Germany's Misguided Paradigm as Versailles Treaty Enforcer While the Brilliance of Reunification Goes Unheeded

11/28/2011 05:05 am ET | Updated Jan 27, 2012
  • Raymond J. Learsy Author, 'Ruminations on the Distortion of Oil Prices and Crony Capitalism'

Sometimes it is not just the numbers. The human factor and historical imperatives need play their role in policy formation.

Unquestionably, the financial impasse in Europe today has historical foundations. A prosperous and diligent Germany is called upon to relent its rigid financial determinants to relieve the regional economic pressures, to in effect underwrite the noble experiment of a now faltering Europe. The Germany being asked to step up and take the risks inherent to underwriting the enterprise of 'Europe' has a memory writ large of financial excess and mismanagement. The destructive inflation of the 1920's was a primary factor that brought about the societal upheaval permitting the ascent to power of the National Socialists. The rest, of course, is history.

What seems to have been overlooked was that the inflation and German economic mismanagement of that period was instigated in large measure by the rigid demands of the Versailles Treaty imposing on Germany's war torn economy reparations it was not in any position to accommodate. The printing press was, at that time, the only solution and the devastating hyperinflation that resulted has left an indelible scar on the German psyche, and in turn one can assume, plays a profound role in today's financial policies.

Yes, the printing of money was the end result, but the fundamental cause was the intransigence in the enforcement of the Versailles Treaty, an intransigence that led to Germany's economic disaster and in turn to Europe's greatest carnage with the loss of millions upon millions of lives. It was In pained reaction to these events that led to the vision and formation of today's 'Europe'. It is this grand vision of a united 'Europe' that the financial crisis is threatening to dismember. It therefore becomes more than ironic, bordering on the frightening, that history would cast Germany as the nominative 21st Century 'Versailles Treaty' enforcer, a treaty that was meant to bring to an end to a war that was meant to "end all wars"

Yet, there was/is another moment, another time, another Germany. It is the moment that the new postwar Germany undertook its greatest risk, financial and human, and achieved an extraordinary triumph on a human, historical and now economic level. The Reunification with East Germany was an act of magnanimity still not fully understood outside the borders of Germany extant. To absorb 18 million fellow Germans from an impoverished, underdeveloped landscape, and to support them freely, unstintingly to help them to reach the economic and societal norm of the their Western compatriots was an act of such magnanimity. It has been rewarded with a flourishing landscape of economic achievement and societal well being. It has turned Germany from laggard, often described as the "sick man of Europe" in the early 1990's, having undertaken the gargantuan task of unification, to becoming the economic behemoth that it is today. Bloomberg BusinessWeek in its cover article, "Best Merger Ever", would state unequivocally:

It's no exaggeration to say that the contours of the Western world as we know it today were forged by German unification. As a result, the European Continent is more peaceful and unified now than at any time in modern history.

Yes, unification had its difficult moments. Initially the introduction of the Deutschmark on a 1 to 1 basis into the newly unified States of what had been the German Democratic Republic, had a devastating impact on East German industry, making their manufactured goods suddenly unaffordable outside their borders and all the societal dislocation that entailed. Yet Germany was unstinting in its support, committing well over the equivalent of $1 trillion to the reunification project. As the former West German President Richard von Weizsacker was to declare that the rebirth of a united Germany was the "the most moving experience of our lifetimes."

The sinews and commitment of "Germany's Reunification" is the lesson that deserves to be emulated. This is the lesson that went far toward restoring the self confidence both of a German nation and a German psyche, traumatized by the earlier events of that century. This is the moment once again, in the spirit of that example, for today's Germany to step forward.

For Germany and for Europe, much more is at stake than simply the balance sheet of the European Central Bank