Does Germany hurt or help Europe?

Germany receives praise and condemnation for being the only winner in Europe. Regardless, Germany will have to play a leading role in Europe, three German journalists said at a symposium in Tokyo.

One of the three argued German strength comes from diligence and will definitely work positively for Europe. The second explained Germany’s energy policy, which is shifting toward renewable energy away from nuclear power. The third argued that for the sake of Europe, Germany and France should work together to lead it.

The three journalists were guest speakers at the symposium, titled “Germany in Europe Today,” organized by the Keizai Koho Center in Tokyo on Dec. 2.

German strength

The first speaker Sascha Quaiser, manager of the economic news department of Deutsche Welle broadcasting company, kicked off his presentation, “Strength in German exports: Are other countries being sacrificed for growth?”, by introducing criticism of Germany for causing an imbalance in Europe.

“The euro is a currency used in 17 European countries, but it is obvious that the strength of each country’s economy is different. Interest rates are high in Northern Europe, but they need to be low to stimulate the economies of Southern Europe,” Quaiser said.

Then the question arises: Does Germany export too much?

He introduced a 35-page report by the U.S. Department of the Treasury in October. He quoted the report, which said Germany’s weak domestic demand, anemic economic growth and overreliance on exports prevent Europe from maintaining a balance while other European countries are enduring pressure.

Indeed, the German economy’s reliance on exports has surged in the past 20 years, from 18.9 percent of GDP to 41.5 percent currently, he said. The European Union accounts for about 57 percent of German exports.

“Exports, such as Baumkuchen cake and Meissen tableware, have supported the German economy,” he said.

But Germany is criticized for its excessive trade surplus. Quaiser mentioned the country records about a ¥2.8 trillion trade surplus a month.

The EU may even impose penalties on Germany because its surplus has exceeded 6 percent of GDP, the standard set by the EU, every year since 2006. The fine would be 0.1 percent of GDP, or several billion euros.

However, Quaiser disagreed that Germany hurts the European and world economies.

He argued a quarter of products made in Germany are effectively supplied from outside the country as they use a lot of imported components, contributing to the economies of foreign countries.

A Porsche, worth about ¥11 million, has about two-thirds of its parts made outside Germany. Also, 45 percent of Porsches in Germany were made outside the country, he said.

He also mentioned German products are high quality and demand is strong even though prices are also high.

The New York Times proposed measures to increase domestic demand in Germany, which include encouraging investment, cutting taxes for low-income earners and taking countermeasures against the aging society, such as increasing the number of nursery schools. All of them are good proposals, but it is an exaggeration to say increasing domestic demand is an obligation, he said.

“They are telling us to borrow and spend more money. That’s too much to ask.”

In justifying his position, he said Germany has gradually recovered its competitiveness in the past 10 years, from the point where it was called the “sick man of Europe.” The country has gradually been increasing productivity, he said.

“We are like a good student. The criticism we are facing is like telling us not to study and to be weak.”

Another point he made is that a weak Germany does not mean a strong Europe.

Germany has been increasing imports to a greater degree than exports, meaning Germany is trying to strike a balance.

Last, he expressed his optimistic view that more money will be spent on domestic investment and workers’ salaries, and Greece, Spain and Portugal look as if they will work their way out of recession.

“Imbalance is inevitable in the global economy,” he said.

Say no to nuclear power

The second speaker, Dana Heide, an editor in charge of corporate and market news at the Handelsblatt daily business paper, made a presentation titled “The German energy transition.” She started by quoting German Chancellor Angela Merkel, “Fukushima changed my opinion about nuclear energy.”

“March 11 (in 2011) did not only change Japan. It changed Germany as well,” she said. Following the nuclear disaster in Fukushima, the country temporarily shut down some old nuclear plants and suspended plans to extend the life of others. Currently, all 16 nuclear plants in Germany are suspended, four of which will never resume operations, she said.

In fact, the shifting of energy policy has been a long, ongoing process in Germany, she said.

In 1986 after the Chernobyl disaster, criticism of nuclear power increased, and people were afraid of radiation and stopped children from playing outside even though Ukraine is a long way away, she said.

In 2000, Germany enforced a law to promote renewable energy, especially solar power, and stop building new nuclear power plants.

After the Fukushima disaster, the German government decided to close all its nuclear plants by 2022. The government also aims to increase reliance on renewable energy to 60 percent of energy demand by 2050. To achieve the goal, the government has decided to pay a lot of money for electricity from solar power generation operators.

Solar power generation technology has advanced rapidly and the profit margin for operators has surged, resulting in a reduction of the price for which the government purchases solar-generated electricity from 50 cents per kilowatt to 43 cents in 2008, she said.

As it stands now, coal produces 45 percent of the energy in Germany. Renewable energy accounts for 23 percent, of which wind power is 8 percent and solar power 5 percent.

Despite the government’s push, the prospects for renewable energy are not entirely rosy. There are two challenges: instability of electricity supplies and high electricity prices.

Dissemination of wind and solar plants is uneven in Germany, with many wind plants located in the north and many solar plants in the south. That means efficient transportation of electricity is necessary. For example, transportation from north to south will be necessary on cloudy and windy days.

Electricity prices have risen because renewable power generation costs money. But the new coalition government is trying to keep electricity prices down, Heide said.

The bright side is that companies have business opportunities in efficiently generating power and transporting it from where it is unnecessary to where it is necessary.

For example, there will be opportunities in transforming leftover electricity into a storable form. As use of electric vehicles spreads, large-capacity batteries will be needed.

Major electricity-generating equipment makers such as General Electric Co. and Siemens AG are constantly working on maximizing energy efficiency. They are creating networks of thermal power and renewable energy power plants to achieve stable power supplies, she said.

“German people generally support shifting energy policy,” she said.

French partnership

Reymer Kluver, a senior writer on diplomacy for Suddeutsche Zeitung (South German Newspaper,) made a presentation titled “Arrogant? Dominant? Authoritarian? How Germany is perceived in Europe — and what the new governing coalition in Berlin will have to do about it.”

He first introduced many different opinions about the EU and Germany.

“Germany may not be a very kind country for Europe. Germany is located at the center of Europe, but opinion on Germany’s place in the EU is split,” he said.

“Some say Germany helps stabilize the EU and is essential for the EU, and others say the EU would be better without Germany.”

While the sovereign and banking crises are not over, faith in the EU is under scrutiny. Some countries in Europe are seeing anti-EU movements.

Germany is not an exception. In a recent election, 5 percent of German nationals voted for an anti-Euro party, whose manifesto is to get Germany out of the eurozone.

Kluver introduced an online poll by Britain’s Guardian newspaper and other major European papers before the September general election on how people view the German leadership. As many as 7,000 people responded in just a few hours, indicating the German election grabbed a great deal of attention in Europe.

He quoted the poll results, saying, “Germans are perceived as arrogant, dominant and authoritarian. They, however, are also perceived as essential to Europe.” People call for strong leadership from Germany, the poll shows.

Southern countries in Europe tend to be hard on Germany. Especially Spain thinks Germany is acting not to help the EU but to be successful by itself, the poll suggests. The fact is that lots of cheap labor went to Germany during the recent recession.

“In summary of the poll results, I came to the conclusion that the European economic crisis has worked in Germany’s favor,” Kluver said.

“Even France is facing increasing unemployment. Greece is saying Germany is looking to profit at the expense of other countries. Now I would say this is the core of the problem with regard to Germany,” he said.

Critics say Germany took advantage of other countries in order to make the EU strong politically and economically. Meanwhile, supporters say Germany is making other EU member states better by imposing harsh austerity measures.

Then what should the new government do? Merkel was sworn in for a third term as chancellor Dec. 17.

Kluver quoted German President Joachim Gauck as saying, “Germany should not impose anything on other countries. Germany should learn from history and not do such a thing. We should be humble.”

Gauck’s remark is a reaction to general concern that Germany is becoming too powerful.

Meanwhile, some European countries expect Germany to play a leading role in Europe.

Kluver quoted the foreign minister of Poland as saying, “We are not afraid of Germany’s power. But we are afraid of Germany not doing anything.”

Kluver then came up with the proposal: Work with France.

“Germany and France have always been the center of Europe historically. We should work together and that is the only way,” he said. “Nobody said it’s easy. But we have no choice. We learned from hundreds of years of history.”

Merkel and French President Francois Hollande also discussed collaboration and having a common government inside the EU. The two European powers must coordinate the interests of member states, Kluver said.

He also proposed Germany should pay attention to social welfare in Europe. By doing so, criticism against Germany may weaken and Europe may become stabilized, he said.

The EU should have common unemployment insurance, he proposed. He also said Germany needs to work to make every member state strong.

Is denuclearization possible?

After the presentations by the three German journalists, Shin Nimura, a commentator of NHK Japanese public broadcaster, moderated a question and answer session.

Nimura asked if Germany can really denuclearize its power generation.

Heide said “yes” clearly. German nationals support the idea even if electricity prices should go up, she said.

She added, though, corporations may oppose it, and thus the government may have to cap the price. Such measures are essential especially because government subsidies for renewable energy are decreasing.

Even large power companies have difficulty controlling electricity prices now and thus need partners, she said.

“I think denuclearization is inevitable. If Germany cannot do it, nobody can, and thus we must do it,” she said.

In the second question, Nimura asked if economic growth will continue in Germany. Quaiser said the fact that Merkel will remain as chancellor means people got used to reforms and thus growth will continue. The German economy is expected to grow 1.5 percent next year, interest rates are low and people’s momentum is high, he said.

Quaiser praised Merkel for her ability to satisfy voters. He said low-income workers in the services industry will be better off.

The moderator then passed a microphone to the audience for questions.

One of the audience pointed out that a poll suggests Germans are optimistic about their economy while the French are pessimistic. He then asked if Germany-France collaboration is realistic.

Kluver confirmed the questioner’s remark that France is not in as good a shape as Germany. But the two countries share the sense of crisis that Europe has two major challenges — reducing government debt, and narrowing the gap between poor and wealthy countries in the region.

“The two countries realize the two points are the most important to bring success to the EU. After all, there is no alternative to Germany and France working together,” he said.

Another question was how Germany deals with the issue of its decreasing birthrate. Japan’s birthrate is 1.36, which is similar to the level in Germany, while France has 1.99, the questioner said.

Quaiser praised France for being successful in encouraging mothers to return to work after maternity leave, which is not the case in Germany. Arguments in Germany are to give financial incentives to mothers and increase the number of nursery schools. But there is no clear solution, he said.