The emergence of Germany as Western Europe’s central economy Topic 3.2.

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  • The emergence of Germany as Western Europe’s central economy

    Alemana tenía que estar *. Debería ser penalizado, y a afectado a todo los otros. Cuando se encontraron, la política era de recuperación: 1947. Pero se he multiplicado por 10, y ha amenacé a todos EEUU incluido. No saben cómo resolver la caída del USD, la economía alemana se convertí en economía central europea. 1970- Hay políticas que lucha mejor contra la inflación y emerge otro elemente que acentúe a la credibilidad de la economía alemana. La DDR amplía sus frontera al caído del ‘’ mur deB

  • La normalización de Alemana es demasiado grande para Europa pero demasiado pequeño para el mundo- Francia había mucho problema con alemana.

    • Seguridad territorial: Francia ocupado 3 veces desde 1870.
    • Seguridad militaría: re-militarización de Alemana
    • Alemana cómo puede producir tanta que Francia: problema económica Solo Alemana pude parar a USSR. Los EEUU, quieren reconstruir los bases EEUU, tienen bases militares en todo Europa. El pueblo alemán es responsable de los crimen Nazi deben ser punido: (ocupación, división)

  • 3German trade levels were completely depressed … a direct threat to the US economy Could only be explainedbecause of Germany!

    1936 –Ultima ano normal
    o 1938–solo podían producir el 10% de producción : no maquina disponible
    1939- 1era salta colectivo: no podía afecta, invertir.
    1941- se rompe todo
    o 1947- 1/3 de la producción
    o Los alemanes son sub alimentos: espectacular cantidad de muertos. Hubido seguido así si no habría tenío la crisis de pagos. Mal diseños de la políticas noramenricana, problemas internacionales.
    o Mayo 1947 decisión que alemana tenía que producir. Ellos empesan a producir igual a los EEUU

  • What policy for Germany?

    • Defeat and punishment!
    – Occupation, division and neutralisation
    – Morgenthau Plan (Sept. 1944)  avoid any future industrial renaissance
    (Germany is our problem)
    • Occupation policies  designed to punish
    – The country completely dislocated, though productive capacity larger in 1945
    than in 1939 • Unproductive occupation
    – March ‘46  Level of Industry Plan:
    • Limits to industrial production = ½ 1938
    – But only 10% of 1936 level for machinery and machine tools
    • Level of industrial production

  • What policy for Germany?

    Unproductive occupation
    – March ‘46  Level of Industry Plan:
    • Limits to industrial production = ½ 1938
    – But only 10% of 1936 level for machinery and machine tools
    • Level of industrial production in 1947 = ⅓ 1938
    – Agricultural production
    • 1946-47 = 70% prewar level
    • 1947-48 = 58% prewar level
    • Such a policy appeared soon to be detrimental to everybody  lack of
    recovery in Germany put the whole word economy out of balance

  • The ERP implied Germany’s normalisation

    – Productive normalisation (1951)
    – Political normalisation (FRG May’49; first gov. Sep.‘49)
    • German normalisation meant a menace for France
    – Territorial security:
    • Three violations since 1870
    – Military security
    • Possible re-militarisation of Germany
    – Economic security
    • A more competitive economy
    • After summer 1947, industrial output in Germany always
    above legal targets, by 1950 surpassed French levels
    (despite French privileged access to German resources)

  • France envisaged 3 possible policy courses

    – Territorial occupation
    – Maintaining direct controls on
    German resources
    –Suspending German direct controls
    on their own – German – resources

  • And the winner is ...Robert Schuman speech of 9 May 1950

    o ROBER SCHUMAN : declaración. Transferencia de soberanía, pero qui pierde sobrenadad ¿ Alemana gaña a soberanía y la Francia gagna en pode sobre la alemana. Jean Monet : eligió para el general de Gaule para llevar a cabo el plano del primero plan economía Francesa 1944.
     Tratado de paz con Francia
     Mas sobreanidad para los dos.

  • 3 posibilidades de Francia ;

    • Ocupacion pero no es viable. (USA, Franca, no funciona)
    • Control de Alemana con mecanismo de control
    • Francia inventa a la supranacionalidad, alto autoridad commun del CECA : no reduce la importancia a la supranacionalidad. Soluciona problemas por una via nueva.

  • A long road from defeat and occupation to ruling them all

    1. Defeat and punishment! (1945-47)  ERP
    2. Quick recovery after the division of Germany required a peace settlement with France  ECSC A long road from defeat and occupation to ruling them all
    3. The German economy occupied a central position in WE trade system in the 1950s  OEEC/EPU
    4. The FRG accepted the Europeanisation of the German economy after mid-1950s  EEC

  • A long road from defeat and occupation to ruling them all

    1. The FRG put its monetary policy prestige to the service of WE after 1979  EMS
    2. DDR fusion into the FRG changed completely the terms of the game!  Maastricht Treaty (€)
    3. Germany the sick man of Europe (2000s)
    4. Since 2010 a leader without leading vocation!

  • FRG  A powerful economic engine

    FRG  A powerful economic engine
    Export sectors in all WE countries propelled by
    German demand (PPT 9/24)... in much greater extent than demand elsewhere (10/24)
    Furthermore, the German market acted as
    stabiliser when other markets declined Exports to FRG, important in GDP terms (Net 5.5%) -11/24

  • 11Exports to FRG, important in GDP termsAlan S. Milward, The European Rescue of the Nation-State, London [Routledge] 1992, p. 139.Relative importance of ERP aid and experts to FRG

    11Exports to FRG, important in GDP termsAlan S. Milward, The European Rescue of the Nation-State, London [Routledge] 1992, p. 139.Relative importance of ERP aid and experts to FRG

  • 14Automatic credit within EPU

    • Hardening of the EPU credit conditions  Proportion of gold/credit
    – 1950-52: Ratio 40% to 60% (persistent debtors were bailed out with
    direct aid from the U.S.: Greece, Turkey, and Austria)
    – 1952-54 (EPU extended two more years): 50/50%
    – August 1955 (EMA), 75% gold/25% credit but annual extension
    • Lesser benevolence towards debtors

  • WE foreign trade dynamism sustained byGerman demand- The FRG financed 70% of WE intrabloccommercial deficits via EPU-- In 1950-51 Germany was acting as a peripheral country in the2010s. US imposed discipline. (PPT13/24)

    WE foreign trade dynamism sustained byGerman demand- The FRG financed 70% of WE intrabloccommercial deficits via EPU-- In 1950-51 Germany was acting as a peripheral country in the2010s. US imposed discipline. (PPT13/24)
    Germany in the EPU/OEEC
    Wanted to move toward convertibility but
    ended up appreciating the cohesiveness
    of the European trade bloc.
    Not necessarily at any cost:
    a) Hardening of credit conditions in exchange
    for resisting British attacks on EPU
    b) Continuation of trade liberalisation
    c) European Monetary Agreement of 1955

  • The centrality of the German economyrepresented, one more time, a problem

    1. The FRG-WE relationship (so beneficial for all) was based on temporary concessions by the U.S. which by definition had to be abandoned
    2. The German economy was and desired to become again a world (not a European) economy • Germany determined to declare the convertibility of the DM  end of cooperation in WE!
    3. Politicians in WE believed that their growth (social cohesion & political stability) depended to a large extent on trade with Germany.

  • Treaty of Paris establishing the European Coal and SteelCommunity (9 April 1951)

    Treaty of Paris establishing the European Coal and SteelCommunity (9 April 1951)
    The ERP-financed OEEC/EPU helped to recover
    intra-European trade volumes very quickly
    Lack of intra-
    European trade had to
    WWII be compensated by
    i t imports from the $
    area when WE’s
    largest scarcity lied in
    its dollar reserves!

  • 15Germany is less dependent upon Western Europe compared to previously.

    15Germany is less dependent upon Western Europe compared to previously.

  • Why a customs union? What sort of c.u.?

    • Protection in common and common
    external trade policy
    – Liberal minded?
    – End to tariff disparity, but low/high tariff levels?
    – How to reduce them?
    • A High Authority (taken from the ECSC)
    with an ad hoc mandate to lower protection
    according to a pre-negotiated timetable
    – Tariff and non-tariff protection
    – Irreversible? (exceptions managed in common)

  • Doubts in Germany 2

    Doubts in Germany 2
    – Scandinavia & UK: fierce competition for German paper, non-ferrous
    metals and products industrial sectors
    – Large industrial economies (France and Italy) remained protected behind
    high tariff walls which could be very much reduced
    • Given the political decision, Erhard imposed:
    – Automatic and irreversible process of tariff reduction
    – Parallel movement toward convertibility (price control) (1955 EMA)
    – Compatibility between the European c.u. and GATT
    • The FRG accepts the Europeanization Germ

  • Could it be more ambitious? Belgium’s interest to protect its high wages: c.u. +harmonisation of wage levels?  Common market! Doubts in Germany:

    Could it be more ambitious? Belgium’s interest to protect its high wages: c.u. +harmonisation of wage levels?  Common market! Doubts in Germany:
    • Initial political pros (Adenauer)
    – European integration is good political business
    – If limited to the Six, easier negotiations
    • Initial economic cons (Erhard)
    – Any European c.u. is limitative (more so if reduced to the Six)
    – Open opposition to any social harmonization
    • Final decision determined by the German industry’s views:
    – Markets outside Europe are unstable, stability is within WEurope
    (investment decisions require stable outlets)

  • French opposition

    French opposition
    • Only interest was atomic energy: symbol of modernisation and
    grandeur
    – Frustration by Eisenhower’s Atoms for Peace’s transatlantic
    cooperation
    – Bonn accepted negotiating Euratom in exchange for Paris
    negotiating the customs union among the Six
    • Further trade liberalisation was not welcome, but which
    were the alternatives?
    – Autarky? // OEEC? France recorded the worst performance!
    // BWS? // European federation?
    – Controlled liberalisation!
    • If defined according to Frenc

  • French negotiation position

    • Social harmonization
    – Higher wages & SS costs than FRG
    – Paid holidays & shorter week hours than FRG (40h. vs. 48h.)
    – No gender discrimination as in FRG (vs. 60-65% fem./masc.)
    • … or limit the irreversibility principle
    – Impossible given German opposition but De Gaulle found
    the way to blackmail the Community in 1964/65.

  • French negotiation position

    Find satisfactory solutions to the following matters …
    • National industrial policies  no common industrial policy
    • Priority in establishing a CAP  starting in 1962
    • Special relations with former French colonies  Yes! (future
    problems with USA & UK)
    • A less-supranational institutional system than the ECSC 
    Commission (not High Authority) and Council of Ministers
    • Social harmonization
    – Higher wages & SS costs than FRG
    – Paid holidays & shorter week hours than FRG (40h. vs. 48h.)
    – No gen

  • Why is there no Common Social Policy?How large were wage differentials between France and Germany?

    Why is there no Common Social Policy?How large were wage differentials between France and Germany?
    Because of the socialf
    France
    pact component of
    the national
    reconstruction
    policies!
    Risk of convergence
    toward the highest
    wage levels to be
    determined by the
    weakest government!

  • e solution to the problem camefrom the Netherlands, why?

    Great dependence on foreign trade and very
    competitive across the board
    Chronic deficit in trade balance from 1946 to 1957
    • Great frustration with previous trade-liberalisation
    formulas
    – Discriminatory for low-tariff countries
    – Not effective in agricultural trade (including the Benelux
    arrangements).

  • 1952- Acaba del plan Marshall, oficial en 1954 que se acabó: entrada del sistema de BW

    Norteamericanos han hecho que esto funciones, crecimiento europea funciona por la discriminación de la USD. Libro: Germany’s comeback in the world market –Ludwig Erhad
    1) Discriminar a los EEUU de manera legal
    2) Alemana debe persuadir que va a funcionar
    3) Manera de discriminar a los EEUU selo BW
    a. Custum unión
    b. Free trade área

  • b. Free trade áreaLos Holandés encontraron a la solución:

    Los Holandés encontraron a la solución: tiene la capacidad de elegir a mecanismos: déficit comercial balancea más grande.  Convertibilidad: unión moneda – acorde técnico. Alemán quieren un mercado abierto: Alemana conquistan a todo los mercado exótico. Una vez que están entrado en mercado- Francia, etc., es irreversible.

  • 17• Dutch active inproposing a Europeancustoms union since1947 without success

    • Why did they receive
    attention in 1954?
    – Renewal of EPU
    • Convertibility of £,
    DM & Bf on the
    table
    • End of intra-
    European trade
    liberalization on
    OEEC lines

  • 15Germany is less dependent upon Western EuropeErhard announced in 1953 the return ofGermany to world markets!

    How can discrimination be made legal
    and permanent? • Three legal exceptions to the BW’s nondiscrimination
    principle
    – Customs union (under a series of conditions)
    – Free-trade area (under a series of conditions)
    – Special waiver
    How can discrimination be made
    attractive to Germany? It should encompass large markets, be liberalminded
    and move toward BWS with credibility

  • 1955- Alemana renuncia a mecanismos de trabajo. Conjunto de los precios europeo.

    Tratado de roma: Bélgica no quería una armonización de los salarios: política social común, Francia sí. Alemán no quiere. Alemana tiene miedo que los sindicados afectan al salario.

  • March 1957, Rome treaties(in force on 1 January 1958)

    European Economic Community (& Euratom)
    pre-establish
    timetabl:Progressi e remo al of internal tariffs
    ahed – Progressive removal – Continuation of quotas’ removal (OEEC)– Progressive establishment of a common tariff – De-liberalization outlawed
    – Progressive creation of a common commercial policy
    – Progressive removal of all restrictions to the free
    movement of goods, services, capital and labor which will not materialized until the 1990s.
    – Adoption of CAP  special treatment for agricultu

  • The EEC represented the second division of theEuropean continent from an economic point of view

    The EEC represented the second division of theEuropean continent from an economic point of view
    • ERP (1947) split the continent into West and East
    • The Treaties of Rome (1957) split the OEEC into
    – The Six (EEC – March 1957)
    – The Seven (EFTA – Jan 1960)
    – The Left Overs - Finland, Greece, Iceland and Turkey
    •Turkey and Greece associated with EEC
    •Finland and Iceland with EFTA
    • At first, EFTA and EEC competed in their respective
    liberalization processes
    • In the 1970s, a large west European-wide industrial
    free-trade area was generated
    • In the 2000s,the EU re-established a common Es-We

  • What led to the EEC? 2

    Find a way to make permanent both discrimination
    towards the $ area and the locking of the FRG into a
    western European block
    – Provide stability to the perceived sources of growth, and
    – Abort a sudden enforcement of the BW system!

  • 24•Great Britain& Denmarkjoined the ECin 1973•Free tradeEC-EFTAagreements in1973 What led to the EEC?

    • The roots of the EEC Treaty of Rome are in the nature
    of intra-European trade vigour
    • The importance of intra-European trade to sustain
    growth, social cohesion and political stability
    • The growth of intra-European trade was carried out on
    the edge of provisional agreements that could be
    suspended almost at any time
    • Trade with Germany was crucial for all but FRG aimed
    to return on to the world markets!