At the end of a comment piece I wrote last month for the Guardian website I talked about Germany’s “economic narcissism”. A lot of the comments on the piece focused on my use of the phrase, so I thought I’d try to explain in more detail what exactly I meant. By using the term, I wasn’t simply trying to say that Germany was responding to the euro crisis in a selfish way. It seems to me that, in the end, whether you think Germany is pursuing its own economic interests or the long-term interests of Europe as a whole depends to a large extent on the economic theory in which you believe. By using the term “economic narcissism” what I had in mind was something related but slightly different: the way the debate in Germany about the euro crisis is so inward-looking.

The debate about the euro in the last couple of years takes place against the background of what I think is a general tendency in Germany to what in a previous post I called “moral narcissism”. Germany tends to be somewhat inward-looking and, for obvious reasons, focuses on its own history and identity. In a sense, it is a good thing that Germany is struggling is to learn the lessons from its own past. But it can also make foreign-policy debates self-referential. Perhaps the best example of this is the debate about the Kosovo war in 1999. Although I think Germany ultimately took the right decision by agreeing to make a contribution to the NATO military intervention, the debate about it was one that seemed more about German identity after Auschwitz rather than the Balkans.

In this case, I think it means Germany tends to assume that the economic lessons of its own history are universal. In Germany the idea of an independent central bank enforcing “stability culture” is sacrosanct because it helped control inflation, create the Wirtschaftswunder, or “economic miracle”, of the 1950s and 1960s and a strong Deutschmark. But Germany is now also seeking to impose those lessons throughout the eurozone. As George Soros pointed out at the Munich Security Conference earlier this month, Germany is also attempting to impose the lessons it has learned in the last decade. Austerity and wage restraint beginning under the “red-green” government helped Germany restore competitiveness in the 2000s. But that does not mean everyone in the eurozone can do the same thing. In fact, Keynesians would argue that this leads to a deflationary spiral.

Narcissism also implies a lack of awareness of your environment. Germans tend to think that their increased competitiveness is simply the result of their own exertions and to neglect the boost that the eurozone itself has given to the German economy. In particular, as I argued in a short piece for the Canadian international affairs magazine Global Brief, the eurozone has helped Germany to dramatically increase exports. The introduction of the euro cut the cost of borrowing in peripheral countries such as Greece, which enabled them to buy German cars and submarines. At the same time, the weakness of the euro compared to the Deutschmark has made German exports to the rest of the world and especially China much more competitive than they were before 1999. But listening to the debate in Germany, you would think Germany has simply pulled itself up by its bootstraps – that’s what I meant by “economic narcissism”.