Thursday, January 19, 2012

More help for eurozone countries: Angie says, "Nein!"

Not that it's a big surprise. But German Chancellor Angela Merkel opposes Germany to kicking in more money to rescue eurozone countries from bankruptcy. (Merkel gegen deutsche Mehrbelastung in Euro-Krise Welt Online 18.01.2012)

This euro crisis has a sickening feeling of rushing toward destruction with everybody knowing it but no one able to imagine changing course.

But it is still a mystery why that would be so. Going back to what John Kenneth Galbraith said about the decisions that led up to the First World War, it's often easy to overlook the effects of just plain stupidity. Cupidity plays a role, for sure. In this case, the European banks persuaded Angie and French President Nicolas Sarkozy to perform a backdoor public bailout for the banks on the hook for Greek debt and the credit default swaps linked to them via public subsidies for Greece to stave off the default that should have happened no later than 2009.

I do think Merkel's own adherence to the very conservative "ordoliberalism" economic doctrine is a major factor. Faced with the obvious failure of her austerity policies, the refusal of Britain to even consider the latest treaty change being proposed, the worsening debt position of every country that has taken her preferred austerity route, the increase in social distress (to the point of a possible humanitarian crisis in Greece), high unemployment, and now a new recession that is affecting Germany, as well.

Yet she's not changing course. She's doubling down on austerity economics. And even if her chosen course were working better than it is, her option still required Germany to be ready to pay more for bailouts to debtor countries, bailouts that are effectively backdoor bailouts for private banks.

Here is one way her past up until age 35 in East Germany may be working against her. She probably doesn't have the depth of intellectual or emotional commitment that political leaders who spent their lives in politics in the western German states acquired.

Merkel is not the only European leader responsible for the impending crack-up of the euro and the European Union. Sarkozy and British Prime Minister David Cameron also bear nearly as a great a responsibility. But Angie's name is all over this mess. And she doesn't give any outward sign that she's on the verge of going down in history as the leader who did the most to wreck the European Union.

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