Friday, December 27, 2013

Europe and four more years of Merkel

Was haben 1914 und 2014 gemeinsam? Leider recht viel. Die aktuelle Lage der Euro-Krise erinnert fatal an die Monate vor dem Ersten Weltkrieg. Angela Merkel hat das erkannt - und handelt trotzdem falsch.

[What do 1914 and 2014 have in common? Unfortunately, quite a lot. The current situation of the euro crisis is fatally reminiscent of the months before the First World War. Angela Merkel has recognized that - and nevertheless does the wrong thing.]
That's economics journalist Wolfgang Münchau, who has been very perceptive about the euro crisis the last few years, in Zukunft der Euro-Krise: Die Gefahren des Jahres 2014 Spiegel Online 25.12.2013.

I guess that's his way of saying "Fröhe Weihnachten!" ("Merry Christmas!") to German Chancellor Angela "Frau Fritz" Merkel. Maybe I should start calling her "die Neue Fritz" to make the reference to Frederick the Great, whose nickname was Old Fritz ("der alte Fritz"), which is also in German a nickname for the Devil.

Münchau points out that two critical things necessary to make the euro a durable currency, a banking union and a fiscal union, ain't happening with Frau Neue Fritz in charge of Europe. He defines his critically pro-euro analysis as a Euro-Federalist position, and the Merkel German-nationalist position that aims to make the euro beneficial to German exports at the severe expense of southern Europe the Structural Conservative position. I sort of like the implied association with the American Federalist vs. Anti-Federalist sides in the debates over the American Constitution in the late 17th century, whether or not Münchau was intending such an implication. In today's terms, the Federalist position in the Constitutional debates was progressive and pro-democracy, the Anti-Federalist position anti-democracy and reactionary. The parallel is a nice one.

On the banking union, Münchau says rightly that the so-called banking union the EU formally agreed to a few days ago is "keine Bankenunion, sondern nur ein schlechter Witz" ("no banking union, but just a bad joke instead"). No one can say what the event will be that pushes the eurozone into a currency collapse. A Greek governmental crisis? An Italian or Spanish one? some new financial panic? But the phony banking union was a decision that keeps the euro on the fast track to doom.

But he also notes that Merkel's preferred solution, the fantasy put into the form of concrete pressure that via severe internal devaluation that countries in southern Europe will convert themselves into copies of Germany, is also not going to happen. "Beide Seiten verlieren" ("Both sides will lose"), he says, the Euro-Federalists and the Structural Conservatives/Angiebots.

In der Zwischenzeit leidet die europäische Wirtschaft an einer gefährlichen Kettenreaktion. Die Banken bauen ihre Risiken ab, indem sie weniger an Unternehmen verleihen, was wiederum die Kreditklemme in der Peripherie verstärkt. Durch die Deflation steigt der reale Wert der Schulden. Ein Schuldenschnitt ist in Griechenland - und nicht nur dort - nur noch eine Frage der Zeit. Da es dafür aber keinen institutionellen Rahmen gibt, keine rechtlichen Voraussetzungen und schon gar nicht eine politische Bereitschaft, wird man diesen Moment der Wahrheit hinauszögern und später minimieren. Dass so eine Politik am Ende explodiert, sollte dann nicht überraschen.

[Meanwhile, the European economy will suffer from a dangerous chain reaction. The banks will reduce their risks by loaning less to businesses, which will in turn intensify the credit clampdown in the periphery. Through deflation, the real value of the debt will increase. A debt haircut is in Greece - and not only there - only a question of time. That there is no institutional framework for it, no legal understandings and absolutely no political preparedness, one [i.e., Merkel's government] will delay the moment and later minimize it. No one should then be surprised if such a policy explodes in the end.]
Heckuva job, Angie, heckuva job!

At least there are no Austrian Archdukes left to assassinate.

In Münchau's view, the current situation of seeming calm in the euro crisis is just the eye of the storm.

The conclusion of the deal for Merkel's new Grand Coalition government was not cause for celebration for many Europeans. Spain's El Diario headlined, "Agreement for a government in Germany: bad news for the citizens of the eurozone" (Steffen Stierle y Christoph Mayer, Acuerdo de gobierno en Alemania: malas noticias para los ciudadanos de la eurozona 17.12.2013. Political scientists Stierle and Mayer characterize Merkel's approach to the eurozone has been characterized by "políticas económicas de austeridad y transferencias autoritarias de poder a nivel supranacional" ("economic policies of austerity and authoritarian transfers of power at the supranational level").

They explain:

Medidas como el MEDE (Mecanismo Europeo de Estabilidad) o los memorandos de entendimiento liderados por la troika están profundizando la crisis económica. Los niveles de desempleo se han disparado, los derechos laborales y los sistemas de seguridad social están siendo destruidos; aumenta la pobreza, la falta de vivienda, se colapsan los sistemas de salud y disminuye la esperanza de vida; incluso el hambre ha vuelto a Europa. Todo ello puede ser visto por los ciudadanos europeos como el resultado de las políticas de la UE promovidas por Alemania.

En la actualidad, la mayoría de los países de la zona euro están dirigidos por élites políticas neoliberales que favorecen las respuestas antidemocráticas y antisociales a la crisis. Fue una decisión consensuada del Consejo Europeo la que optó por priorizar el rescate a los bancos con dinero de los contribuyentes, que es, de hecho, una forma de hacer que los ciudadanos de a pie paguen por la crisis económica. Si Grecia, Portugal, España e Irlanda no hubieran tenido gobiernos que cooperaron con Alemania en las instituciones europeas, no habría sido posible aprobar las reformas de austeridad al nivel europeo. A pesar de esta colaboración, sin embargo, todavía tiene sentido ver al gobierno alemán como el motor detrás de esta línea política.

[Measures like the ESM {European Stability Mechanism} or the memoranda of understanding led by the Troika are deepening the economic crisis. Levels of unemployment have shot up, labor rights and systems of social security are being destroyed; poverty is rising; including hunger having returned to Europe. All of that can be seen by the European citizens as the result of the EU policies promoted by Germany.

In reality the majority of the eurozone countries are headed by neoliberal political elites that favor the anti-democratic and anti-social responses to the crisis. It was a consensual decision of the Council of Europe that opted to prioritize the rescue of the banks with money from the contribitors {i.e., contributing countries} which is in practice a form by which the citizens bear the cost of paying for the economic crisis. If Greece, Portugal, Spain and Ireland hadn't had governments that cooperated with Germany in the European institutions, it would not have been possible to pass the austerity reforms at the European level. Because of this collaboration, nevertheless, it still makes sense to view the German government as the motor behind this political line.]
And they cite the Pew Research report, The New Sick Man of Europe: the European Union 05/13/2013, as giving evidence of the drastic decline in other Europeans' regard for Germany due to Merkel's policies.

Simon Kennedy in Austerity's Fiscal Drag Nears End as Europe, U.S. Go for Growth Bloomberg Businessweek 12/19/2013 seems to think that austerity is going away. But with federal spending in the US in sharp downturn and Merkel ready to push on with her deflationary politics in the eurozone with the eager cooperation of her Social Democratic Party (SPD) partners, it's hard to see how he comes to such a conclusion.

But others have delusions that Merkel's policies can continue and actually work in the way she claims. Wolfgang Clement, for instance, a former senior official of the SPD turned fulltime corporate 'ho' business lobbyist and "consultant," in Der Koalitionsvertrag ist eine Sünde Huffington Post 20.12.2013 has apparently convinced himself that what Germany itself needs is far more austerity and deregulation. Is he delusional? Or just loyal to the ridiculous conviction of the Very Serious People in Europe that Herbert Hoover/Heinrich Brüning economics is just what the doctor ordered for a depression!

Kurt Biedenkopf, a former CDU politician in eastern Germany who was once seen as an important conservative leader for democracy, bitches and moans along the same line in „Kinder kann man nicht kaufen“ Handelsblatt 26.12.2013. Social-democrat Clement and conservative Biedenkopf agree: Heinrich Brüning is the man! Bipartisanship!!

Good grief. Biedenkopf in that piece is being interviewed together with Bert Rürup, an economist and SPD man, who takes a starry-eyed nationalist booster's perspective that Germany's economy is looking at accelerated growth as far as the eye can see. Biedenkopf is skeptical because he thinks Germany still has way too much gubment. Two Very Serious People.

Biedenkopf does have high praise, though, for the neoliberal Agenda 2010 "reforms" that lowered wages and increased job insecurity in Germany, a reform push through by the 1998-2005 coalition government of the SPD and the Greens. Tripartisanship! Awesome. That interview reads like a German version of Tom Friedman, aka, Little Tommy Friedman Age 6, and David "Bobo" Brooks discussing the Big Economic Issues of the day.

They do talk about the Fiscal (Suicide) Compact that Merkel successfully forced on most EU countries and that effectively outlaws Keynesian stimulus policies in recessions, instead imposing deflationary policies. Both Biedenkopf and Rürup agree that it's a grand idea. But they disagree in that Biedenkopf is less optimistic than Rürup that it will be implemented sooner rather than later. The idea that it's madness based on basic macroeconomics is evidently foreign to both of them.

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