Nostalgic Germans Blame the Euro for Faltering Economy | Business| Economy and finance news from a German perspective | DW | 20.06.2008
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Nostalgic Germans Blame the Euro for Faltering Economy

Trade union critics say that the social market economy is not working so well anymore for Germany. Older generations nostalgic for the D-mark that marked the post-war economic boom, blame the Euro for inflation.

D-mark notes and the new euro notes

One third of Germans want a return to the D-mark, a symbol of the 1950s economic miracle.

Sixty years ago this Friday, June 20, the allied powers introduced a new currency, the D-mark, which became the basis of social market economy that led to the Federal Republic of Germany's Wirtschaftswunder or economic miracle in the 1950s.

But the combination of free market dynamics with a wide social net that had served Germany so well in the post-war period, is “facing a deep legitimacy crisis”, said Michael Sommer, head of the Confederation of German Unions (DGB), an umbrella trade union organization in an interview with the newspaper Berliner Zeitung.

Since the middle of the 1990s, real wages have hardly gone up, with every fifth worker barely earning enough at a subsistence level, added Sommer.

“Social mobility still remains an illusion for the majority of single parents, long term unemployed and immigrant groups,” he said lashing out at big multi-national companies that put short term gains and profits ahead of a long term strategy that preserves jobs and benefits.

Euro blamed for inflation

fruit and vegetable stand, with a hand holding Euro coins

German consumers feel their euro is not stretching far enough

With massive job cuts underway at big DAX companies such as Deutsche Telekom and Siemens, as well as general cost of living increases, many Germans are feeling the pinch and blame the euro, the common EU currency introduced nearly a decade ago for inflation.

More than a third of Germans would even like to have their D-mark back, according to a representative survey by the Association of German Banks (BdB) published Friday.

When asked whether they would like to have the old national currency back to replace the euro, fully one-third of 34 respondents answered “Yes.” In January 1999, the switch to the euro for 11 EU member states took place electronically, although the notes and coins were introduced three years later.

Inflation has nothing to do with the Euro

family having a picnic in front of their Volkswagen Beetle in the 1950s

In the post-war decades, the D-mark provided a sense of economic well-being.

The main reason for wanting the deutsche mark back was the perception that the euro was responsible for rising prices, an argument that BdB rejected saying that current inflation had everything to do with higher energy and food prices and nothing to do with the euro.

The BdB also pointed out that inflation in the euro zone over the past 10 years had even remained fairly moderate.

"Since the start of currency union, inflation has, at 2 percent a year on average, been relatively limited," said BdB Chairman Manfred Weber. "In this connection, the euro is one of the most stable currencies overall.”

Weber said the currency now provided a firm basis for growth in the euro zone, which has now grown to 15 members, since the eastward expansion of the EU in 2004. Britain, which still maintains the pound sterling, is the only major EU country that has not joined the euro zone. EU leaders have just decided at their current summit in Brussels that Slovakia will become the 16th member country to introduce the euro in 2009.

Older Germans still think in terms of D-marks

Despite the BdB's confidence in the euro, nearly half of all Germans, especially elder generations who feel nostalgic for the D-mark, still calculate in the old currency, according to Frankfurt psychologist and university professor Henning Haase. Converting to D-Marks is also relatively easy since one euro was roughly two deutsche marks.

"Particularly in times of higher inflation, many people long for the return of the D-mark," Haase said, but added that that while an inflation rate of 3.1 percent is now perceived as high, inflation had

"The deutsche mark is still firmly anchored in many minds as a stable currency," he said.

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