studies, Prof Paul De Grauwe points out that between 1997 and 2007 Germany underwent a significant internal devaluation to boost its own competitiveness, the results of which we see today. However, since 2007 there has been no internal revaluation to match economic growth. Put simply, while the German economy has grown significantly since 2007, wages and prices have not. Therefore if Germany is the economic benchmark, a German revaluation would make the debtors’ devaluation less severe, making economic competitive convergence within the euro zone easier. I believe such action must be considered as an important tool in restoring the European economy as a whole.
Sitting back and lazily lamenting German inaction or demanding that Germany solve our problems is not a workable solution to the problems we face. Germany alone is neither the problem nor the solution. However, working in concert with other European countries, Germany is certainly a hugely significant part of that solution.
In order to contribute to a European resolution to a European crisis we in Ireland need to offer solutions, engage constructively and persuade Germany, and others, where differences exist. This was demonstrated by the recent agreement on banking debt at June’s European Council meeting.
Germany is a crucial, powerful, rational and friendly ally and the potential for deeper economic ties and political co-operation is clear. The Taoiseach, the Government and I as Minister for European Affairs will pursue that path with energy in the months ahead.
Lucinda Creighton is Minister of State for European Affairs