The fear of a runaway inflation in Germany, and everywhere in Europe, is not justified now, while depressing demand and mass unemployment will not put the countries in trouble in a position to pay their debts.
The protracted crisis of the “poor Europeans” continues, kept alive by the “conditionality” of any decisions to help them from the other European countries, led by Germany. Germany offers no respite and no mitigation, notwithstanding the continual request coming from outside, from the USA and China to bring to an end the economic crisis and depression of Europe.
The limits imposed by Germany are often justified by the fear of repeating an event which happened in Germany around 1923, a great post-war inflation which, by the way, had no connection with the rise of Hitler to power, which happened years after, and was in fact due to the general economic depression and mass unemployment.
The fear of a runaway inflation in Germany, and everywhere in Europe, is not justified now. It is in fact an improbable event, given the instruments available today to the single States and to United Europe to control the economy. Very few people in Europe believe the Germans really fear such an event, while everybody thinks that the actual danger is, in fact, the opposite, the reduction of economic activity, a drastic fall of demand and growing unemployment in Europe.
Everybody now suspects that the Germans do not really want to help the other members of the United Europe, because they consider them unable to run a modern economy, and therefore must be punished by a father who loves them, but has, for their sake, to punish them whenever they do something wrong. Therefore, the crisis continues, and the misery of the population also continues, and increases, with unemployment, stagnation, and no perspective for the future.
Germany is probably the country that took the maximum advantage from the Union of the European States, and from the large market it created. The country had a long tradition of industry and technology, especially in chemicals and steel and large companies that would flourish in an open, wide market; and it succeeded to build up its economy to become the largest one in Europe. The merit for the Common Market is however not exclusive of Germany, as all members, even from those who did profit less, supported it.
Therefore, Germany’s economic success should not be converted into a primacy, which is what the other European countries see behind the fear of inflation, and the desire to impose to every other country a “correct " economic management. If any measure to alleviate the difficulty of the countries at risk needs to have a specific green light from Germany, a country which obsessively fears (or so it is said) a negative event which happened about a century ago go (to the point of writing it in its Constitution) and therefore needs a long time to answer any call for help, the future of the “poor” countries and people does not look good at all.
Those countries might eventually react to their difficulty by considering that the United Europe is not an alliance of equal members, and not the alliance that will work for solving of their problems, but a group of countries with a strong leader, and some weak followers. They might therefore think of moving to different sets of alliances. For example, to the old regional desire to secede from the main body of some country; or to a project to go back to the old de-valuable national currency. That would mean the failure of the main hope that was ever open to the future of Europe, as a large multicultural area, in which various countries live without having to renounce to their characteristic way of life, and mixing with the other members, without the need to obey orders they cannot reasonably obey.
The real problem is that the recipe that is proposed, or, better, ordered, to countries in difficulties is simply to reduce public expenditures, with no considerations not only of the people suffering, but also of the political repercussions. Squeezing the population is not a very good idea. It destroys many small enterprises, which would otherwise grow, and will disappear, reducing to zero the possibility of new entrepreneurs to develop to a larger and more profitable operation.
The recipe is, in fact, contradictory. “Liberalising” the economy, means really to reduce the wages and the pensions of the workers, a relevant part of the general demand. That will not only reduce the economic activity and income, but also reinforce the trend to deepen the inequality between citizens, which would eventually destroy the “flat” (as compared with the USA) European income distribution, the base of European democracy.
Depressing demand and mass unemployment will not put these countries in a position to pay their debts. So the present situation has no exit: the suffering countries will continue to have a low level of demand, and therefore will not be able to increase their production. Moreover, reducing the bank credit to the small and medium companies means reducing production, trade and income.
The answer that is often given to this question is that, if and when the workers will be earning less, and the small companies will be dead for lack of finance, some great feeling of optimism will pervade the country, and by magic the economy will become buoyant, because everybody will invest. Who will have the resources to invest does not seem to be obvious. Perhaps the same people that did not want to invest as long as the workers were organised, and able to fight for their salaries?