The Role of German Social Democrats in Creating the Creditor’s Paradise

by Dirk Ehnts, Econoblog101

I have recently wondered about the political economy of social democrats in Europe and their view of the euro and its crisis. Mark Blyth, who wrote a book on austerity, has been awarded a prize by German social democrats and was invited to give a lecture. And some lecture they got.

Here is a part from the end:

Today it is a profound irony that European social democrats worry deeply, as they should, about the investor protection clauses embedded in the proposed Transatlantic Investment Treaty with the US, and yet they demand enforcement of exactly the same creditor protections on their fellow Europeans without pausing for breath for the money they “lent” to them to bail out their own banking systems’ errant lending decisions.

Something has gone badly wrong when social democracy thinks this is OK. It is not. Because it begs the fundamental question, “what are you for – if you are for this?” The German Social Democrats, for we are all the heirs of Rosa Luxemburg, today stand as the joint enforcers of a creditor’s paradise. Is that who you really want to be? Modern European history has turned many times on the choices of the SPD. This is one of those moments.

It’s great that my book has helped remind you of the poverty of these ideas. But the point is to recover your voice, not just your historical memory. Your vote share isn’t going down because you are not shadowing the CDU [christian democrats] enough. Its going down because if all you do is that, why should anyone vote for you at all?

This analysis, I am afraid, is quite correct. Social democrats in Germany has voted with Merkel and therefore austerity policies every single time. Jeroen Dijsselbloem from the Dutch social democrats (labor party) is head of the Eurogroup. Socialdemocrats have been critical to the imposition and execution of the austerity policy failures so far. They’ve been reduced to 5% in Greece in the last elections and will reduced to second largest left party – behind Podemos – in Spain if things continue without major surprises. European social democracy has a long-term problem because it cannot give any answer to the right’s policy of “there is no alternative”. It will be interesting to see whether German social democrats will be able to change their course. Personally, I have my doubts.