Saturday, February 07, 2015

Greece-Germany confrontation: The Empire Strikes Back

Timing is important in diplomacy. On Thursday, Greek Finance Minister Yanis Varoufakis was in Frankfurt and Berlin meeting with, respectively, ECB chief Mario Draghi and German Finance Minister Wolfgang Schäuble. About the same time, Draghi announced new restrictions on the ECB giving credits to Greek banks.

It's no surprise that Germany would bring down the hammer in its latest round of confrontation with Greece. Angela Merkel has been doing that since 2009 anyway, and doing enormous damage to the Greek economy in the process.

Draghi's action doesn't cut off credit to Greek banks. And it may well have been more of a signal to Germany to take the situation seriously as it was a signal to Greece that the ECB would prefer Greece's leader to just shut up and proceed with the destructive austerity measures.

But the more I think about Thursday's news, the more I think Greece successfully wrong-footed Germany in the non-negotiation negotiations. Though it's probably due more to Merkel's and Schäuble's arrogance - but that has been consistent, too. By announcing pressure on Greek banks as Varoufakis was in Germany visiting the ECB chief Mario Draghi and Schäuble, Draghi makes the ECB in this case look like a tool of German national policy, at least to the broader public.

Which emphasizes the reality of this situation, which is that the EU and the ECB really are acting as fronts for German policy in imposing Herbert Hoover austerity economics on Greece and the other EU periphery countries. Which means that the negotiations with Germany are the only ones that really count.

Even the near-useless François Hollande, President of France, just said that Greece should negotiate directly with Germany, although at the same time he backed the ECB's action. Krugman is dubious that Draghi will be willing to push Greece's banks into insolvency on Angie's behalf.

BTW, isn't it time to start calling measures like what the ECB just did "economic sanctions"?

Schäuble stonewalled Varoufakis, allowing Mr. V to use this great line at their joint news conference: "We didn't even agree to disagree."

I'm going on the assumption that Merkel knows she has been running a highwire, high-risk policy in the eurozone. She may be nasty, but she's not dumb. At the same time, I really do think she's dogmatically committed to the Hoover/Brüning policies. But she's essentially locked herself in to having to try to bludgeon Greece into submission, or she'll have wholesale rejection of the austerity policies in several countries.

Italian PM Matteo Renzi said this week that he's flushing the deficit requirement from the Fiscal (Suicide) Pact Angie crammed down the eurozone's throats in 2012. Greece is also in desperate need of getting out of the austerity trap, and they're much closer to a when-you-ain't-got-nothin'-you-got-nothin'-to-lose position than Germany is.

Greek Prime Minister Alexis Tsipras was defiant. He said Greece "is not going to take orders" from the EU or the ECB, "much less by e-mail," emphasizing the arrogant approach Germany via the EU has taken to Greece. (Tsipras dice que "Grecia ya no aceptará órdenes, y menos por e-mail" Público 05.02.2015)

No comments: