Decoding the neoliberal economics vocabulary

Joshua Kurlantzick, Senior Fellow for Southeast Asia at the Council on Foreign Relations, has written a lament for the prospects of further neoliberal trade development, Farewell To the Age of Free Trade Bloomberg Businessweek.

"Major potential trade deals, such as the proposed Transatlantic Trade and Investment Partnership between Europe and North America, are at risk of falling through," he writes. "As of early December," he reports, the TTIP negotiations "have resumed, but the prospects for a
deal remain highly uncertain."

That sounds like a cause for celebration to me, based on what we've heard is being cooked up for us in the secret negotiations over the TTIP and its evil twin, the Trans-Pacific Partnership (TPP).

I was thinking as I read Kurlantzick's piece that the current vocabulary of neoliberalism that has become so widely embedded in writing and discussion about international trade because center-left parties in the US and Europe have happily adopted it rather than challenging it, can actually be pretty arcane to readers assigning more common-sense meanings to words.

Here are some examples from Kurlantzick's piece:

Protectionism: People generally have a sense of what that is, barriers to products or money coming in from other countries put up to protect some domestic constituency. In the language of neoliberalism, though, "protectionism" is the worst cuss word. Even capital controls to prevent the fabled "bond vigilantes" from wrecking your country's currency or economy count as "protectionism" in this conceptual world, and therefore are evil by definition.

State capitalism: Almost as much of a cuss word as "protectionism." This is when a country owns a company as public property, as with Gazprom in Russia, PDvSA in Venezuela or, as of this year, YPF in Argentina. Protecting national sovereignty, preventing irresponsible practices by private corporations, revenue for other kinds of development: in the neoliberal worldview, none of them remotely justify the evil of "state capitalism."

Giant state-owned companies: Another way to use the "state capitalism" cuss word adding a little dramatic emphasis

Free trade: Equals goodness. Means removing barriers to capital flows across borders, lowering wages, getting rid of unions, overriding national laws on consumer and environmental protections, lowering taxes on corporations and the wealthy (preferably to the vanishing point)

Economic integration: Removing barriers to capital flows across borders, lowering wages, getting rid of unions, overriding national laws on consumer and environmental protections, lowering taxes on corporations and the wealthy (preferably to the vanishing point)

Globalization: also equals goodness; requires removing barriers to capital flows across borders, lowering wages, getting rid of unions, overriding national laws on consumer and environmental protections, lowering taxes on corporations and the wealthy (preferably to the vanishing point) to maximize goodness

Giant state-owned companies: Another way to use the "state capitalism" cuss word adding a little dramatic emphasis

Political leadership: Doing what international corporations want. Also has variations, such as strong leadership, responsible leadership, etc.

Populism: Not doing what international corporations want. Also a cuss word.

The global trade agenda: Removing barriers to capital flows across borders, lowering wages, getting rid of unions, overriding national laws on consumer and environmental protections, lowering taxes on corporations and the wealthy (preferably to the vanishing point)

Credibility on trade: Removing barriers to capital flows across borders, lowering wages, getting rid of unions, overriding national laws on consumer and environmental protections, lowering taxes on corporations and the wealthy (preferably to the vanishing point). See also: political leadership.

Dynamic: What an economy becomes when it removes barriers to capital flows across borders, lowers wages, gets rid of unions, overrides national laws on consumer and environmental protections and lowers taxes on corporations and the wealthy (preferably to the vanishing point).

Fostering interdependence: Removing barriers to capital flows across borders, lowering wages, getting rid of unions, overriding national laws on consumer and environmental protections, lowering taxes on corporations and the wealthy (preferably to the vanishing point).

As you see, there are some redundancies in meaning among these words and phrases.

Kurlantzick gets several of these words loaded with occult meaning into one notable paragraph:

Far from creating a long tail, globalization and the Internet have instead made economies of scale more important to companies’ survival. That has prompted consolidation in industries from telecommunications to oil to mining, allowing many of these industries to become dominated by giant state-owned companies from countries such as China, Russia, and Brazil. These state-owned enterprises are hardly forces for free trade: They often crush entrepreneurs in their own societies, and they often push for protectionist barriers, not against them. [my emphasis]

When you translate into more everyday language, you get:

Far from creating a long tail, Goodness and the Internet have instead made economies of scale more important to companies’ survival. That has prompted consolidation in industries from telecommunications to oil to mining, allowing many of these industries to become dominated by the Evil Ones from countries such as China, Russia, and Brazil. These Evil Ones are hardly forces for Goodness: They often crush the Good Ones in their own societies, and they often push for Evil Things, not against them.

Who says economics isn't a morality play?

The kinds of trouble neoliberal trade treaties can cause is illustrated in this New York Times report by Sabrina Tavernise, Tobacco Firms’ Strategy Limits Poorer Nations’ Smoking Laws 12/13/2013. Tobacco consumption has been falling in wealthier nations, so the tobacco companies want to sell more cigarettes in less developed countries. And when some countries try to restrict smoking, the companies have started to use the option they have under so-called "free" trade treaties to deter them. "The industry is warning countries that their tobacco laws violate an expanding web of trade and investment treaties, raising the prospect of costly, prolonged legal battles, health advocates and officials said."

... tobacco opponents say the strategy is intimidating low- and middle-income countries from tackling one of the gravest health threats facing them: smoking. They also say the legal tactics are undermining the world’s largest global public health treaty, the W.H.O. Framework Convention on Tobacco Control, which aims to reduce smoking by encouraging limits on advertising, packaging and sale of tobacco products. More than 170 countries have signed it since it took effect in 2005.

More than five million people die annually of smoking-related causes, more than from AIDS, malaria and tuberculosis combined, according to the World Health Organization.

Alarmed about rising smoking rates among young women, Namibia, in southern Africa, passed a tobacco control law in 2010 but quickly found itself bombarded with stern warnings from the tobacco industry that the new statute violated the country’s obligations under trade treaties.

“We have bundles and bundles of letters from them,” said Namibia’s health minister, Dr. Richard Kamwi.

Three years later, the government, fearful of a punishingly expensive legal battle, has yet to carry out a single major provision of the law, like limiting advertising or placing large health warnings on cigarette packaging.

Treaties approved by the Senate have a legal force equal to the Constitution itself in the US; they even override the text of the Constitution, i.e., they have the force of Constitutional Amendments. So we should expect our elected officials from the President on down to take the part of the general public and not business lobbyists in considering trade agreements like TTIP and TPP. (Yes, I know how otherworldly that sounds!)

Kurlantzick makes an intriguing argument that I've not seen put this way before about the immediate future of international trade:

The belief that trade flows would inevitably increase was based on two assumptions: Emerging markets still had huge space to expand, and new technologies would make businesses more interconnected. These ideas still power reports such as HSBC’s forecast. But they appear to be wrong. Today’s technological advances don’t necessarily lead to economic integration. The latest breakthrough in manufacturing, 3D printing, makes it easier for companies to keep their design and initial production work in-house and cut out suppliers—which reduces trade, because it removes incentives to outsource later rounds of manufacturing overseas. The coming breakthrough in many science-based industries — such as synthetic biology, in which living forms are created from strands of DNA — will similarly create pressure for companies to keep operations in-house. Already, many corporations are coming home: Cross-border investment inflows fell by 18 percent in 2012 and probably will drop again in 2013.

I don't know how well-founded that may be, but it's made me curious about the argument.

This, on the other hand, apparently relies on a code I haven't cracked yet:

Over the past 60 years, at least one major economy was able to take the lead in advancing the global trade agenda. Today, however, every prominent trading economy is too consumed by problems at home. Weakened by the shaky rollout of health-care reform, President Obama faces a hostile Congress that has little inclination to support either the administration’s proposed free-trade agreement with Asia, called the Trans-Pacific Partnership (TPP), or a U.S.-European trade pact. China's top leaders are still trying to consolidate power and address domestic challenges such as land reform. Britain is consumed with austerity, Japan is embarking on contentious economic reforms, and Germany is constrained by its history and Berlin’s consensual politics. Reports of U.S. spying on top European leaders have caused politicians across the European Union — already skeptical of a trans-Atlantic trade zone because of concerns that many European industries would be swamped — to call for trade negotiations with the U.S. to be cut off. [my emphasis]

This reads weird to me. In this case, "one major economy" presumably means the United States, so why not just say that?

Is there a clear majority in either House of Congress against the TTIP and TPP already? I seriously doubt it. I doubt even more how firm that theoretical opposition will remain when and if the things are signed and business lobbyists go to work on the Congress about the virtues of corporate buccaneering Goodness free trade.

China's leaders don't have time to pay attention to international trade? Seriously?

And however much "Germany is constrained by its history and Berlin's consensual politics," that hasn't prevent Chancellor Angela Merkel from imposing a ruinous austerity policy on several of her eurozone partners that benefits Germany at the expense of imposing prolonged depression conditions on those partners. That should be a reason for other countries to distrust Germany on economic matters. But shyness due to its "its history and Berlin's consensual politics" hardly seem to be serious concerns in that regard.

All of that may just be Kurlantzick's way of saying that the US so far hasn't been able to get its way on either treaty, both of which are still under negotiation. But why the strange circumlocutions if that is the real point?

Tags: angela merkel, austerity economics, eu, euro, european union, neoliberalism, tafta, tafta, trans-atlantic free trade agreement, trans-atlantic trade and investment partnership, trans-pacific partnership, tpp, ttip

The neoliberal side of the Obama Administration

I know I'm jaded about Obama. But this is why.

After a new push for renewable energy, a re-energized affirmative defense of the ACA and a progressive speech on economic inequality in America, here's a new report that in the Trans-Pacific Partnership (TPP) negotiations, the Obama Administration is pushing to "grant radical new political powers to corporations, increase the cost of prescription medications and restrict bank regulation." (Zach Carter, Obama Faces Backlash Over New Corporate Powers In Secret Trade Deal Huffington Post 12/08/2013)

And, of course, treaties when approved by the Senate are equal in legal force to the Constitution.

The good news in Carter's article: "The Obama administration appears to have almost no international support" for those measures.

This is the Barack Obama we've seen most often the last five years on economic policy. The corporate Democrat who pushes the neoliberal agenda aggressively. Yes, he's still NABATR (Not As Bad As The Republicans). But that's faint praise indeed!

How bad could the TPP be? Here's a sample:

One of the most controversial provisions in the talks includes new corporate empowerment language insisted upon by the U.S. government, which would allow foreign companies to challenge laws or regulations in a privately run international court. Under World Trade Organization treaties, this political power to contest government law is reserved for sovereign nations. The U.S. has endorsed some corporate political powers in prior trade agreements, including the North American Free Trade Agreement, but the scope of what laws can be challenged appears to be much broader in TPP negotiations.

"The United States, as in previous rounds, has shown no flexibility on its proposal, being one of the most significant barriers to closing the chapter, since under the concept of Investment Agreement nearly all significant contracts that can be made between a state and a foreign investor are included," the memo reads. "Only the U.S. and Japan support the proposal."

Under NAFTA, companies including Exxon Mobil, Dow Chemical and Eli Lilly have attempted to overrule Canadian regulations on offshore oil drilling, fracking, pesticides, drug patents and other issues. Companies could challenge an even broader array of rules under the TPP language. [my emphasis]

This cartoon from Public Citizen illustrates the relationship of such courts to justice:

And it sounds like the Administration is carrying water for Big Pharma in the TPP negotiations: "The Obama administration is insisting on mandating new intellectual property rules in the treaty that would grant pharmaceutical companies long-term monopolies on new medications. As a result, companies can charge high prices without regard to competition from generic providers."

And since we all know that the fine folk who run giant banks would never set up a new financial crisis like 2007-8, why should the following worry us?

The U.S. is also facing major resistance on bank regulation standards. The Obama administration is seeking to curtail the use of "capital controls" by foreign governments. These can include an extremely broad variety of financial tools, from restricting lending in overheated markets to denying mass international outflows of currency during a financial panic. The loss of these tools would dramatically limit the ability of governments to prevent and stem banking crises.

The last thing we need is this kind of neoliberal trade treaty to further cripple consumer protections and let corporate bandits run wild.

And let's not forget that the same Obama Administration is simultaneously negotiating a neoliberal Transatlantic Trade and Investment Partnership (TTIP), aka, Trans-Atlantic Free Trade Agreement (TAFTA).

Tags: neoliberalism, neoliberalism,obama adminstration, tafta, trans-atlantic free trade agreement, trans-pacific partnership, tpp, ttip

Merkel complicates the trans-Atlantic trade negotiations (Updated)

Since I'm no fan of the neoliberal vision for the the Trans-Atlantic Free Trade Agreement (TAFTA), aka, Transatlantic Trade and Investment Partnership (TTIP), I'm pleased to hear news of just about anything that might impede it.

This article about the instruction European business lobbyists have been giving to EU negotiators about what to include in the treaty would also be largely acceptable to the American lobbyists calling the shots on the US side of the negotiations (European Officials Consulted Business Leaders on Trade Pact New York Times 10/08/2013):

Internal documents obtained by The New York Times offer a window into the extent that European trade negotiators allow big business lobby groups to set the agenda. Among other things, the business community was seeking an active role in writing new regulations — the trans-Atlantic rules that might one day cover things like how poultry is cleaned and how trade secrets are protected.

"It's a bit like enshrining a right to lobby in the E.U./U.S. trade agreement — that is what it is about,” said Pia Eberhardt, who follows trade issues for the Corporate Europe Observatory, a nonprofit group in Brussels that is critical of corporate ties to government. ...

Although last year’s preliminary discussions could end up having little influence on any final trade pact, the documents offered some hints at the ripest targets for business executives — as well as insights into the officials’ responses. The auto industry was seen as being “first and foremost” among industrial sectors where a melding of regulations from Brussels and Washington made sense, according to an assessment last December by the European trade commission. And the issue of duplicative trans-Atlantic testing procedures was seen as particularly relevant for the pharmaceutical industry.

Among the proposals made last October by business groups that are still on the table is a regulatory oversight group that would have the authority to continue to ensure that any new or existing trans-Atlantic rules are compatible, even after trade negotiations formally conclude. Businesses and other stakeholders would be able to propose regulatory changes to the council.

In other words, what the lobbies are seeking to incorporate into the treaty is a kind of lowest-common-denominator function that would force the level of regulations down to the lower standard between the EU-US area and could override national regulations.

So it's encouraging to hear that German Chancellor Angela "Frau Fritz" Merkel is making better protection against NSA spying an issue in the talks, as reported by Stefan Wagstyl et al, Berlin seeks privacy rules in EU-US trade pact Financial Times 11/03/2013.

Berlin’s unexpected move highlights the anger generated in Germany by claims that American intelligence eavesdropped on a wide range of targets, including Chancellor Angela Merkel. German officials are particularly angry that even when Berlin set up high-level talks with Washington over the extent of US surveillance activities earlier this summer, US officials failed to disclose the monitoring of Ms Merkel’s mobile phone.

Even though German officials insist the relationship with Washington remains strong, Ms Merkel’s position seems to be hardening in response to the public controversy and to concerns in German business about commercial spying. Industry representatives said they were aware that the question of data protection was being “politically discussed” in the context of the trade deal talks.

The proposed safeguards in the trade pact would not be catch-all privacy rules but specific regulations to protect companies worried about industrial espionage.

Merkel's Heinrich Brüning economic policies are awful. But if her personal pride leads her to do constructive things, in this case putting up impediments to TAFTA/TTIP, that's fine by me.

Leonid Bershidsky notes in Bershidsky on Europe: Merkel Turns on US Bloomberg View 11/04/2013:

Germany's volte-face [on the privacy issue and the trade negotiations] is a way to put pressure on the U.S., but also respond to voter sentiment. In Germany and across Europe, the idea of keeping user data on the continent is gaining popularity, with local telecoms offering cloud services as an alternative to U.S.-based ones. Deutsche Telekom even advertises "email made in Germany," saying it routes German internet traffic inside the country only.

Update: Big business on both sides of the Atlantic really want this deal. That's why I'm not too surprised by this story, Data protection ruled out of EU-US trade talks James Fontanella-Khan Financial Times 11/04/2013:

Viviane Reding, vice-president of the European Commission and the EU’s top justice official, said that data protection was outside of the scope of the Transatlantic Trade and Investment Partnership negotiation.

"The Commission'’s view and the position taken by all leaders at the recent European Council is clear: let’s not mix up the phone tapping issue with the ongoing trade talks,” Ms Reding told the Financial Times.

"Including data protection in the trade talks is like opening Pandora’s box. The EU is not ready to lower its own standards . . .  That is why the free trade agreement negotiations are not going to include privacy standards."

EU officials stressed that at present there are no common transatlantic standards on data protection and therefore they fear that finding a middle ground with the US would only lower overall EU privacy standards.

Translation: Big business lobbies in Europe really, really want this deal. Plus, who knows how much dirt the NSA has dug up on key EU officials to pressure them with?

But the official statement by Reding might not be all hot air:

Privacy advocates also warned that Germany’s call to include commercial spying rules in the trade talks would inadvertently favour tech groups such as Google and Facebook that have been trying to water down EU attempts to set tough standards.

Lobbyists for the US technology industry have long wanted to introduce data protection in the Transatlantic Trade and Investment Partnership negotiations as they believe it would give them a better chance to set less stringent standards than the ones currently proposed by the European Commission and EU lawmakers.

US companies argue that the current EU legislation is unworkable because, they claim, it gives little legal certainty on how businesses can use individuals’ personal information. They also want to scrap a clause that would limit the US government’s ability to obtain information on EU citizens without the European data protection watchdog’s consent.

Tags: angela merkel, austerity economics, eu, european union, nsa spying, tafta, trans-atlantic free trade agreement, transatlantic trade and investment partnership, ttip

Spying on European allies

It's understandable and necessary to have a certain amount of cynicism about leaders like German Chancellor Angela "Frau Fritz" Merkel professing to be shocked, shocked to find out he US is spying on them.

But for what it's worth, my reading of the news is that there are aspects about the spying revelations that some countries are generally surprised and angry about. The spying on EU trade negotiators, for instance, whose only likely purpose is to gain an extra advantage in trade negotiations that will primarily be applied to the advantage of American corporations at the expense of European ones. The massive spying on French citizens, of whom it's unthikable that millions are involved in terrorist plots against American interests or American citizens.

There are formal and informal rules governing mutual spying between allied nations, the latter not being posted on government websites. Whatever those informal rules are between the US and the EU nations and NATO allies, it certainly looks like not only European citizens but numerous European officials think the US has drastically overstepped them with the NSA spying. Roland Nelles writes in Merkels Wut, Obamas Versagen Spiegel Online 24.10.2013

Der Lauscher kann die Politik des Belauschten voraussagen. Er kann sich auf Verhandlungen besser einstellen, weil er alle Absichten und Erwägungen seines Gegenüber bereits kennt. Er kann - zumindest theoretisch - geheimes Wissen sogar nutzen, um dem Abgehörten massiv zu schaden, um ihn oder sie womöglich sogar zu erpressen oder bloßzustellen.

Wer die Kommunikation anderer Staatschefs abhört, verhält sich wenigstens niederträchtig, wenn nicht sogar feindselig. Es gibt Hinweise, dass die Bundeskanzlerin im Visier von US-Geheimdiensten gewesen sein könnte. Der SPIEGEL hat darüber zuerst berichtet. Ist Deutschland ein Feind der USA?

Barack Obama hat bislang den Eindruck erweckt, der Gute im miesen Spiel rund um die Sammelwut der US-Geheimdienste zu sein. Es ginge den USA bei allen Überwachungsmaßnahmen allein um Terrorbekämpfung, lautete das Mantra, mit dem das Ausland besänftigt werden sollte. Alles Bluff: Fast täglich kommen neue Enthüllungen über Abhörangriffe auf "befreundete" Nationen ans Licht: Frankreich, Mexiko, Deutschland. Wie lang ist die Liste noch?

[The eavesdropper can predict the politics of the one being eavesdropped. He can adjust himself between to negotiations because he already knows the intentions and considerations of his opposite number. He can - at least theoretically - even use secret knowledge to cause massive harm to the one being intercepted, in order to blackmail him where possible or ruin him.

Whoever eavesdrops on the communications of another chief of state is conducting himself in a miscreant way, if not downright hostile. There are indications that the Federal Chancellor [Merkel] could have been in the sights of the US spy agencies. Spiegel first reported on it. Is Germany the enemy of the USA?

Barack Obama has up until now awakened the impression that he's the good guy in the filthy game around the collecting mania of the US secret services. All the spying measures had to do only with fighting terrorism, ran the mantra by which foreigners should be put at ease. All bluff: Almost daily new revelations come to light about new spying attacks on "friendly" nations: France, Mexico, Germany. How long will the list wind up being?]

One good outcome for ordinary citizens in the US and the EU from the fallout from the NSA spying scandals might be the torpedoing of the negotiations for the Trans-Atlantic Free Trade Agreement (TAFTA), aka, Transatlantic Trade and Investment Partnership (TTIP), a new neoliberal treaty to weaken consumer protections and workers rights and lower the incomes of the majority for the benefit of the wealthiest. (Annett Meiritz, EU vs. USA: Spähverdacht gefährdet Freihandelsabkommen Spiegel Online 24.10.2013)

Claus Christian Malzahn in the conservative Die Welt writes about the possible serious implications of the latest revelations about NSA spying on our nominal ally Germany. (Ein Skandal von ungeheurer politischer Sprengkraft 24.10.13) Presseurop's English-language version of the story has a less dramatic headline. Die Welt's would translate, "A scandal with monstrous political explosive power." Presseurop uses a more sedate, American Eavesdropping: Communication lines under tension:

... it would be good to know why this incredible breach of trust was exposed not by German intelligence services but by journalists. Does the BND [German secret service] consider the eavesdropping on the most powerful politician in Europe a mere trifle? ...

Only a few days ago in Paris the American Ambassador was hauled into the French Ministry of Foreign Affairs because of suspicions that the war on terror is serving to cloak industrial espionage as well.

Just this question was brought up during the election campaign by Chancellory candidate Peer Steinbrück. At the time, some thought it overly dramatic. Today it turns out that Steinbrück’s question was more than justified.

At least the hapless candidacy of Peer Steinbrück did something right!
Malzahn notes:

Western values are not protected by this sort of practice; on the contrary, this practice can lead to the end of the West as political formation. The political consequences of the recent scandal can certainly not be predicted. And how much can we rely on assurances from Washington that this is a misunderstanding? Probably not at all.

Another commentary in Die Welt by Uwe Schmitt, Die Supermacht ist in kleinmütige Paranoia gestürzt 24.10.2013, notes than its espionage, the US under the Obama Administration "hardly seems to differentiate between friend and foe" ("die zwischen Freund und Feind kaum Unterschiede zu machen scheint"). Schmitt writes, "Die paranoide Überwachung von jedem und allem wird peinlich für die Vereinigten Staaten, sie schädigt Ruf und Geschäfte" ("The paranoid surveillance of one and all is becoming embarrassing for the United States; it's damaging its reputation and businesses"). And he notes that the experience of the East German Stasi (secret police) is a reminder that massive spying doesn't necessarily lead to better knowledge.

Which is another way of saying that when spy agencies collect indiscriminate piles of information, it makes it more difficult to sort out relevant information for actual criminal investigations. And he notes that the problems with the Obamacare rollout also raises a question about whether the US government is as super-efficient in its computer operations as the NSA would have us all believe it is.

Schmitt speculates plausibly - though without citing particular polling data - that the post-Bush charm that Europeans found in Obama has been replaced by a perception of him "as a wolf in sheep's clothing: conciliatory, always laughing, intelligent, leading with high morality in his mouth, hard as steel like a Cold Warrior" ("als Wolf im Schafspelz: Konziliant, stets lächelnd, intelligent, die hohe Moral im Munde führend, stahlhart wie ein Kalter Krieger").

James Ball reports for The Guardian in NSA monitored calls of 35 world leaders after US official handed over contacts 11/24/2013:

The National Security Agency monitored the phone conversations of 35 world leaders after being given the numbers by an official in another US government department, according to a classified document provided by whistleblower Edward Snowden.

The confidential memo reveals that the NSA encourages senior officials in its "customer" departments, such the White House, State and the Pentagon, to share their "Rolodexes" so the agency can add the phone numbers of leading foreign politicians to their surveillance systems.

The document notes that one unnamed US official handed over 200 numbers, including those of the 35 world leaders, none of whom is named. These were immediately "tasked" for monitoring by the NSA.

He also notes:

The European Commission, the executive body of the EU, this week backed proposals that could require US tech companies to seek permission before handing over EU citizens' data to US intelligence agencies, while the European parliament voted in favour of suspending a transatlantic bank data sharing agreement after Der Spiegel revealed the agency was monitoring the international bank transfer system Swift.

Tags: angela merkel, nsa spying, tafta, trans-atlantic free trade agreement

Merkel's German nationalism and the EU

It sounds internationalist at first glance, German Chancellor Angela "Frau Fritz" Merkel wanting to enhance the authority of the European Commission over the budgets of individual countries. (Mehr Rechte für EU-Kommission: Merkel will europäische Verträge ändern Spiegel Online 19.10.2013)

But for Merkel, who is running the EU according to a milder form of the model by which Leonid Brezhnev and his successors ran the Warsaw Pact, more power to the Commission means more power to her. More specifically, according to this report, it would give her (via the Commission) more power to impose perpetual austerity policies on the EU nations. (I should note that I'm interpreting here what Spiegel reports in more neutral jargon, but I'm confident in my interpretation based on Frau Fritz' history with the EU.)

The problem for Merkel's approach is that the costs to the euro "periphery" countries is enormous, with years more suffering in sight. The European Central Bank (ECB) successfully stabilized the situation against interest rate speculators - the fabled "bond vigilantes" - by using a broad interpretation of the ECB's authority to backstop national bonds that might come under attack.

Frau Fritz frames the problem as a debt crisis in which Germany must teach the inferior nations how to behave by imposing gruesome austerity policies on them. One way to look at it is that absent mechanisms for systematic transfers of wealth within the currency zone to adjust for differential rates of changes in productivity, the periphery countries have to undergo real devaluation, meaning in this case major reductions in wages and living standards until national competitiveness becomes more equalized. Without the trap of the euro currency zone, such adjustments could be made with far less devastating human consequences. Paul Krugman has been following how this dilemma plays out, e.g., Do Currency Regimes Matter? 10/19/2013.

Another aspect of Frau Fritz' approach has been to further institutionalize austerity economics in the EU treaties and bailout terms. The current EU agreements require arbitrary limits on debt as a percentage of GDP as well as equally arbitrary limits on annual budget deficits. In effect, the current EU arrangement outlaw Keynesian economic policies during a depression. Instead, in a recession in which GDP is shrinking, the rules require a country to pursue pro-cyclical policies of cutting government deficits and spending which accelerates the decline.

The periphery countries currently under Frau Fritz' austerity hammer - Cyprus, Greece, Ireland, Italy, Portugal and Spain - have been experiencing that already in the current depression. Given targets of debt as a percentage of GDP, they've cut their government spending, which causes the economy to contract, which makes the debt as a percentage of GDP bigger, which requires they cut government spending even more, and so on, over and over.

And the premise that the periphery countries can pay down the current debt without major debt relief is a conscious fraud, argues Yanis Varoufakis (The US Debt Ceiling Strife from a European perspective 10/17/2013):

In Peripheral countries like Greece, Portugal, Spain, Ireland, even Italy, countries immersed and drowning in un-payable debt, the race has been on for 4 years now to pretend that these insurmountable debts can be repaid even though we all know they cannot. Imagine the Greeks’ bafflement when they hear that the most powerful economy in the world, which has no trouble repaying its debts, is toying with a default when Greece and Europe have struggled so hard to mislead the world that Greece’s debt will be, somehow, repaid. Using default as a weapon with which to wage internal wars seems to Europeans like a very peculiar form of self-inflicted credibility loss.

Italy survived a government crisis just recently that could have led to new elections, which likely would have strengthened the anti-austerity, anti-Merkel parties and increased the pressure to refuse new austerity measures. Now they may be facing another one. (Neue Regierungskrise in Italien Nachrichten.at 19.10.2013) As Reuters reports, the current Prime Minister Enrico Letta proposed a budget that "seems designed more to offend nobody than to give the euro zone's most chronically sluggish economy a decisive boost." (Letta plays safe with solid but unambitious Italian budget 10/16/2013)

This is no way to fight a depression. But Merkel is not only dogmatically committed to austerity economics. It provides national advantages to Germany's export-oriented economy for the non-German part of the eurozone to have weak economies indefinitely while they implement internal devaluation. The value of the euro is based on the strength of the currency zone economy as a whole, which means that the euro is a cheaper currency for Germany than a separate German currency would be. This is fine by Angie. And the Social Democratic Party (SPD) with whom she's currently negotiating a new coalition government is not going to make any kind of real challenge to that policy, much to to their shame - and almost certainly to their future decline as a competitive party.

Markus Wehner's commentary in the 20.20.2013 Frankfurter Allgemeine Zeitung on the coalition negotiations is title, Die Schwarze Witwe lieben lernen ("Learning to Live With the Black Widow"). Angie previously had the SPD as a junior coalition partner in 2005-9, after which the SPD's voting percentage took a dive. Wehner quotes an unnamed "SPD man" as having observed that the fall of 11% points in the SPD's vote share in 2009 normally happens only in the case of a country going bankrupt or in a civil war. Frau Fritz' junior partner in the outgoing government is the Free Democratic Party (FPD), which in September's election didn't even get enough votes nationally to be represented in the Bundestag.

As Wehner points out, in a different tone than I'm summarizing it, is that the current SPD leadership is so pitiful that they have taken up an explanation for the 2009 election debacle that Frau Fritz herself offered publicly. It wasn't Angie's fault or her policies, it was the SPD's fault! Because, well, whatever, we should just go into another Grand Coalition headed by Merkel. This is really sad to see. One of the main arguments he cites is essentially a circular one: we allowed Merkel to punk us in the previous Grand Coalition, so there's no reason to not go into another one! Actually a circle closes, and I'm not sure that argument does. But the SPD leaders obviously aren't trying very hard to remind themselves or anyone else what a political disaster the first Angie The Great Coalition was for the SPD.

Alexis Tsipras, head of the left SYRIZA grouping that is currently the most popular party in Greece, is reminding Germany of a debt it owes Greece from an earlier and even uglier outbreak of German nationalism, the Second World War. Germany occupied Greece and dealt out a lot of suffering a death. (Eberhard Rondholz, Blutspur durch Hellas Zeit Online 08.03.2001) One of the German's methods of plundering Greece was to force the Greek central bank to loan them money. And despite the coercion involved, they were formally set up as loans, loans which the German government never repaid or otherwise resolved. Zeit Online provides an estimate sourced to unspecified Greek politicians that the debt would be worth €40 billion (around $54 billion). (Griechenlands Linke verlangt Rückzahlung deutscher Schulden 14.09.2013) This is separate from any reparations issue, something that has also been raised by Greeks justifiably angry over German behavior in the euro crisis. (Georgios Christidis, Secret Athens Report: Berlin Owes Greece Billions in WWII Reparations Spiegel International 04/08/2013; By Suzanne Daley, As Germans Push Austerity, Greeks Press Nazi-Era Claims New York Times 10/05/2013)

From Daley's report:

Prime Minister Antonis Samaras's government has compiled an 80-page report on reparations and a huge, never-repaid loan the nation was forced to make under Nazi occupation from 1941 to 1945.

Mr. Samaras has sent the report to Greece’s Legal Council of State, the agency that would build a legal case or handle settlement negotiations. But whether the government will press the issue with Germany remains unclear.

Some political analysts are doubtful that Athens will be willing to take on the Germans, who have provided more to the country’s bailout package than any other European nation.

Others, however, believe that the claims — particularly over the forced loan — could be an important bargaining chip in the months ahead as Greece and its creditors are expected to discuss ways to ease its enormous debt burden. Few here think it was an accident that details of the report were leaked to the Greek newspaper Real News on Sept. 22, the day that Germans went to the polls to hand a victory to Germany’s tough-talking chancellor, Angela Merkel.

"I can see a situation where it is politically difficult for the Germans to ease the terms for us," said one high-ranking Greek official, who did not want his name used because he was not authorized to speak on the issue. "So instead, they agree to pay back the occupation loan. Maybe it is easier to sell that to the German public."

Greece could also effectively achieve a debt haircut by refinancing its debt at much longer terms. (Mark Schieritz, Die Kosten des griechischen Schuldenschnitts Die Zeit Herdentrieb 09.10.2013) But Frau Fritz is unlikely to allow such a thing. (Update: But even if Frau Fritz allows such an approach, it doesn't solve the debt problem; it's not the same as a straightforward writedown of the debt.)

The SPD held a Party convention on Sunday (Oct. 20), which easily gave the leadership approval to continue with their negotiations to once again become a junior partner in a coalition with Frau Fritz. Hannelore Kraft, the Minister-President (Governor) of North Rhine-Westphalia state, was previously the most prominent public opponent of a Grand Coalition with Merkel's Christian Democrats (CDU), but she's on board with it now. There is a membership vote after the coalition deal is made that could throw in some new complications. But it will be pretty much a "done deal" - literally - by that time.

Both sides have to put up a pretense of hard negotiating in forming the coalition. Veit Medick and Philipp Wittrock, Coalition Face-Off: Tough Negotiations Lie Ahead Spiegel International 18.10.2013) But the fact that the SPD didn't even pretend to try to organize a majority coalition with the Greens and the Left Party means the SPD leaders have already decided to be toadies for Merkel the next four years, no matter what the needs of their clients or their ostensible partner nations in the EU or the eurozone.

The new Angie the Great Coalition would be a neoliberal wet dream. The conservatives and the social-democrats unite behind Merkel's nationalistic austerity policies and pretend that the whole EU project isn't already on the rocks. Columnist Ralph Bollmann in the conservative Frankfurter Allgemeine Zzeitung practically drools over how much fun it will be to watch the Sozis be willing patsies for Frau Fritz in a new Grand Coalition. (Was will die SPD in der Regierung? FAZ 20.10.2013)

What is stunning is that the perilous state of the EU is playing at best a minor role in the negotiations. The two sides in the coalition negotiations are arguing over ministerial posts, of course, and over tax increases, a national minimum wage (a worthy enough cause for sure, and, no, Germany doesn't currently have one) and numerous transactional-type issues. But the threatened collapse of the "European project" is evidently regarded by the leader of Merkel's CDU and the SPD with 1914 levels of arrogance, indifference and nationalist recklessness.

The SPD also seem untroubled by the prospects of the neoliberal Trans-Atlantic Free Trade Agreement (TAFTA) currently being negotiated between the EU and the US under high levels of secrecy. Well, in secrecy from the public and legislators, anyway. As we've known for a while now, the NSA is intercepting the EU's internal communications on their negotiating positions. So why not let the public in on it?

The anti-TAFTA group Seattle to Brussels Network (S2B) has issued a new report on the risks and problems of TAFTA A Brave New Transatlantic Partnership (October 2013).

Tags: angela merkel, austerity economics, eu, euro, european union, greece, italy, neoliberlism, spd, tafta, trans-atlantic free trade agreement