Teacher’s copy Education Program August 12, 2013 C L A S S R O O M E D I T I O N READING AND REASONING Read each article and answer the questions that follow. Why Germany Must Save the Euro: Rana Foroohar argues that while the Germans may complain about their profligate EU partners and balk at underwriting more bailouts, they need to save the euro. 1. What is Germany’s role in the euro-zone crisis? Refer to p26. Answer: It has become the underwriter of bailouts. Wealthy Germany, the only country in the rich world to enjoy higher economic growth and lower unemployment after the global financial crisis than it did before, has paid for $73 billion worth of bailouts. It has either implicitly or explicitly backed hundreds of billions more of debt restructuring and stimulus efforts by the European Central Bank. As it does not see itself as responsible for endlessly supporting fiscally imprudent neighbours, it has turned advisor and is insisting on austerity measures for the ailing economies. Its economic clout means that debt-ridden states will do its bidding and have cut their budgets. 2. What do (a) Germany’s Mittelstand firms and (b) the writer think of Germany’s insistence on austerity and why? Refer to p26. Answer: (a) Mittelstand firms (small and midsize family-owned export companies that are said to be the embodiment of social and moral values like thrift, conservatism, family orientation and long-term thinking): Their corporate values and experience* convince them that austerity is the way to go for the ailing European economies. (b) The writer: Austerity isn’t helping. When both public and private sections are cutting costs, deficit problems get worse, not better. The economies that use the euro as their currency have shrunk and will likely shrink again this year. Unemployment in the euro zone, especially young unemployment, is high. It is being exacerbated by the lack of retraining or a better social safety net in the countries that have cut budgets in an austerity drive. Social blowback – inadequate funding for programmes such as school meals, growing popularity of right-wing parties and frequent street protests and riots. *Refer to pp28-29 for Agenda 2010, successful public-private partnerships that enabled Germany to meet reform targets, and accounts of Mittelstand firms weathering years of debt crisis and recession. 3. Germany’s insistence on austerity has contributed to the country’s growing unpopularity across Europe. However, the Germans continue to argue that European nations “need to buckle down and reduce wages and benefits, slash budgets and shrink debts.” According to the writer, why is this recommendation flawed? Refer to p27. Answer: Germany had grown rich (in the 1990s) while practising austerity because other European nations had spent freely to counter the effects of it doing so. Its suppression of wages to bolster its export economy and spur growth had terrible ramifications for the rest of the euro zone. So has its low interest rate monetary policy. While it is true that free-spending European nations have to manage their public finances much better, Germany’s mercantilist economic strategy has played a part in the European debt crisis and it must now adopt an approach that will allow the current account balances between nations to equal out. This means that if the other countries cut budgets and spend less, Germany must spend more (boosting domestic consumption with major wage hikes, lowering consumption taxes or using a fiscal stimulus to boost spending, ideally on products produced by other European nations) *Germany is enjoying currency advantages of the euro but does not offer unequivocal support because it wants to avoid exposing itself to the risks or costs of further integration. 4. Even amongst the Mittelstand firms, there are those who believe that Germany should do whatever it takes to bail out the euro. Explain why Jürgen Müller, Daimler’s chief economist, supports this conclusion. Refer to p28. Answer: The euro has contributed hugely to Germany’s global competitiveness. Müller has seen Daimler’s revenues being hit by lower export sales (back to 1990s levels). He believes that major political decision-makers have focused too exclusively on austerity. He explains, “a diet can’t make you build muscles. The easiest way to fix your budgets is with growth, not just cuts.” He and the others believe Germans must increase their domestic consumption to help spur region-wide growth. *They do not support a return to the deutsche mark (as suggested on p27) as it will greatly affect the country’s economic growth. 5. On p30, the writer again expresses her preference for Germany to underwrite whatever debt restructuring and payments necessary to keep the euro zone together and shift its economic model to help economic rebalancing. However, she Permission is granted to individual teacher to reproduce this Student Worksheet for classroom use only. Reproduction by an entire school system or any other organization is strictly prohibited. Copyright © 2013 Time Asia (Hong Kong) Limited. All rights reserved. 2 C L A S S R O O M E D I T I O N acknowledges that it will be challenging. Identify the obstacles. Answer: Merkel has to keep a deft balance between being a prudent German and generous European. In particular, prudence means that Germany should not increase its debt underwriting and change its economic model. The coming general election means that a new coalition government will be elected and it is unclear whether there will be support for drastic changes even if Merkel believes that they should be made. Moreover, it is not possible to make the required financial commitments without a new European constitution that allows Brussels (the seat of the EU) the power to run the economic affairs of member nations. 6. The writer points to “a few glimmers of hope” on p31. What gives her “hope” and why does she use “glimmers” to describe them? Answer: Hope – Germany is beginning to look beyond austerity at other measures: a new plan to fund the efforts of countries to replicate Germany’s vocational training programme and use it to help reduce high youth unemployment (it is acknowledging the need for investment and not just budget cuts) and some increase in wages. Glimmers – the wage increase is not enough to make up for previous decade of slow growth; urgent policy reforms are unlikely to happen anytime soon. The Tashkeel Diaries: Chris Ballard tells the story of how Tom Gouttierre transformed Afghan youth under his charge into basketball players who understood the value of tashkeel. In the process, he came to know and love Afghanistan and its people. 7. “In the end, it’s a story about one man’s enduring influence on a country, and its influence on him. And what basketball can achieve, and what it cannot.” (p34) In addition to these broad observations, what other insights and takeaways can you derive from the article? Answers: The Gouttierres joining the Peace Corps and going to Afghanistan – when we have identified our dream/goal in life, we should act on it even if it is arduous/takes us into unfamiliar terrain. There is much we can learn in the process. Gouttierre teaching basketball and seeking advice from John Wooden – we need not be very good at something to volunteer our services. We can observe and learn as we go ago and seek advice from experts (who can be very generous with their assistance). The Afghan boys’ initial rejection of tashkeel – distrust and ethnic and social differences cannot be easily transcended. These prejudices can impede people from interacting with one another. They can blind people to talent and make them fail to acknowledge the best person for a job. The Afghan boys’ acceptance of tashkeel – through persistent effort and by creating situations where people have to collaborate, it is possible (for those who are not deeply prejudiced) to discard their preconceived notions and realise that the whole to become so much greater than the parts. Gouttierre learning Dari and immersing himself in Afghan culture and society – when we know the language well and interact with the people, we see a country/society for what it is. We can then help to fill knowledge gaps or benefit intangible ways (an illustrious career for Gouttierre). The Afghanistan-China game – sports between nations is so much more than a game. National pride and political and diplomatic repercussions cannot be ignored. The Afghans’ victory – underdogs can triumph if they are well-prepared and use strategic thinking to maximise their strengths and attack their opponents’ weaknesses. Esmael starting a team in both Afghanistan and the U.S – sports can be used as a rallying point, especially for the diaspora/displaced people who easily lose touch with their people and national identity. Rahi’s dismal – without political stability and safety, people do not have the chance to develop their talents. *Note to Teachers: Afghanistan’s descent into political chaos – students will need to read up on the country and its wars to understanding why and how that it was caught between superpowers and mired in sectarian strife. RESEARCH Read each article and complete the tasks that follow. Why German y Must Save the Euro 1. Countries participating in the global economy are easily affected by downturns in other economies. (a) Has any company or industry in your country been affected by the euro zone crises? How did they respond and were they able to withstand the repercussions? (b) Were your country’s allies or trade partners affected by the euro zone crisis? How did they respond and were they able to withstand the repercussions? (c) In the case of both (a) and (b), did your government offer assistance.