BERLIN – There are 4,169 miles between Berlin and Washington. But on economic policy, the two capitals sometimes appear to be on different planets.
Germany has taken a tough-love, austerity-driven approach to solving Europe’s recession, pushing struggling countries to sharply cut public spending and chop their debt even as their economies slump. The United States confronted its own crisis with an $862 billion stimulus package in 2009, which brought debt levels to heights not seen since shortly after World War II but may have dulled the worst blow of its downturn.
A look at economic conditions in the G8 coutnries.
At the annual gathering of the world's top eight wealthiest nations, Europe's economic health is expected to top the agenda.
Chancellor Angela Merkel, her advisers and even much of the German opposition see Europe’s problems in starkly different terms than the Obama administration does. Merkel’s impulse — to fight debt at all costs to boost investor confidence — has been at the core of Europe’s crisis response, because industrial powerhouse Germany has been calling the shots. But she has come under heavy criticism from Americans who say her efforts are misplaced.
The differing approaches have gained renewed urgency as the crisis flares again in the euro zone, and Europe’s response will probably dominate discussions Friday at the Group of Eight summit at Camp David. With a reelection fight looming, President Obama will want to avoid the economic hit that is likely to follow if the euro zone unravels. And there is new pressure on German-led austerity from furious voters in Greece and from French President Francois Hollande, who has pushed for more economic stimulus.
But the discussion inside Germany’s borders remains starkly different from that in Washington, or even just across the Rhine in Paris, where politicians and voters are more tolerant of budget deficits and are willing to throw money at short-term problems in the belief that doing so can jump-start struggling economies, making it easier to pay off debts later on.
“The German community is a closed shop,” said Sebastian Dullien, a senior fellow at the European Council on Foreign Relations in Berlin. “They’re speaking a different language.”
Germany’s belief that the crisis stemmed from excessive government debt inspired the austerity pact signed by 25 of the European Union’s 27 countries this year, in which governments pledged to enshrine strict automatic brakes on spending into their constitutions and reduce their debt to levels so strict that not even Germany currently meets them. Those rules have many Americans worried.
Europe risks “a negative spiral of growth-killing austerity” if countries cut spending and raise taxes every time their growth falls short of targets, Treasury Secretary Timothy F. Geithner said this week.
Germans, meanwhile, look at America’s debt-financed stimulus program with disbelief and shrug off any suggestion that a similar model could be used in countries such as Spain, where joblessness has topped 24 percent, or Greece, which is in recession for the fifth straight year.
“One cannot now seriously demand taking on even more debt to solve the crisis,” said German Finance Minister Wolfgang Schaeuble in an interview with the weekly Focus magazine this month. “That would be like vowing to improve oneself, but before doing so, sinning some more.”