While the established financial press in Germany celebrates Angela Merkel for embracing her inner "Swabian housewife" and putting Germany on a path of austerity and deficit reduction, the left-leaning bloggers have been searching for a strong voice to make the argument for more stimulus. They found him: Paul Krugman, the Nobel prize-winning economist and columnist for the New York Times who has been spending time in Berlin.
Jens Berger, one of the more influential bloggers in Germany, writers on his blog: Fragen wir doch mal Paul Krugman ("Why don't we ask Paul Krugman?") and commands his readers to read the interview with Krugman in the Handelsblatt. But Berger fears that Krugman's "wise words" will fall on deaf ears in Germany ( "Krugmans weise Worte auch weiterhin ein Kampf gegen teutonische Windmühlen sind").
In the Handelsblatt inteview, Krugman sees serious problems for Europe down the road if Germany follows through on the austerity measures:
Wenn die Deutschen 80 Milliarden Euro weniger ausgeben, spürt man das auch in den Nachbarländern. Der Konsolidierungskurs Deutschlands drückt nicht nur im eigenen Land auf die Konjunktur, er bremst auch in anderen Ländern das Wachstum. Deshalb müssen insbesondere die Europäer ihre Wirtschaftspolitik untereinander abstimmen. Außerdem schwächt die Sparpolitik den Euro, was wiederum anderen Exportnationen inklusive uns Amerikanern das Leben schwermacht.
(If the Germans cut expenditures by 80 billion euros that will be felt by its neighboring countries. The consolidation program in Germany will not just have a negative impact on economic growth at home, it also slows growth in other countries. That's why it's so important that the Europeans coordinate economic policy with each other. Also, the austerity measures weaken the euro, which causes problems for other export nations including America).
Another influential economics blog, Nachdenkseiten, notes with satisfaction that Krugman's comments in the interview were greeted with outrage by the establishment economists and conservative politicians close to Angela Merkel:
Offenbar hat Krugmann ins Schwarze getroffen. Weitere, geradezu wunderbare Bestätigungen der völligen Borniertheit der deutschen Ökonomenzunft und der deutschen Politik. Gerade die Aussagen des finanzpolitische Sprecher der Unions-Fraktion im Bundestag, Leo Dautzenberg, sind in ihrer Ignoranz kaum mehr zu übertreffen.
(Evidently Krugman struck a nerve. The reaction only confirms how close-minded the clique of German economists is. Especially the remarks of Leo Dautzenberg, the conservative spokesman for the finance committee in the Bundestag are striking in their total ignorance.)
Outside of the blogosphere, Krugman's criticism of German policy was met with derision; Wirtschafts Woche called Krugman an "economics clown" (Ökonomie-Clown). Still, Krugman received strong support from none other than George Soros:
Mr Soros said Germany was treating the deeply-flawed Maastricht Treaty as it
were a “sacred text”, warning that monetary union cannot endure
for long as a narrow construct based on debt and deficit ceilings. He said
wage rises in Germany are imperative to help lift the whole eurozone,
allowing peripheral economies to claw their way out of trouble without
fighting the extra headwinds of deflation.
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