Sunday

24th Jul 2016

Italy chastises Germany for handling of euro crisis

  • Italy had strong words for the way Germany is handling the crisis (Photo: Wayne Lam (Ramius))

A German finance ministry official caused a stir at a Brussels conference by urging deficit countries to "become ants" rather than profligate "grasshoppers," in response to criticism by Italy's Prime Minister Mario Monti that Berlin is too slow in helping troubled euro-countries.

"More money is not the solution. We need to repair the lack of competitiveness in the eurozone, which is only feasible through reforms, investments in innovation and building up a stable legal framework," Thomas Steffen, a director general in the German ministry of finance said on Thursday (31 May) during the Brussels Economic Forum, a conference organised by the European Commission.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

In reply to Monti, who spoke during the same event via videolink, Steffen suggested that Italy and other southern countries are just like East Germany during the re-unification process: "What we did was we spent a lot of money, investments, built a legal framework only to learn a very simple thing: there is no button to push to create growth."

Monti during his speech acknowledged that his country has accumulated a high level of debt, which he labelled as "sins of the past", but insisted that Germany's reluctance to stop contagion from other troubled countries to Italy is driving up borrowing costs in an unfair manner.

"I know there is the argument that unless there is pressure from the markets, governments will not do the effort of structural reforms. But the more months go by with society submitted to this strong effort without seeing any objective indication from markets this is an effort worth doing, obviously there will be a backlash sooner or later," the Italian premier said.

"Germany should really reflect deeply but quickly about these aspects," he warned, or else risk having its culture of fiscal discipline undermined.

Monti also pleaded for more public investments and said the whole paradigm that state expenditure is bad under any circumstance and has to be kept in strict limits is "biased" and should be rethought.

Grasshoppers and ants

But the German official disagreed.

In his bid to illustrate the German stance on things financial, Steffen recalled a fable written by Jean de La Fontaine in the 17th century "about the grasshopper that enjoyed summer, spending a lot of money" and then having no food in winter, while the ant, "not enjoying the summer but preparing for winter, had simply the better concept in place."

"Maybe we should all become ants rather than grasshoppers," the German official said.

One French economist from Harvard University, Philippe Aghion, retorted that La Fontaine also had a fable about an oak despising the "flexibility" of the bamboo. But during a storm, the "stable" oak breaks while the bamboo resists. To which Steffen replied: "It was not German oak."

Lucio Pench, an Italian EU commission official, also pointed out an "important problem" in Steffen's metaphor: that lenders in a market economy cannot pile up food and sit on it waiting for the winter, but rather accumulate guarantees from producers or borrowing countries that they will pay back.

"So there is also a self-interest for the debtor to pay, not just a matter of solidarity," he said.

A Greek commission official, visibly disturbed by the comparison, said she would probably be called one of the "grasshoppers," but her and her fellow nationals were hard working "ants" as well.

Another economist in the audience challenged Steffen on the matter, pointing out that not all countries in Europe can run surpluses and be as competitive as Germany.

"Yes, it's true we cannot have only surplus countries. But the current processes in Germany leading to higher wages could mean that Germany will become less competitive while others are catching up. The basic point about the grasshopper was whether we should be short or long-term oriented," Steffen argued.

EU to tweak rules on Chinese 'dumping'

The EU Commission has tried to fudge the issue of whether China is a “market economy” amid efforts to protect European industry from cheap exports.

Court ruling puts Renzi bank plan in doubt

EU court ruling on bank bailouts has raised the likelihood of a political embarrassment for Renzi, months before a referendum puts his future and, potentially, Italy’s euro future on the line.

Stakeholders' Highlights

  1. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event Agenda for 2016
  2. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  3. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  4. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  5. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  6. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  7. Dialogue PlatformFethullah Gulen Calls for International Probe Into Turkey Coup Allegations
  8. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  9. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children
  10. Counter BalanceReport: Institutionalised Corruption in Romania's Third Largest Company
  11. Access NowEuropol Supports Encryption. We Can Relax Now… Right?
  12. GoogleLearn about Google's projects across Europe on Twitter @GoogleBrussels

Latest News

  1. Munich attack might not have been terrorism
  2. A very British (and Corbynite) coup
  3. Poland 'changing for the worse' for Muslims and refugees
  4. EU aims to lift visas on Turks despite purge
  5. ECB in ‘bail-out’ of scandal-tainted VW
  6. EU failed to learn lesson from Brexit, Poland says
  7. UK accord on EU workers 'crucial', France says
  8. EU and US take different lines on Turkey crackdown