- Associated Press - Sunday, August 21, 2011

BERLIN — As Germany emerged from the destruction of World War II, it rebuilt its economy on a system of strong rules governing virtually every aspect of business, such as auto manufacturing and competition among regional newspapers.

Today, the German economy is Europe’s strongest. Neighbors depend on the regional powerhouse for billions of euros to cope with their staggering indebtedness. Germany is insisting that it, too, adopt strict rules before it is prepared to release its money.

Left, right and center, the vast majority of Germans and their leaders say the combination of free markets and strict competition controls was the key to their country’s economic success.

“At the root of the concept is that you put down the rules and let people have a go, but you don’t screw with the rules,” said Jackson Janes, executive director of the American Institute for Contemporary German Studies in Washington.

“That’s a very different attitude that doesn’t apply in places like Greece. It’s very difficult to get people to focus on that structure that has worked so well for the Germans.”

Germans point to their nation’s 3.6 percent growth rate last year, the strongest in Europe, that allowed them to recover swiftly from the 2009 global downturn as proof.

The belief in “Ordnungspolitik,” or “order politics,” underlies Berlin’s years of repeated demands for the European Union to force restrictions on its members in exchange for German funds to rescue neighbors no longer able to service their staggering national debts.

Those demands were on display last week when Chancellor Angela Merkel traveled to Paris armed with plans for a new EU body to enforce strict budget limits and fiscal policy, and calls for all 17 eurozone nations to follow Germany’s example and enshrine balanced budgets in their constitutions.

Such disagreements over “order politics” are viewed abroad as having hampered Europe’s response to the crisis, spawning long political battles with countries that see strict, unchanging rules as unsuited to their economies.

That squabbling has undermined investors’ faith in the eurozone’s ability to manage its members’ debt, and the euro and the Continent’s stock markets have been hit by seemingly unending turmoil.

When Greece first appealed for help in 2010, Mrs. Merkel demanded a permanent crisis resolution mechanism before Germany would agree to loosen its purse strings, ultimately delaying a bailout.

Germany came under fire for insisting that EU members agree to tougher sanctions for countries that have excessive government debt before endorsing the $157 billion bailout package.

In the end, Mrs. Merkel backed down, the aid to Greece was approved, the regulations weren’t and Germany emerged facing accusations of foot-dragging and tightfistedness.

Yet the situation continued to worsen. Within months, there was talk of Ireland and then Portugal needing aid.

In Germany, the move had been an attempt to make the package more palatable to voters who feel they repeatedly tightened their belts after the expensive unification of East and West Germany in the 1990s, and that others should do the same.

After the bailout, German tabloids howled that taxpayers’ hard-earned savings were being squandered to bail out a nation viewed as indulgent and lazy. The media were flooded with stories of Greek tax-dodging and corruption.

“Germans are a very disciplined people. This characteristic has also made us masters of export in the global economy,” said Peter Walschburger, a professor at Berlin’s Free University who specializes in the psychology of economics. “The Greeks, by contrast are governed more by emotion and impulse.”

Some 90 percent of Germans say state regulation is needed to govern large financial institutes such as banks and big businesses, according to the 2010 Pew Global Attitudes survey. Last year, Germany’s federal debt increased 21.9 percent to $1.82 trillion, largely because of the need to bail out ailing banks.

EU countries have been patchy at best in keeping their debts below 60 percent and their deficits below 3 percent of economic output as stipulated by the Stability and Growth Pact, pushed in the 1990s by Germany’s finance minister at the time, Theo Waigel.

Germany and France later agreed to weaken the rules, inviting other countries’ profligacy.

Now, Berlin’s response has been to push for even stricter and more automatic sanctions at the EU level.

“The Germans have set up this whole concept of, here are the parameters, now go to it,” Mr. Janes said. “When they see them violated, or when they see people cheating on them, it basically makes them enforce it that much more.”

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