Germany and the Global Plan

Germany was the second pillar of the global plan. Its fate became intertwined with that of the Global MInotaur while its surplus rose due to its vital space and reunification, soon the crash of 2008 would bring the flourishing German economy down with them only to be recovered with the European bank bailouts.

The German economy was growing at this time with surpluses passing that of its neighbors due to its amount of exports. This was largely in part to the european common market or what is now the European Union. (vital space). Germany became a major exporter of both consumer and capital goods with its own vital space. The key to its success was the policy of keeping growth rate below that of the rest of europe while maintaining investment at a much higher rate. This in turn fed the Minotaur while bringing prosperity to Germany.

After the collapse of the soviet union, the reunification of Germany with the rest of Europe was increasingly successful. With the implementation of the Euro there became somewhat of a competitive wage deflation, Germany promoted a strategy of restraining wage growth to a rate far below productivity growth. In 2004 Germany’s surplus rose while unemployment fell and the capital increased.

In spite of europe claiming to not be affected by the wall street crash of 2008, German banks were caught with an average leverage ratio worst than that of wall street or london's city. This was because the Euro was nothing like the dollar which was the world’s reserve currency and also though each member states  are bound by a common currency their public debts are divided separately. To battle this banks turned their losses into public debt. They begin betting on greece and the public started borrowing which increased with CDS giving the financial sector the opportunity run wild like that of Wall Street, making the economic crisis in Germany even greater.

Three lessons Varoufakis draws from the experience of Germany is that the surplus in Germany grew largely because of its exports and vital space, the reunification of Germany was successful to helping build the surplus, and the bank’s bailout in Europe was more difficult than that of wall street.