Martin Höpner, who works at the Max-Planck Institute for the Study of Societies in Cologne, recently sent me a copy of his latest paper – The German Undervaluation Regime under Bretton Woods: How Germany Became the Nightmare of the World Economy (published January 2019). He presented this research at a Makroskop workshop in Wurzburg on October 13, 2018 – I was on the same panel as him at that workshop and enjoyed some very productive conversation about these issues. It is a very interesting historical analysis of the way that the German elites (central bank, industry groups, banks, politicians, and trade unions) have collaborated since the 1950s to suppress domestic consumption and maintain the nation’s export competitiveness, even though this has undermined material prosperity for workers. The relevance of the analysis to current debates about the Eurozone and its capacity for reform are that the undervaluation regime is entrenched in Germany’s institutions, its history, its culture, and its power elites and have been that way for many decades. What the Europhile progressives, who still think reform is possible, have to show is that this entrenched position can somehow be abandoned. They have never provided any convincing argument to substantiate that hope/belief. That is why I continue to call them out as dreamers – good intentions but naive to history.

Last week (February 14, 2019), Eurostat released its latest national accounts estimates – GDP up by 0.2% and employment up by 0.3% in the euro area – which confirmed that EU growth rates have declined significantly over the course of 2018. Moreover, the December-quarter data confirmed Italy is in official recession and Germany recorded zero growth (thereby avoiding the ‘technical recession’ category after contracting by 0.2 per cent in the September-quarter). Export expenditure accounts for nearly 50 per cent of Germany’s GDP – a massive proportion. It has adopted a growth strategy based on impoverishing its own residents through flat wages growth and a sustained proportion of low-paid, precarious jobs and setting its sail on sucking out expenditure from other nations (in the form of their imports). This has been particularly damaging to the Eurozone partners but also exposes Germany to the fluctuations in world export markets. Those markets are softening for various reasons (economic and political) and, as a result, German growth has hit the wall. The solution is simple – stimulate domestic demand, push for higher wages for workers, outlaw Minijobs, and start fixing the massively degraded public infrastructure that the austerity bent has starved. Likelihood of the German government adopting that sort of responsible policy. Zero to very low. There is the problem of the Eurozone from another angle. The main economy cannot play the game properly.