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Monday, August 13, 2012

Germany's Summer of discontent?

Over the last few weeks, a range of German policymakers have fired broadsides against further German involvement in the eurozone crisis, and against further aid to Greece in particular. Referring to September’s troika report on Greece, Michael Fuchs – the deputy parliamentary leader of Angela Merkel’s CDU party – yesterday told Handelsblatt that:
“Even if the glass is half full, that won’t be sufficient for a new aid package. Germany cannot and will not agree to that. We reached the point where the Greeks must show they are capable of delivering a shift long ago.”
Last week, Horst Seehofer, Prime Minister of Bavaria and leader of the CSU, the Bavarian sister party and coalition partner of Angela Merkel's CDU (which has been getting increasingly agitated by the eurozone bailouts), proposed a series of referenda:
"We must involve the people... First of all: on the transfer of important competences to Brussels. Secondly: on the accession of new states to the European Union. And thirdly: on German financial aid to other EU states."
In particular Seehofer cited debt pooling such as eurobonds or a debt redemption fund, adding that "with the CSU there won't be any United States of Europe".

Merkel's other coalition partner, the liberal FDP, is also stepping up its rhetoric, with its leader and deputy Chancellor, Philipp Rösler and also its leader in the Bundestag, Rainer Brüderle, saying they were reconciled with a Greek euro exit. Bavarian Economy Minister Martin Zeil has gone even further arguing that: 
"...a country needs to leave the euro, when it doesn't fulfil its duties. If necessary, two or more [countries] could leave." 
From the other side of the political spectrum, former German Finance Minister Peer Steinbrück (SDP) last month stated that:
"in certain cases, I have increasing doubts whether all countries will be able to be kept inside the eurozone (...) I can see how certain countries will be unable to close their competitiveness gaps [with Germany]"
However, the SPD have also recently publicly come out in favour of eurozone debt pooling - albeit it with strict conditionality in terms of national financial policy-making.

Otmar Issing, former chief economist of the ECB, added his voice to the chorus, saying some eurozone member states might have to leave:
 "Everything speaks in favour of saving the euro area [however] how many countries will be able to be part of it in the long term remains to be seen."
The question is whether all of this is rethoric, or the beginning of something else.


Rik said...

1. Looks clearly more opposition than before and a lot more. Also more from mainstream politicians.
2. SPD is the combination Eurobonds and democracy (asking the German people and say Merkel is doing everything in a stealthy way (but the SPD so far has supported everything she suggested, so hardly sound convincing).
3. Might be a further extension of the Constitutional provisory ruling because of the Irish E-Court case. See Handelsblatt today.
4. Also a lot of problems/opposition with the ECB possibly buying bonds.
5. Merkel is very unactive. Seen the opposition also in own ranks, I woukld expect a semi-u-turn.
6. Greece also looks to become very difficult. As said earlier Merkel might have to give something in return for further approval. And Greece is the easiest thing as it is expendable and the ESM for insyance not.
7. Also a lot more voices pro-referendum. Please note that some of the against referendum are not simply in order to avoid voters killing the thing off. Substantial part looks to be to have the Constituion stop excessive guarantees.

Rollo said...

Germany has enjoyed a 16 Billion Euro per month trade surplus with the rest of Europe, much of it financed by feckless reckless borrowing made possible by Euro membership. The German interest is to let this go on for as long as it can. When the ability to borrow more to spend more on German products wanes, the Germans will pull the plug. Greece first; Portugal and Sapin and Italy and Cyprus coming up; then France and Belgium. Curiously, though deep in the muck, Ireland has a positive balance of trade, and may survive.

Idris Francis said...

A trade policy of lending money to enable poor customers to buy one's products has never struck me as sensible, and the more obvious it becomes that the customers are bankrupt the less sense it makes.

To an extent, giving mortgages to people who could never expect to repay them made more sense than this, if only for the smart-alec bank shysters who knew that they could take their inflated salaries and bonuses and run before the whole thing collapsed - but countries necessarily have to take the long term view.

Late afternoon one Friday soon the first departure from the euro will be announced - its inevitable and has been since the day the euro was launched.


Anonymous said...

Notice it has been a long-term struggle but specifically who is pushing the EU/euro framework has always been hidden. The idea is actually quite simple--shackle the Protestant Ethic to the corpse of Catholic Europe, enlivening the corpse as it were and hobbling the great competitor to the American Empire. In the end, disintegrating the Germanic idea into a federal regime that is actually controlled from New York and London without the least endangering their own powers. No matter how long it takes, that is what the game is--wear down the opposition, if any, but push steadily until the game is won.

whoknows said...

@Idris Francis says:
"A trade policy of lending money to enable poor customers to buy one's products has never struck me as sensible, and the more obvious it becomes that the customers are bankrupt the less sense it makes."

Very sharp, I couldn't agree more.

But we need to dig a little deeper with the german trade surplusses. For the most part of the last years, german export has been repaid within the emu by the PIIGS with so called ecb target2 liabilities. The Bundesbank sits on target2 claims against the eurosystem in the amount of more then 700 billion euros.

So the PIIGS customer gets its german product, real estate or company. The german seller gets its Euro money, but the Bundesbank and therefore the german people are getting not really paid. So the PIIGS get real wealth from Germany by printing effectively euros.

So basicly Germany finances parts of its own export, and might get paid in the end. But I doubt it highly. The big german exporters are very happy with this EMU of course, but they are not Germany.

At one day in the not so far future, this whole sick Eurosystem will implode ... and will take all ecb stuff with it. Nobody will care about all the target2 claims the Bundesbank holds.