December 11, 2011
If someone has a gun and is shooting it repeatedly at another person, we might infer that the shooter wants to kill this person. In this vein, how could it never occur to analysts that the purpose of Chancellor Merkel and the ECB’s policy of austerity across Europe is to permanently weaken the power of labor across the continent?
It is hardly a secret that workers can be forced to make concessions on wages and benefits in periods of high unemployment. The power of workers will be further undermined if government supports like pensions and employment protection legislation are also removed. All of this is well-known and widely understood.
Therefore it is remarkable that the class implications of the Merkel-ECB policies never get mentioned in a NYT piece examining the contrasting approaches of Merkel and President Obama to the euro zone crisis. In fact the piece explicitly sends readers in the opposite direction, saying it is “a battle of ideas” in a quote from Almut Möller, a European Union expert at the German Council on Foreign Relations.
In fact the most obvious basis for the difference in the views between President Obama and the Merkel-ECB view is standard Keynesian story that it is in the interest of any individual business owner to have other businesses pay their workers more money. This creates more demand for her products.
In this context, President Obama would be very happy to see a prosperous Europe which would provide a stronger market for U.S. exports right now. However, Chancellor Merkel and the ECB seem more focused on keeping down their own labor costs.
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