Saturday, July 18, 2015

German Punishers

Germany violates Eurozone rules all the time. Maybe its violations of debt-to-GDP limits and other restrictions pale in comparison to those of Greece, but Germany is hardly pristine in its adherence to the very rules it is accusing Greece of having violated. And folks forget about the big German default of their post-WWI reparations debts. The outright malevolence towards Greeks of a majority of the German electorate seems both cultural (“they’re not like us; they have no self-discipline”) and based on the lingering resentment that Greece had to fudge its financial statements to get into the Eurozone in the first place.
“More than half of Germans think the planned deal with Greece is bad and many would have preferred that the crisis-stricken country left the euro zone rather than getting the chance for further aid, according to an opinion poll… In the YouGov survey seen by German newspaper Welt am Sonntag, 56 percent of respondents said they thought the plan for such a deal with Greece was bad, with just over one fifth of those saying it was very bad.” Reuters, July 18th.
There are few outside of a minority of Germans and their Teutonic followers who believe that Greece will ever be able to comply with the bailout requirements that Germany literally forced its EU partners to impose on Greece. Greeks aren’t remotely likely to be able to service their massive debt with an economy that shrinks with every new austerity measure slapped on Greece by the EU. But then, most savvy folks believe that Germany never imposed such severe measures to help Greece come back; rather, it was kicking the can down the road to prepare for Greece’s eventual departure from the Eurozone.
“[W]ith its handling of Greece’s bailout package, Germany is at risk of losing that trust, some European analysts say. By taking what sounded to many as an aggressive, punishing, contemptuous tone toward Greece, the German leadership may have undercut its moral authority, they say. And by floating the notion that Greece might be better off leaving the common currency, Germany displayed its national interest more nakedly than in the past and made it clear there are limits to its willingness to put European unity first…
“[Finance minister, Wolfgang] Schäuble [pictured above], after helping to negotiate a deal expressly intended to keep Greece in the eurozone, has suggested several times that Greece would be better off leaving. He has come to represent, in many eyes, the hidden face of German power. In Greece, he is portrayed as a Nazi. Even an Italian weekly, L’Espresso, showed him on its cover with the headline: ‘This man scares us, too.’
“It may be too soon to say for sure whether the harsher German tone signifies a turning point in its role within Europe or if it is the transitory result of circumstances. But for many in Europe, especially on the center left, the Greek crisis ‘revealed a more brutal Germany, embodied in Schäuble,’ said Hans Kundnani, the author of ‘The Paradox of German Power.’
“‘But we see, with this crisis, a qualitative transformation of the European Union into a more coercive bloc, different from the one the founding fathers had in mind, or even the creators of the single currency,’ he said. ‘And Germany is at the heart of that.’” New York Times, July 17th. One of the guiding principles that gave rise to the European Union in the first place was to reduce tensions in that region, democratize the relationships among EU nations to prevent the divisiveness and wars that had plagued Europe for centuries. The subtext may also have been to coral Germany, the driving cause of two world wars. All of these values seem to be slipping away. Kindness and empathy have left the building.
The bigger question being asked behind closed doors is whether Germany itself belongs in the EU. With it coterie of allies in the Eastern Bloc, it is impossible to envision Germany being asked to leave, but a slow reconfiguration of the Eurozone – starting with a projected departure of Greece and eventually followed by the exit of other weaker countries like Spain, Portugal, Cyprus and even Italy – could effectively splinter Europe into hostile subparts of haves and have-nots. That the currency of the remaining powers would rise is a foregone conclusion, but that too would have deeply negative consequences for the survivors.
To maintain an export economy, their resulting relative labor costs of the rich nations would force them to move manufacturing off-shore, costing millions of local jobs, creating the kind of economic polarization they decry, the American model if you will. German assumptions of economic basics – predicated on a morbid fear of inflation and a tolerance for recession as I have blogged before – are at severe odds with the expectations of most of the balance of Europe, and most particularly in the southern half… including France.
Reeling from NAZI years, Germany shoved patriotism down the value chain for a very long time. They had been shamed in the eyes of the world… and to themselves. They became European. But with the reunification of East and West Germany, with the growth of the German manufacturing machine, attitudes toward self-pride have returned in spades. Add to this mix that is was primarily Germany’s wealth, her success that enabled Europe to muddle through the Great Recession. And it was her money that was the biggest part of the Greek bailout.
“In the past, Germany was willing to provide the glue — whether the money or the deal — to hold Europe together and go forward, though to some degree European unification has only progressed through crisis. But national interests are becoming more visible everywhere in the enlarged European Union. When it came to the latest flare-up over Greece, [Chancellor Angela] Merkel again negotiated to keep Europe united, but perhaps with less conviction, because few expected the deal to rescue Greece to work very well.
“In fact, while portrayed as the man trying to push Greece out of the euro, Mr. Schäuble is considered more of a European federalist than Ms. Merkel. But in his view, federalism means not an open-ended commitment to rescuing neighbors but a willingness to abide by accepted rules…
“Germany was hardly alone. In its tough stance toward Greece, it had support from northern European countries like the Netherlands and Finland, and the newer countries of central and Eastern Europe and the Baltics. Even the French and Italians, who fought to keep Greece in the eurozone, were reluctant to push too hard, given the behavior of [leftist] Syriza, Mr. Tsipras’s political party.
“‘For the moment, blame is put on Germany, but the Germans believe that the Greeks were not playing by the rules,’ said Daniela Schwarzer, director of the German Marshall Fund office in Berlin. ‘Merkel now has a double fight — at home, to bring along Parliament, her party and the public for another rescue package for Greece, and in Europe, where she will still have to show power to make sure the Greeks keep their commitments and play by the rules. The whole euro system depends on that.’…
“Germany always wanted the eurozone to resemble federal Germany, with solidarity dependent on everyone playing fair, by the rules, said Robin Niblett, the director of Chatham House, a research organization based in London… But instead, the Germans ‘find themselves with 70 billion euros of taxpayer money in hock in Greece and asked to write a chunk of it off, which they told German citizens would never happen,’ he said. ‘Merkel has managed to keep the public on side with each ratchet of the eurozone, where Germany is vulnerable. So I’m not surprised it got so heated.’” NY Times. At a time where the world needs stability, this quivering mass of uncertainty in one of the most important political institutions on earth is deeply troubling.
I’m Peter Dekom, and with so many destabilizing events taking place all over the world, it is often difficult to understand the ramifications of so many moving parts.

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