Economic Outlook: Deja Vu in Europe - UPI.com

Online, November 18, 2010 (Newswire.com) - By ANTHONY HALL, United Press International

Germany's reaction to the Irish bank crisis sounds like deja vu all over again, which is to say it sounds like Greece revisited.

Earlier this year, when Greece's debt crisis was coming to a boil, Germany was critically and clearly the most cautious member of the European Union involved in the discussions. Critically, of course, Germany is Europe's largest economy making it hard to envision any rescue without its cooperation. Turns out, as the months of negotiations dragged on, it was reluctant cooperation at best.

Although tied with Greece by the euro, Germany was reluctant to bailout the Greek government, which had put together what were considered overly generous benefits for its citizens.

At the height of the crisis, the focus was on the negotiations. When the dust settled, the backlash became clear, as Greece and others strode up to the podium to announce that Germany's success was partly to blame for the whole mess.

The argument, in a nutshell: Germany, as as surplus-positive nation, was making so much money off of its European neighbors, the likes of Greece, Portugal and Spain were going bankrupt. It wasn't the pension funds that did Greece in. It was Germany's fault.

The focus is now on Ireland and the blame there falls to Irish banks that have lost billions of dollars and put off their day of reckoning.

Not knowing the depth of the problem, German Economic Minister Rainer Bruderle said the European Union should not "throw money from helicopters."

"You have to create confidence in institutions, in the state, in public authorities," he said, The New York Times reported.

What Bruderle left out was economic growth. Making money covers a lot of mistakes and Ireland, like Greece, is now faced with the grim task of cutting back on services and raising taxes just to afford to bail out its banks or to pay back an international loan, which may be in range of $100 billion.

Among the changes on the table is a suggestion Ireland revamp its corporate tax level, which is 12.5 percent and among the lowest in the euro zone.

Who is pressing for an increase in the corporate tax rate? Germany.

Is Germany kicking a rival when it is down? Should Ireland give up a moneymaker when it needs it most? Predictably, when the dust settles, there will be a line at the podium as the negotiations aim to put another Humpty Dumpty back on its feet.

In international markets Thursday, the Nikkei 225 index added 2.06 percent while the Shanghai composite index gained 0.94 percent. The Hang Seng index in Hong Kong rose 1.82 percent while the Sensex in India climbed 0.33 percent.

The S&P/ASX 200 in Australia gained 0.34 percent.

In midday trading in Europe, stocks were up across the board. The FTSE 100 index in Britain added 1.37 percent while the DAX 30 in Germany gained 1.41 percent. The CAC 40 in France rose 1.6 percent while the Stoxx Europe 600 gained 1.23 percent.