Wednesday, May 25, 2005

Failed Unification

On the 18th of september, there may well be a change of the guard in Germany, the biggest economy of the Eurozone and the European Union, and suffering the symptomatic continental European disease of big welfare statism, which kills the entrepreneurial spirit in Europe.

There is a big chance Angela Merkel, the leader of the CDU-CSU, will be elected new Kanzler then. It’s not too clear to define where she stands for, but she has already protested against a possible entrance of Turkey in the EU, which is great news for Turkey, if the EU doesn’t transform into a bilateral governed purely free market zone.

Possibilities are a coalition with the liberal FDP, or a “grosse coalition” with the ruling SPD. And maybe the CDU-CSU will be even strong enough not to need a coalition partner. That the struggling Schröder will be kicked out of power, seems to be a good thing, although it cannot be said that Merkel will be able do more than his too little too late – reforms.

Consciousness still hasn’t reached the political classes on the highly competitive world that is getting shape. In the case of Germany, apart from the fact that they are also governed by the centralist Eurobureaucracy with their comitology expert groups, an aggravating factor is the unification, still not questioned anyhow in Germany. It costs lots of money to the Western-Germans, and even more to the Eastern-Germans in terms of development.

The money flows into the Eastern part of the Country. Wages weren’t allowed to differ between the West and the East. Where the rest of Eastern Europe, where profound changes have been made, although also not perfect, enjoys a strong economic growth, the once least unsuccessful communist country, isn’t following their example. They are hostaged, without even knowing, by the Western money, what creates a terrible unemployment incentive.

Decentralising economic decision making would be a first step in the right direction. But this will only work given an abolishing of the money flows. Whether the Ossi Merkel will agree on that, should be doubted.


Anonymous said...

The unification is may be now not so succesfull because it is a long process that will take some generations.

Ok, Germany suffers from socialism but the progress en the changes that Schröder wants to reach in Labor legislation are very interesting, and because of this fact Schröder looses the more traditional conservative socialist support. People don't vote against Schröder because of the good reason.

By the way: the FDF in Germany is far from a real liberal party. Maybe we may use the term liberal in the Anglo-saxian way.

Pieter Cleppe said...

Probably the transfers will diminish, as they were in the form of infrastructure money and for the Eastern Germans a profitable conversion of the East Mark to West Mark. Nevertheless Germany's big statism won't disapear in a country of so many people.

I think one of the reasons of the loss of Schröder was the awaitening for the results of the reforms, rather than the reforms itselfs. Everybody knows they are necessary. Otherwise the PDS, and not CDU, would have gained the votes of SPD.