No Season for Transatlantic Blame Games
by Peter Ammon, German Ambassador to the United States
Following the recent debate on the financial crisis I sense anxiety in Europe and the United States. The dimensions of this crisis that began with the collapse of Lehman three years ago are mind-boggling. Economic textbooks no longer provide answers. There are differences in perceptions and solutions in Europe and the United States – of the problems and of each other. What works here, might not work there. We are in new territory.
On Thursday, despite a highly controversial debate across the country, German Parliament voted into law with a vast bipartisan majority a substantial reform strengthening the European Financial Stability Facility, a fund ready to provide financial assistance to Euro Area member states of up to 440 bn €. To make this possible, Germany will provide guarantees of up to 211 bn € (approx 300 bn $).
This is an enormous effort, meant to safeguard the financial stability of the euro area as a whole. These sums represent not only an outstanding show of solidarity with our neighbors – they are also proof of a continuing support of the German people for the European ideals and of its will to act. Of course, solidarity has to go hand-in-hand with solidity and responsibility on the part of those European partners that receive financial assistance. These are two sides of the same coin. Not country in the world can enter into spiralling debst forever.
We and our European neighbors have understood this and are implementing painful reforms. There is a growing consensus in Europe that debt financing or printing money will only postpone the reckoning to future generations. Or, to put it into a simple formula: you cannot fight a debt crisis with evermore debt. Today Germany is earning the fruit of being among the first to implement a strict debt reduction strategy and has anchored the goal of achieving sustainable public finances in its constitution. Its government deficit is about to fall to 1.5% of GDP this year, and Germany entered a debt brake in its constitution that immunizes the almost no-deficit strategy from political bickering and pressure groups. Sound public finances and low inflation are major pre-conditions for long lasting growth. Recent figures show Germany’s unemployment at a 20 year low. What helped Germany to improve its competitiveness and to encourage long-term growth were measures that increased the flexibility of our economy, reformed an expensive and economically burdensome social security system and encouraged investments in education, research and technology. However, such policies can pay off only in the medium and long term. But there is a simple truth: there is no short-term fix without any pain.
These are challenging times for Europe and the United States. We share values and interests like no other two partners in the world; for both of us, it is by far the most important and reliable partnership on the globe. Against popular perception, mutual direct investments and job creation across the Atlantic are surpassing by far the corresponding relationship each of us has with any partner in Asia. Enormous strength still lies in the transatlantic relationship, and it is this strength that can help us emerge from this crisis stronger than before.
Peter Ammon is German Ambassador to the United States