Economists do battle over Merkel’s policy

German economists are increasingly outspoken on the issue of Chancellor Angela Merkel’s policies. Starting on July 5, they have been launching appeals and counter-appeals to condemn or express support for her handling of the euro crisis.

The first salvo was fired by the highly influential President of the Ifo Institute of Economic Research in Munich, Hans-Werner Sinn. According to Spiegel-Online, Sinn, who is convinced that bailing out European countries in difficulty is against Germany’s interests, has organised a petition signed by 170 economists who urge their “fellow citizens” and the country’s parliament to put a stop to a “dangerous” policy and avoid a banking union.

According to the signatories, the banking union will force “solid countries” like Germany to take on increasing levels of risk to help out their indebted partners.

Economists close to Germany’s employers and unions were quick to respond, arguing that their colleagues petition was both “dangerous” and unfounded. In particular, they insist on one point in their defence of the Chancellor’s policy: the European Stability Mechanism (ESM), which is set to come on-stream this month, will not directly finance crisis-stricken banks until the appropriate European supervisory authorities have been established.