Gideon Rachman of the FT has great run-down of his recent conversations with German officials and diplomats.
There is considerable impatience with the Davos-led, Lagarde-Cameron-Geithner line that Germany has to throw more money at the problem, by building a bigger firewall and rebalancing its trade. “I simply don’t understand them,” says one senior official. “This is a problem that will not solved by the ECB or bazookas or bigger firewalls. It can only be solved by growth. And the only long-term route to growth is structural reform.”
Cool. I will posit two things. First, bureaucrats, diplomats and dare-I-say even economists have never been able to fully explain where long-term growth comes from.
Second, this “simply not understanding” by a senior German official I can only describe as incredibly weak. One has to be talking about willful incomprehension when this issue has been thrashed out and explained ad nauseum over the past 18 months in the major newspapers’ op-ed pages (including the FT) and by too many celebrated/prize-winning economists to cite.
The “Lagarde-Cameron-Geithner line” is really the Lagarde-Cameron-Geithner-Putin-Sarkozy-Krugman-Eichengreen-Roubini-Sarkozy-andlotsofothersmartand/ordisinterestedpeople line. It’s basically the “everyone-except-Germany” line.
So meh. I’ll chalk that “not understanding” as a case of the cognitive dissonance of one German official – who must imagine himself serving the public and European interest on some level – having to defend a policy that is manifestly ruining the European economy, destroying the EU’s image across Europe, and is, beside that, unsustainable. It’s interesting, if depressing, that even after the thrashing at Davos the German high authorities appear so completely unreconstructed.
Lots of other good stuff in the post.