The Myth of a Lazy Southern Europe: Merkel's Clichés Debunked by Statistics

by Sven Böll and David Böcking

Spiegel
May 19, 2011

Chancellor Angela Merkel earlier this week strongly hinted that Southern Europeans take too much vacation and retire too early. It is an image many Germans share of Greece, Spain and Portugal. But how true are these clichés? A quick fact-check shows that one could say the same thing about Germany.

How the times have changed. Not too many years ago, Germany was the "sick man of Europe." With 5 million unemployed, its labor market and economy were considered to be ossified. Given the sheer number of stalled reforms, many had given up hope of improvement. Regardless which international comparison was used to determine the best places in the world to do business, Germany always looked bad. Its workers took too much vacation, their salaries were too high, they retired too early, there was too little incentive for the jobless to seek gainful employment and there was no Sunday shopping to spur consumerism.

Today, Germany has the world's fourth largest economy -- and business is booming. At the same time, other members of the euro zone face bankruptcy. When transfers take place within the currency zone, Germany must shoulder the greatest burdens in providing money to beleaguered member states. And because that may continue to be the case for a few more years, many Germans feel their money is seeping away to southern Europe. In response, German Chancellor Angela Merkel is pointing her finger at the recipients of this aid, admonishing them to administer urgent reforms.

Addressing the question of what the reeling crisis nations must do in return for the billions of euros in aid from Germany they need to survive, Merkel said this week: "It is also important that people in countries like Greece, Spain and Portugal are not able to retire earlier than in Germany -- that everyone exerts themselves more or less equally. That is important." Merkel also indirectly criticized southern Europeans for enjoying more vacation than others. "We can't have a common currency where some get lots of vacation time and others very little. That won't work in the long term."

In less statesman-like vocabulary, what she really meant is this: "We aren't going to give our hard-earned German money to lazy southern Europeans." The chancellor made it sound as if Germans are financing some sort of easy prosperity for these countries. While there may not be anything new in the substance of that message coming from Berlin, the tone certainly is. They are the kind of statements that appeal to voters concerned these countries might be getting a free ride at their expense. But is Merkel correct?

The answer is yes and no. It is indisputable that bankrupt countries like Greece and Portugal as well as Spain, where the danger persists that markets could lose confidence in the country, are dealing with massive economic problems. For too long now, these countries have lived beyond their means. And they accepted a loss of competetiveness for their economies as a result.

A statistic from the Cologne Institute for Economic Research (IW) shows that consumer spending and investments in the three countries in the past decade were higher than gross domestic product. If a country consumes and invests more than its actual economic output, then it will rack up foreign debt. In the medium term, that is not an advantageous position to be in -- especially if, as has happened, a considerable portion of the foreign credit is consumed and not invested. It's called living on credit.

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