The German Industry and the Euro

Pubblichiamo l’articolo dell’amica Philine Schuseil, giovane ricercatrice presso Bruegel.

There seems to be a division among the representatives of German industry. While representatives of German family businesses claim for more regulatory rules and less integration for the eurozone, representatives of the DAX (Deutscher Aktien IndeX) and in particular the Federation of German industry (BDI) generally regrouping export-orientated enterprises have a different point of view and defend the common currency.

The Wirtschaftswoche writes on 1 June about the two different positions among representatives of German industries in regard to the future of the eurozone. On the one hand, principals of most DAX enterprises are generally aware of the benefits of the euro. The larger and the more export orientated the enterprise is, the clearer is its defense of the euro.  The chairman of Audi, Rupert Stadler, says “There is no alternative to the euro. Germany benefits from the monetary union so we must do everything in order to keep the single currency strong.”
On the other hand, German Family Businesses and in particular the association Die Familienunternehmen sees the future of the euro from a different point of view. Lutz Goebel, president of Die Familienunternehmen, states that “Better a miserable end than endless misery “in regard to the possible exit of Greece out of the eurozone. “The necessary consequence of the crisis must be a return to free market rules and not further centralisation in the eurozone. Europe does not need a centralised economic government but an economic system with clear regulatory principles (Ordnungpolitik).”

The Alliance of Jena, created in 2008 on the occasion of the jubilee of 60 years “Marktwirtschaft”, calls for stronger regulatory guidance in Europe instead of economic governance. They published on 21 June 2012 a call on the Frankfurter Allgemeine Zeitung with the title “An economic constitution instead of economic governance”. They denounce regulatory failures in the monetary union due to too weak monetary and fiscal policy commitments. Moreover, the monetary union was suffering from the beginning of two fundamental design flaws, namely the inclusion of Member States which do not fulfill the conditions required for membership and a non-credible regulatory framework. The first design flaw cannot be corrected anymore: while it was easy to join the eurozone, it has become now difficult to leave without significant costs and side-effects. However, the second design flaw can and must be urgently corrected and a regulatory framework should contain inter alia the following rules: all governments are obliged to balance their structural budgets modeled after the German or the Swiss debt brake and to reduce their debt by a fixed repayment schedule to a fixed maximum binding. However, neither the EU nor individual Member States should provide specific guidelines on how other democratic countries should reach this objective. Furthermore, the ECB should return to its original mandate which consists uniquely in ensuring price stability. Centralisation is not the right solution, but the mechanisms of a credible self-commitment to a European economic constitution.

Recently, the President of the BDI, Hans-Peter Keitel reacted to this position by writing a letter to the most important German companies and the Länder where he expresses his support to Angela Merkel and her EU policies. This letter is on hand of the Handelsblatt. According to the Handelsblatt, he says that the root of the current problem is the level of debt that became out of control and that “the assurance of the monetary union at the long run is an elementary interest of each of us.”.” It does not fit to the self-concept of the economy to claim actionism and audacious maneuver of the politics.”  He means by that the wish of a lot of family businesses for an exit of Greece out of the eurozone according to the Handelsblatt.
Keitel underlines the many advantages the Germans have of the single currency such as increasing German exports to the eurozone, more stable exchange rates and prices, lower interest levels and a higher “economic balance” that allows Germany to represent its interests at an international level. He stresses, according to the Handelsblatt, six points that do not allow a step back in the process of European integration including inter alia the following points: The common currency fostered Germany’s trade with the euro zone, the currency fluctuations of the Euro to the Dollar are lower than had been those of the D-Mark to the Dollar in the 1980s and 1990s, and the euro offers Germany the political weight to represent its political interests at an international level. Another point is that he German share in the global GDP is at a downward trend and Germany can only be a “Global Player” within the EU. Keitel claims for a step to further political integration in the EU. The crisis has shown that a “common currency policy needs a mutualisation of important elements of economy and finance policies.”

What are the main differences between the two positions according to the Handelsblatt?

Greek exit: An exit of Greece or another country of the eurozone is beyond question for the BDI, while the representatives of the Family Businesses claim for a Greek exit. The so-called “Berliner Erklärung”, signed by 100 middle class firms called officially for a Greek exit and also for the abolition of all additional aid for Greece.

Eurobonds: The BDI position regarding Eurobonds is not univocal. They agree with Angela Merkel in a sense that they consider the introduction of Eurobonds as a final step after a long process of integration. The Family Businesses, on the other hand, are clearly against the introduction of Eurobonds

ESM and Fiscal pact: While from the point of view of the BDI, the ESM is an appropriate mean to tackle the debt crisis, Burn-Hagen Hennerkes of Family Businesses, says that the ESM is not an appropriate mean and that it constitutes a “Black Box” due to its far reaching powers of immunity. They suggest the Bundestag deputies to not approve it. Regarding the fiscal pact, the BDI considers it as a further step towards financial stability, while the Family Businesses see the pact rather critically.

Role of the ECB: Six months ago, Keitel was still vehemently against the purchasing of government bonds on the secondary market, but this position seems to weaken given the international pressure on Germany. The Family Businesses are clearly against the purchase of bonds and any expansive monetary policy of the ECB and want the ECB to return to its original mandate.

Philine Schuseil



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