One poor man can hide another

Published on 19 April 2013 at 16:46

As sharp-tongued commentators might put it, “the empire is striking back”. Just when it seemed that Europe was over the Cypriot crisis, in which Germany was once again accused of imposing its will in the form of Draconian bailout packages on its southern neighbours, a European Central Bank (ECB) survey has reignited debate on the culpable negligeance of southern countries in the German press.
 According to the survey, the German population is the “poorest in Europe”, with a median net wealth lower than it is in Spain, Italy, and even in Greece and Cyprus.

It was more than enough for Spiegel to lead with a headline on “The lie of poverty. How crisis stricken European countries are hiding fortunes,” which was accompanied by an image of an old man astride a donkey, scattering banknotes on the breeze. “Is the rescue of the euro equitable, when people in countries receiving aid are richer than the citizens of donor countries?” wondered the weekly, adding that “a debate on how the burden should be shared is long overdue”.

While playing a part in the war of clichés that has been complacently waged in both northern and southern countries, Spiegel also raised a crucial question: will Germany back away from the mechanisms that have been established in the eurozone? However, this question is based on a mistaken perception. True, Germany is paying more than its partners to bring liquidity to countries in crisis, but it is not alone in footing the bill, and the amount it is paying is not disproportionate.

Member states’ contributions to bailouts and the European Stability Mechanism are determined on the basis of population size and national wealth. As it happens, Germany is both the most populous and the wealthiest country in the EU, so it is reasonable that it should contribute more, but in a proportionate manner, to the solidarity funding that has been established since 2010.

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However, this solidarity — more coldly dubbed a "union of transfers" — does not sit particularly well in Germany. There is widespread sentiment that European treaties (which have been largely circumvented) should be respected, and the argument is very much alive that the wages of those who make the effort to respect the rules should not be used to compensate poorly managed (southern) states who mishandle their finances.

This argument reaches its simplest conclusion in the Alternative for Germany, a new political party advocating an exit from the euro, which will weigh heavily on next September’s elections.

Now the ECB has added grist to the mill by claiming that Germany, the most ardent exponent of austerity and the country asked to dig deepest, also has the poorest population. However, the method used by the survey has been contested, because it focuses on wealth rather than income.

In fact, it also reveals — much less surprisingly — that the figures for both median and average income are higher in Germany than they are in most other European states. All of this goes to show that Germans simply manage their wealth differently, and that they are less likely to be homeowners than their counterparts elsewhere in the EU.

The big picture is of a Europe divided into countries that are prosperous and those that are experiencing serious difficulties; between countries where vast numbers are out of work and those where unemployment has been contained; between countries marked by youth emigration and those that are destinations for young migrants; and between countries where median wealth is high but incomes are low and those where goods and services are still accessible to most of the population.

Should we also add a division between virtuous and non-virtuous countries to this list? Not on the basis of the moralising comment that has been voiced in the north. But from the point of view of the distribution of wealth, and the drive to combat corruption and governmental inefficiency, the distinction should be the subject of a debate for both the north and the south.

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