Europe: In Former East Germany, Anxious Residents Resent Paying for Europe's Problems

Germany may be Europe's most powerful economy. But its prosperity is so uneven that Poles just across the border see it differently: as a place where housing is a bargain.

With unemployment higher in Loecknitz than anywhere else in Germany, a big house on a generous parcel of land runs just $90,000, real estate agents say. That is the cost of a one-bedroom apartment in nearby Szczecin, a burgeoning Polish city of 400,000 a half-hour away.

In the past, "it was always a one-way road," with Germans moving to Poland because of the difference in prices, said Krzysztof Wojciechowski, a professor at the European University Viadrina in Frankfurt an der Oder, a city that abuts Poland. Now, he said, the situation is reversed.

Anxiety in Germany's poorer areas is part of the reason the country has been reluctant to contribute more toward European rescue programs. Many Germans in this region say the notion that they should give over more money to pay away Europe's problems misjudges their own situation. And although the more urgent problems facing countries such as Greece and Spain have prompted other European leaders to call for greater German assistance, opinion polls show that most Germans approve of Merkel's unwillingness to dip deeper into her country's treasury.

Even now, many Germans see reunification as no more than a mixed success —- a tremendously expensive undertaking that brought prosperity to a few cities but left the countryside and smaller towns such as Loecknitz depopulated and economically depressed.

For more, see In Former East Germany, Anxious Residents Resent Paying for Europe's Problems by Michael Birnbaum, June 21, 2012 at The Washington Post.

Europe: Why Does the Laziest Country in Europe Work the Most?

... the OECD's richest, most productive, most hardworking countries have some of the shortest working hours. The bottom five, according to the OECD, are Denmark, France, Norway, Germany, and the Netherlands. All are richer per capita than Greece. All are technically "lazier" if you go by hours worked.

By hours worked ...

For more, see Why Does the Laziest Country in Europe Work the Most? by Derek Thompson, May 29, 2012 at The Atlantic.

Europe: The Difference Between the U.S. And Europe in 1 Graph

The difference between the U.S. and Europe is that when the Greek economy "pulls a Mississippi" (or perhaps I should say, when Mississippi "pulls a Greece"), the EU and the U.S. have 180-degree opposite reactions. Over here, we calmly write checks to Mississippi in the form of Medicaid and unemployment insurance, no questions asked. Europe has no comparable "Peripheraid" for its weak peripheral states. Instead, it has chaos.

For more, see The Difference Between the U.S. And Europe in 1 Graph by Derek Thompson, May 8, 2012 at The Atlantic.

Europe: What History Can Explain About Greek Crisis

Oh, dear!

If Greece makes it through the current political crisis and stays in the euro zone, one useful case study is Germany's reunification, which suggests that the adjustment could take decades, not years, and involve mass emigration, billions of euros more in fiscal transfers and the rise of fringe parties in Greece as well as in the countries that have to foot the bill.

Like the former East Germany, Greece suffers from a crippling competitiveness gap and is locked into the euro. East Germans were priced out of the labor market because the value of the Deutsche mark reflected Western, not Eastern, productivity levels. About 14,000 businesses were shut down and four million jobs lost in the first five years after formal reunification, in 1990. Unemployment eventually peaked at more than 20% in 2005.

Since the fall of the Berlin Wall, in 1989, more than 2 million of the 16 million people living in the East have moved West. Long-term unemployment and wage depression bolstered xenophobic parties and the Left Party, which grew from the former East German Communist Party and hopes to reach the national government in 2013.

More than two decades later, living standards have converged, although they remain about 20% lower in the East with unemployment in the Eastern part at nearly twice the Western average.

And this was within one nation with the same language, perfect mobility and the fiscal transfers missing in the euro zone: German taxpayers financed more than €1.7 trillion, or about $2.17 trillion, at current exchange rates, with the "solidarity surcharge" to pay for modernizing the former East Germany.

But ...

... if it does not and Greece leaves the euro zone, the diplomat added, the cost could be even higher.

For more, see What History Can Explain About Greek Crisis by Katrin Bennhold, May 21, 2012 at NYTimes.com.

Europe: A Greek Exit's Impact on the U.S.

... the [U.S.] domestic economy remains vulnerable to disruptions in Europe. Roughly one-quarter of American exports go to Europe, and Americans held $1.4 trillion in the securities of euro zone companies and countries at the end of 2010, according to the most recent available federal data.

"If there is a major financial problem in Europe," Mr. Bernanke told Congress in February, "there will be so many different channels on which that will affect our financial system that I would not want to take too much comfort from" the fact that the financial system has little direct exposure to Greece.

For more, see A Greek Exit? Euro Zone May Be Ready by Binyamin Appelbaum, May 17, 2012 at NYTimes.com.