Germany Approves Biggest Austerity Plan Since World War II

Demonstrators carry banners and flags to protest the governments planned austerity measures in Stuttgart, Germany on June 12, 2010. /AP Demonstrators carry banners and flags to protest the government's planned austerity measures in Stuttgart, Germany on June 12, 2010. /AP

Austerity is on everyone's mind as one European government after another introduces spending cuts to try to get deficits under control and shore up the beleaguered euro currency. Austerity is the order of the day as parliaments across Europe debate how to reduce deficits and where to cut. And, that includes Europe's economic giant.

The government of German Chancellor Angela Merkel has agreed on budget cuts to bring Germany's deficit within European Union limits of three percent of GDP. Speaking at a news conference in Berlin recently, Merkel explained why it was necessary. These are difficult times, she said, "We cannot afford everything we wish for if we want to create a future."

The aim is to save nearly US$100 billion by 2014. It is being called Germany's biggest austerity plan since World War II.

In general, Europe's emphasis on austerity is driven by the current financial crisis, says political analyst Cornelius Adebahr, of the German Council on Foreign Relations. "We have seen the example of Greece, where there was no more trust in the Greek government's ability to cut down the budget, to contain the debt or to keep it under control," said Adebahr. "So there is a momentum right now that is very much driven by the markets."

The financial crisis was triggered by the Greek government's inability to pay back its loans and by the country's near default, which threatened to drag the euro and those countries using the currency with it.

Germany is a major part of the European Union bail-out plan for Greece, and while its economy is in much better shape than that of Greece, austerity is the order of the day.

And many Germans, it appears, agree. "Saving is definitely the right way to go", said a German. He warned that somebody is going to have to pay the debt back and it will be future generations. "We have to start and not postpone it again" said another man. His wife agreed. "I think everyone should do their part, including those who are better off financially," she said.

Germany has traditionally followed a fiscally conservative path and Germans are widely viewed as prudent with their money. With budget cuts on the agenda, the question now is where will they come from and will they endanger the German social safety net.

Germany and most of Europe has a broad social-welfare net -- benefits for the poor, for the unemployed, universal health care and good pensions.

Many would not want to give that up. But political analyst Adebahr says many young people do not believe they will get those same benefits in the future. "Many in the young generation do not believe in the old pension system," said Adebahr. "If you ask them whether they will receive a pension and what age, they say "I am not sure whether I will be in the position of pensioners of today."

Some benefits have already been reduced -- including jobless benefits and health care. Plus, the retirement age has been raised and many say it will continue to go up. But many Germans are adamant the austerity burden must not cut too much into their cherished welfare state.

That is as it should be says head of the Berlin stock exchange, Artur Fischer. "I want to live in a country where people have a minimum to live somewhat of a happy life," he said. "Therefore I am willing to give away, through taxes and through other means, part of my income as a person, and a lot of other people think the same. So, we have a more stable society and we do this consciously."

Strains on the social-welfare net are not new and go beyond the current financial crisis. In general, Germans want that social contract maintained and are willing to save to do so -- for themselves and future generations.

VOA News / Jun. 17, 2010 09:47 KST