Time to understand Germany

It was a surprise to hear Mervyn King appear on BBC Radio 4’s documentary series on Germany: Memories of a Nation. The former Bank of England governor is well known for his passionate support for Aston Villa FC and his interest in cricket but not his German expertise.

However, on closer inspection it made sense. King was appearing on an episode focused on Notgeld (emergency money) that discussed Germany’s hyperinflation of the early 1920s. His job was to explain how a vicious circle can develop when governments attempt to finance their budget deficit by printing ever more money. That was certainly the case in the early years of Germany’s Weimar republic when prices ended up doubling every three and a half days. With the national currency, the papiermark, rapidly becoming worthless many local institutions started creating Notgeld as an alternative.

Although that turmoil was almost a century ago it still has important echoes for today. The former governor explained how the fear of monetary instability underpins contemporary German economic policy and indeed that of the European Central Bank. In his view such anxiety should be understood as a reaction to the financial disaster of the Weimar republic.

Although King’s observation is accurate it does not tell the whole story. From a post-War German perspective the economic dislocation of the 1920s is seen as the backdrop to the rise of Nazism. Therefore the new federal state designed economic institutions to be insulated from what it saw as excessive political pressure. That explains why the German authorities set so much store by the independence of the central bank, the Deutsche Bundesbank, and still insist on the ECB’s autonomy from government.

In any case King is not the only Brit suddenly showing an interest in Germany. A recent story in Der Spiegel, a German weekly newsmagazine, made headline news in Britain when it suggested that Angela Merkel, the German chancellor, would not accept the government’s demand for an upper limit on immigration from EU member states. It quoted unnamed “Berlin sources” as saying “that would be that” if Britain took such a stance.

Leaving aside the topic of immigration itself it is striking that Germany’s views are being taken so seriously in Britain. Gradually, almost unnoticed, German’s stance on financial, economic and political issues has gradually become viewed as significant.

This growing sense of Germany’s importance, at least among Britain’s elites, helps explain why there is an increasing interest in the country. The BBC Radio 4 documentary series on Germany and the associated British Museum exhibition are among several high profile manifestations. No doubt this year’s two big anniversaries have helped increase interest – its 100 years since the outbreak of the first world war and 300 years since the Hanoverian succession – but they are not the whole story.

Let us hope that this renewed interest in Germany is not confined to either the economic and financial sphere or the horrors of the Holocaust. There is much to be celebrated in the best of Germany culture including its art, music and literature.

At is happens German culture is something Mervyn King seems to have some appreciation of after all. He reportedly received a replica bust of Johann von Goethe, widely revered as the country’s greatest literary figure, when he retired as governor.

Understanding Germany is central to understanding Europe and indeed the world. Its history exemplifies both the best and the worst that humanity has to offer.

This blog post was first published yesterday on Fundweb.