Merkel to blame on establishing sound budgetary policies?

Angela Merkel
“Foreign countries are to blame!” – That is how politicians tend to justify developments voters do not appreciate. From a politician point of view such a accusation is understandable in two ways: Those who are accused can’t vote (and so can’t harm the politician) and, secondly, the politician is absolving himself of responsibility. The problem with this: In most cases the accusation is wrong. It’s just political tactics, more or less clever.

German Chancellor Angela Merkel for example is accused of being responsible of weak economic growth in Europe (chart below) – currently by Italy for example. Germany should get into debt “to create a basis for economic growth”, says Mario Monti, in the run-up to the European Finance Ministers’ meeting next weekend in Milan. Sound budgetary policies to blame on weak economic growth in Europe?

GDP Q2 2014 Europe

In fact it seems for the first time in years that the german state isn’t spending more than collecting (graphic below).

Statistik: Einnahmen und Ausgaben des deutschen Staates von 1991 bis 2013 (in Milliarden Euro) | Statista

But fundamentally asked, what could be wrong if a state is just spending what comes in? Especially when you consider that democratic societies tend to live at the expense of the next generations? Some call current policy of the Federal Government a rigorous budgetary policy. But it is not. There are no savings. Everything is spent. Not to mention that Germany has to give billions just for servicing loans (55 billion Euro in 2013). And don’t forget: It was public debts that partly caused the economic and financial crisis.

So, after decades of running up debts Germany is supposed to go into new debts? Do not even think about it!

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