European Central Bank Governing Council member Ewald Nowotny rejected being portrayed as opposing Germany’s push for austerity after comments he made about the rise of the Nazis in the 1930s hit German mass media.
Nowotny, who is also governor of Austria’s central bank, had told an academic conference in Vienna on June 18 that a “single-minded” focus on austerity in Germany in the 1930s had helped bring the Nazis to power. He also said it had been on the mind of “every central banker” when the financial crisis started that the mistakes of the 1930s had to be avoided.
Germany’s most-read daily newspaper Bild yesterday reported Nowotny as having said that the strict austerity programs in Europe’s periphery, being pushed by German Chancellor Angela Merkel, are a mistake. Bild headlined its story saying Nowotny had “shocked” with his Nazi comparison.
Nowotny “hasn’t linked the current fiscal policies in Europe with the economic policy after 1929,” the Austrian central bank said in an e-mailed statement today. “The governor especially objects to being put in contradiction to the position of the Federal Republic of Germany and German Chancellor Angela Merkel,” according to the statement.
“In some countries, this crisis could be overcome in a democratic context,” Nowotny had said at the conference about the Great Depression of the 1930s. “In other countries, like Germany, like Austria, due to I would say misleading theories, a single-minded concentration on austerity policy led to mass unemployment, a breakdown of democratic systems and in the end to the catastrophe of Nazism.”
He went on to say: “I truly can say that when we had the big crisis of 2007 and 2008, it was back in the mind of everybody, all of us, every central banker, that we must avoid the mistakes of the 1930s. This is something where we really have to be aware that this is an underlying theme.”
The Nazi Party doubled its vote in the 1932 election after two years of austerity policies under Chancellor Heinrich Bruening. Bruening had raised taxes, cut welfare benefits and encouraged wage cuts, largely bypassing the parliament with the help of presidential decrees, to increase exports and help Germany meet reparation payments to the victors of World War I.
Former German Chancellor Helmut Schmidt said late last year that he was worried about Germany’s push for strict budget discipline across the euro area. He likened the policy to “disastrous” austerity measures applied by Bruening in the closing years of the Weimar Republic.
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