The German establishment and the crisis in Spain

I am publishing this translation of a piece by Vicenç Navarro, originally published in Público on 7th of February, not because I think it contains anything new -anyone familiar with his work will be conscious of his constant repetition of the same themes and the same rigid terminology, making him a rather tedious writer to translate-, or because I believe in social democratic Keynesianism as a political programme, but because it illustrates precisely the kind of cross-border thinking and engagement with the populations of other countries in Europe that is utterly lacking from the Irish context. Also Germany’s role in the establishment of Spain’s fascist dictatorship, and the consequences of that, are all too easily forgotten.  It is a translation from the Spanish of the original German article written for Kulturaustausch.

The responsibility of the German establishment in the Spanish crisis

The fact that a German publication should have invited me to write an article on the policies promoted by the German government that affect Spain (among other countries), an article that will be published in a forum aimed at the German intellectual and cultural world, forces me to speak with complete frankness, since we are talking about how one country sees the other, and how this affects the public policies pursued by their governments.

Spain is currently in a deeply difficult situation, with a very high unemployment rate, which is engulfing various generations. There is enormous suffering and fear of the present and of the future among the popular classes. The high number of suicides among those who are evicted from their homes is an indicator of this suffering, which is reaching desperate levels. The public policies promoted by the financial, economic, political and media establishments in Spain consist of cutbacks and more cutbacks to public spending, including welfare spending, and making it easier for business owners to sack workers. All this sacrifice is presented as necessary in order to get the public deficit down and inspire the financial markets with confidence, thereby permitting the Spanish State to borrow money at lower interest rates than those it is paying now, and to pay off its growing public debt. The Spanish State is a poor State, with highly regressive fiscal policies, and very little redistribution. A consequence of this is that services and transfer payments from the Welfare State are very poor. Its social spending per inhabitant is one of the lowest in the Eurozone and the cuts are impoverishing it even more.

This situation is due to the huge domination the conservative forces (the heirs of the previous dictatorial state) have had over the Spanish State in the last seventy years. The banking sector, captains of industry, the Church and the Army, who were the backers of the fascist coup in 1936, have been the dominant forces during all these years in Spain, both during the dictatorship and during the democratic period. I have documented in numerous publications the major responsibility such forces have held for Spain’s social and economic development.

Whilst all this is going on, it is worth asking how German financial, industrial, media and political establishments view the situation in Spain. And let’s be frank. Reading the German press, one gets the impression that these establishments (via the broadcast media they control, which are many) see the Spanish people in a deep crisis, resulting from having spent well beyond their means. This is the kindest reading of the reality in Spain made by these German establishments. But a more frequently recurring one, which appears in the popular press is that the Spanish working class has too many rights, it is unproductive, it does not work enough and a long volley of observations in that vein that are more in the category of insults than that of credible facts. It is easy to see from empirical data that his perception is mistaken. The productivity of the Spanish worker (standardising for unit of production and productive sector) is not very different from that of the German worker. But this image is doubly offensive since apart from being untrue, it hides Germany’s responsibility in the genesis of the crisis that Spanish society finds itself in.


German responsibilities in the genesis and persistence of the crisis in Spain

In reality, the German establishment plays a large part in the situation that Spain finds itself in. Let’s start with the history. The German establishment played a key role in the victory of fascism in Spain. Without the help of Hitler, chosen by the German people, General Franco’s military coup against a democratic State would not have succeeded and the installment of a fascist dictatorship would not have taken place. The evidence for this is overwhelming, despite the arguments from revisionist historians who always resort to equal weighting, of justification and resources, between the mis-named sides on the Civil War inorder to place equal weight upon the responsibilities on both sides of the conflict. It was the German establishment that played a key role in the establishment of one of the most bloody dictatorships there has been in Europe. Even the Gestapo advisers, who acted as consultants to the dictatorship, were surprised by the force of the repression.

It was this fascist dictatorship, made possible by aid received from Nazi Germany, which is the origin of the present situation, since this regime imposed on the Spanish people implanted a productive structure and financial system that led us, when democracy arrived, into the famous property bubble, which has led Dr Merkel to criticise, rightly, the Spanish political authorities for not having prevented it. But what Dr Merkel ought to have said as well was that the German banking sector played a key role in generating and maintaining this property bubble, since it was money from the German banking sector that played a key role in developing it, obtaining enormous profits arising from it. Dr Merkel ought to have criticised the German government and the German banking sector since both collaborated in the maintenance and sustaining of the financial structure that produced the bubble and its subsequent burst. In reality, this explosion happened when the German banking sector stopped lending money to the Spanish banking sector, alarmed by the awareness and discovery that it was contaminated by the toxic products of the US banking sector.

And now, one of the causes of cuts in public spending, including welfare spending, which are brutally damaging the welfare of the population is precisely the payment of the Spanish State’s debt to the German banking sector. In reality, even the supposed help from the German authorities -through the European Commission and the European Central Bank-  to the banking sector is nothing more and nothing less than aid so that the Spanish banking sector pays the German banking sector (as was recognised by the economic adviser to Chancellor Merkel, Jürgen Donges, during the debate that took place in the German Parliament regarding the approval of this supposed financial aid to Spain.


Germany and the governance of the euro

But there is another area in which the German establishment is responsible for the suffering of the popular classes in Spain (and Greece, Portugal, Ireland and Italy) and it has to do with the excessive influence that this German establishment, particularly the financial establishment, has had in the governance of the euro. Germany is, without doubt, the country that has benefited the most from the establishment of the euro. The German State can currently obtain money as it wishes, practically without paying interest rates, and this is intimately related to the enormous difficulties that the States of the peripheral countries have in obtaining credit. Such an unequal situation has caused a large amount of capital from the peripheral countries to move to Germany, which has benefited enormously from it. These peripheral states are completely defenceless against the speculative attacks of the financial markets, and this is no mere coincidence. This is down to the enormous influence of the Bundesbank, which for many years has managed to put a stop to the purchase of public bonds of states, forcing instead that the ECB loan money to German banks and those of other European countries (including Spain) at very low interest rates, with which these banks buy the public debt of these states at scandalously high rates of interest. The German establishment press has the cheek (to put it kindly) to say that the fact that the interest rates are so high is down to the fiscal indiscipline of the Spanish people, whose underfunded welfare state is being cut back further and further to pay off German banks. But the German establishment benefits even more from the situation since, because they are unable to devalue their currency, these countries cannot compete with German products through monetary devaluation.

None of these facts appears in the German press, whether in the ‘respectable’ or popular press. In the latter, the message is deeply offensive and is intended so that the German worker looks upon the Greek, Portuguese, Irish or italian worker as the beneficiary of his taxes, paid so that, in the final instance, these parasites from the south of Europe continue to benefit from excessively generous levels of welfare. In fact, Dr Merkel has used very similar expressions. Once again, the German establishment is using racism to mobilise its popular classes, diverting the complaint away from the situation in which the German worker finds himself (with low wages and scant social protection) towards the foreign worker, instead of directing his justified anger toward the German establishment. In fact, one of the victims of the policies of the German establishment has been the German working class itself, since its salaries have been kept well under the level of its productivity. The famous supposed success of German exports is based on this fact.

The regressive Schroder-Merkel reforms created an enormous problem of domestic demand due to the limited purchasing power of the German working class. This allowed the German economy to have exports as its engine instead of domestic demand, a situation that harms the working class and the popular classes of all the countries in the Eurozone, since the recession would not have happened if German domestic demand had risen, which would have stimulated the European economy. What is best for the German worker would have also been what was best for the Spanish (and Greek, Portuguese, Irish and Italian) worker. What is more, such a growth in German domestic demand, besides stimulating European economic growth, would have weakened the euro somewhat (since the German balance of payments surplus would not have been so great), thus boosting competitiveness across all European countries.

German readers can see that in the power establishment in Germany, centred upon financial capital and the exports sector has a great deal of responsibility for what is happening in Europe. Needless to say its policies can count upon the complicity of the ruling elites in the peripheral Eurozone countries, who are implementing such grossly unpopular policies, destroying, in the process, the idea and concept of Europe, with the goal of saving the euro. And they are succeeding.

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