By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
No debacle is allowed to interfere with Chancellor Angela Merkel’s efforts to hang on to her job, and any debacles get swept under the rug at least until after the elections on September 22. Every time uppity opposition voices stir up some controversy, it’s brushed off, denied, ridiculed, or minimized – and it has worked admirably well so far.
Even Edward Snowden’s revelations day after day in Der Spiegel – which had received copies of documents detailing German involvement in NSA spying activities, among other sins – were successfully shuffled off. Though the discussion continues to be heated, it is, like in the US, a bi-partisan debacle, compromising political figures from both sides. The scandal is spreading and festering, but apparently without political fallout.
So time is running out for Peer Steinbrück, the SPD’s candidate to unseat one of the most popular German politicians. And when Finance Minister Wolfgang Schäuble, for whatever reason, mentioned a week ago that Greece would need a third bailout, Steinbrück jumped on it. Another debacle! Turns out, Greece, though it has disappeared from the media, hasn’t disappeared from the list of bankrupt euro states. And Steinbrück needs to do something fast to change the election math.
If the election were held next Sunday, a series of weekly surveys, has been fairly consistent: 41% of the vote would go to the governing CDU/CSU and 5% to their coalition partner, the FDP, barely squeaking over the 5% minimum to get into the Bundestag. Together, the coalition would have 46% of the vote. On the other side: the SPD would garner 22%, the Greens 11%, and the Left Party 10%, giving their coalition 43% of the vote. The remainder wouldn’t clear the minimum.
Barring a big debacle, Merkel, the consummate political animal, is going to hang on to her job. But she might have to make some unpalatable deals or perhaps enter into a Grand Coalition with the SPD. This too has been done before, most recently under her first mandate from 2005 to 2009, when her current challenger, Steinbrück, was her Minister of Finance.
Now a third bailout of Greece has bubbled up just before the election, rather than afterwards; but it would only be €10-11 billion. Minimizing it. That’s the policy. Without that money, Greece would go bankrupt. The prior two bailouts, each of which was ultimately much higher than initially envisioned, and each of which would cure, once and for all, the ills plaguing the country, amounted to €240 billion. This was crowned with a €107 billion haircut for private-sector bond holders.
With Greece, it’s never enough. Carsten Schneider, budgetary policy spokesman for the SPD, had gotten word from the Troika that, according to its latest analysis, Greece would in fact need €77 billion in addition to the €11 or so billion to get through to 2020. The new hole was created by a deteriorating economy and a complete lack of progress in privatizing the state-owned business apparatus. So Schäuble “must put the actual numbers on the table quickly,” and before the election, Schneider demanded.
And then Merkel herself spoke. She was angry. At a rally on Tuesday, she was defending her bailout policies that are getting increasingly expensive for German taxpayers. The Eurozone “is such a treasure, such a boon, that we can’t place it in doubt,” she said. “For this reason we’ve shown solidarity, but solidarity always linked to responsibility for reforms in those countries that experience our solidarity.”
She lashed out against these attacks from the left, and against Steinbrück who’d accused her of silencing to death the true costs of her bailout policies, and she pointed her finger at them: “Chancellor Schröder picked up Greece and softened the Stability Pact,” she said about her predecessor. “Both decisions were fundamentally wrong, and one of the starting points for our current troubles.” Then she said what others have said for years: “Greece shouldn’t have been allowed into the Eurozone.”
How do you fix that problem? More bailouts. The third bailout package for Greece now on the table will keep growing as time passes. And on Monday, Greek Finance Minister Stournaras put “renegotiation” of the €240 billion in debt from the first two bailouts on the table, ostensibly to ease the burden. But in the notorious Eurozone incrementalism, renegotiation of rates and terms would just be another stage on the way to debt forgiveness.
And debt forgiveness is officially off the table until after the election. An explosive topic. Since European central banks and bailout funds hold that debt, it would hit taxpayers – and German taxpayers more than any other – if it were forgiven. The costs would suddenly have a real number that could no longer be swept under the rug. And so, Merkel made another effort on Sunday to wipe it back off the table. “I am expressly warning against a haircut,” she said. “It could create a domino effect of uncertainty … in the Eurozone.”
And so, nothing has been resolved in the Eurozone where no price is too high in order to keep it intact, to keep all members, even Greece, in what has become a debt transfer club – from private investors to the public – since the euro, as Merkel had said so eloquently, “is more than a currency.” Because for her and her ilk, it has become a religion.
“The largest espionage scandal in the 21st century is shaking Germany,” wrote Steinbrück in an effort to use the NSA spying activities to unseat Merkel. And it has been one heck of a scandal.
26 comments
Comments are closed.
The entry of Greece formed a ticking time bomb, useful for the controlled demolition of the Euro, which at one stage was seen as an alternative to the dollar. Still the Europeans should be grateful they didn’t get the Iraq/Libya (and Iran pending) treatment. After all, these countries also tried to raise alternatives to the use of the US dollar for oil/gas purchases.
Go long on popcorn….grin
It is amazing to me that the global plutocrats are so successful with their control of all “Western” finance and media such that they can create hate on Greece citizens instead of themselves for this mess.
How is that we believe that some humans are better than others and by what measures do we assess this difference and why?
Exactly. It has been quite hilarious in both the US and Europe watching the criminals and their enablers spew this ridiculous notion that citizens have a responsibility to give money to banksters.
I think we have been taught to fear and loathe poverty almost more than anything. It seems that we unconciously extend that fear and loathing to actual poor people, and even poor countries, blaming those living in poverty for their circumstances rather than looking to the causes.
When we are all poor, and reach for those non-existent boot straps by which to oull ourselves out of indentured servitude, perhaps we will begin to face reality.
Upfront: I’m a total Latin amateur.
“Divide et impera.” Whoever came up with that phrase must have been a Roman Einstein overturning the established view which was — just go out and bash them. IMHO, “Divide et impera” (divide and rule/conquer) could be further tweaked into “Divide now, rule later.” I’d be surprised if there were not some classical scholars among the NC readership who could render this phrase in proper Latin. Something like — “From division now to rule later.”
Not unexpectedly, Anglo nimbleness has won the day. Blair led the parade followed by Schroder, Hollande, and now pipsqueak outliers like Miliband and Steinbruck.
I disagree with the conclusion.
>since the euro, as Merkel had said so eloquently, “is more than a currency.”
>Because for her and her ilk, it has become a religion.
It’s questionable whether Angela Merkel has some kind of religion in the worldly sense of the word. She certainly never ever sticked to any world view or any person if the changing of the course offered advantages to her.
I think the right conclusion would be something like this:
Because for here and the majority of german politicians (!) the euro is more than a currency, since they are unable or unwilling to separate the currency from the european project.
The main problem, from my point of view, is that too many people around here (germany) seem to think that the end of the euro means the end of the EU, too. Others, who clearly are able to separate EU and €, are unable or unwilling to communicate that. One might wonder why this is so.
It’s been a mess, even long before the german election. And it will continue to be one after that election is over – an election in which the two main candidates are almost indistinguishable.
Or it could all be simply about Deutsche Bank. How weak is the bank? After five years could any default, even tiny Greece, bankrupt the largest bank in Europe? Grandmother Merkel may be motivated by practical considerations we’re not aware of. In which case, even after Sept 22 nothing will change. The can kicking shall continue.
I still think the german electorate are a bunch of kasekopfs! Along with their fellow idiots in America, Britain and Canada.
I suspect that Deutsche is more or less okay these days (though i didn’t have a close look for three years).
But our life insurances aren’t as healthy, and many have for years not been able to make enough money to be able to pay their guaranteed interest.
>The can kicking shall continue.
Of course. This is all Angela Merkel ever stand for.
>I still think the german electorate are a bunch of kasekopfs!
I beg to differ :-)
>Along with their fellow idiots in America, Britain and Canada.
Ah, well. You might in fact want to add some countries to that list.
I was part of a culinary tour of Lesbos and Chios in 1999 and even to this casual economist, it was eveident that some things were very wrong with the Greek economy. For example, I was given a tour of a brand new Ouzo distillery located in such a remote location that any rational investor would have balked at such a business proposal. There was also the constant request that I pay in cash at restaurants and even at hotels. I left swearing never to return to such a backwards country.
I was astounded that Greece was ever allowed to participate in the Euro. I think it’s possible to put forth this concept while accepting it as a fait accompli. Ignoring that the problems in Greece started at the beginning of its entry into the Eurozone does nothing but to allow the underlying problems to be ignored, and the original culprits.
Yes, the bankers should have known better and should be the parties to ake the biggest hit, but I am more worried that without deep analysis and reform by the Greek citizens themselves, the base flaws will only be used for the inevitable replay of this type of fiasco.
I suspect that Greece was allowed to enter the euro zone just because it was felt that it shouldn’t be left out of it, with Greece having invented democracy and multiple other things.
And bigger was seen as better, anyway. I still haven’t seen a bureaucracy saying no when it comes to expansion.
IIRC nobody ever questioned the wisdom of including Greece in 2001.
Besides: The GDP of Greece did not look too bad until 2008.
1961–1970 8.44%
1971–1980 4.70%
1981–1990 0.70%
1991–2000 2.36%
2001–2007 4.11%
That number looked as if the country was on course, and in fact GDP growth was above eurozone average from 1997 to 2008.
And remember, it was 2001. Even in 2002 deficits didn’t matter. Things changed.
>Yes, the bankers should have known better and should be the parties to ake the biggest hit,
Yes, the should, but they never take the hit alone. Insurances and pension fonds would have had to announce big losses, too, and they’ve their own share of trouble, anyway.
The race was on in the 1990s to create banks and corporations that could take optimal advantage of the globalization agenda of the USA. That’s why Glass-Steagal had to go and why the Eurozone had to be expanded as far and wide as possible. The Germans were by far the greatest beneficiaries of that Eurozone expansion as it gave their banks and corporations a continental market similar to that of the United States. That they mismanaged that market is self-evident to everyone but the Germans and those in thrall to neoliberal ideology. They must blame the victims. Of course, on the elite level, the victims were deeply complicit in their victimization, but the Germans were at the controls throughout, and now refuse to bite the bullet. Of course, the Americans do, too, using endless Fed and Treasury interventions to prop up an unsustainable lifestyle. So long as both countries are feared, I must sadly state that they will get to castigate whomever they wish and get away with whatever they want to.
The Pirate Party, while irrelevant to finance-centric discussions informed by the binary question of to euro or not to euro, are an interesting omission from the percentile breakdown Richter lists.
Although light years from the slick “Yes We Can” microtargeting that astronomical funding and eternal campaign cycles engender, simple German campaign posters are quite interesting. The CDU has gone with the slogan “Strong Together”, plunked securely onto a sea of yellow & black, with snaps of Merkel plugging dowdily away like a Volvo. The FDP are harking continued fiscal strength, while the SPDs campaign could be likened to the lazy taking for granted of its base of the American Democratic party. Die Linke has a refreshingly provocative poster up which advertises higher retirement benefits “instead of collecting bottles”; a shout-out to the elderly which Germany has shamefully swept aside and forgotten, who survive the benefits gap by returning bottles. They also tease a “millionaire tax” along with the affordable rent the SPD & Greens are also offering.
The Pirates alone appear to have a knack for the modern advert, with slogans like ~”sharing is the new having”~ , ~”transparency instead of corruption”~, with others for privacy and against genetic engineering & patenting.
Merkel’s a shoe-in but one wonders how long orthopedic nursing shoes will appeal to millenial Germans and more especially Gen X Germans rapidly approaching seniority.
All the hate from the german politicians and media has done only good things to my country.The sympathy and friendship from every where,all around the world shows that.Officially we will have the record number of 17 million tourists this year but this number will be evebtually reach 20 million.All this while our tourists experts say that greek can not handle more than 22-24 million tourists.25 million are our max limit.
Now since the editor of the “Bild”-racist newspaper which attacks greeks on a daily basis has become the chief editor also of the “Spiegel” we might reach this limit very soon.So one word to our neighbours in the north:Keep it up folks.
Some small corrections ;-)
That record number of 17 million tourists is not a record – that might have been the 19 millions of 2009. And quite a lot of those who came back just came because they couldn’t go to Egypt etc. Greece will have to do something to keep them. I wish you the best of luck.
Blome was not chief editor of Bild, but deputy, and was supposed to get deputy chief editor of Spiegel, and chief of the capitol city editorial department.
There was some controversy inside the Spiegel about that, and right now it looks like Blome will get a much smaller role in Spiegel, if any (one question still open: why does he have a role in german media at all?).
Besides: Bild is not really racist, but populist. That paper habitually exceeds borders of common sense in any and all directions. Being treated bad by Bild is a kind of accolade.
Dear Uwe,
Bild is very well racist.I guess you know this and I have difficulties to understad how you can defend them.For example:This newspaper has printed the whole book of the racist Sarrazin in their newspaper.A guy who was called as a racist even by he UN:
http://www.spiegel.de/international/germany/un-anti-racism-committee-reprimands-germany-over-sarrazin-comments-a-895247.html
As for Blome.After all the protests in the last days he has indeed not becoming the editor (or co-editor or what ever).Now he “only” sits in the chief editorial staff of “der Spiegel”.This for me is not “a small role”.
http://www.tagesspiegel.de/medien/ende-einer-titel-geschichte-blome-wird-nicht-spiegel-vize/8706672.html
And at least:2009 was a very bad year for greek tourism.Because of the recession back than all over the world.19 million may be only true if included the domestic tourism.This years 17 million foreign tourists are indeed a record.More so since this number is for many reasons an underestimation.The crisis in egypt may play a role in this but not as big as they want make you believe in the german media.Most of the growth comes from the tourists from russia,the balkans and..china!
Greetings.
Hello Charis,
i don’t defend Bild, i just accuse them of more crimes: They do anything to get more circulation.
And i also refuse to believe that germans and greeks belong to different races. So, what about a different word? Xenophobia? Bild uses that regulary.
Uh, Sarrazin? Does that count as a kick below the belt?
Regarding Blome, it’s not a small role, but a smaller one than originally planned, if he will get any role at all (that’s still an open question).
Regarding 2009: http://www.mfa.gr/missionsabroad/en/about-greece/tourism/ and https://en.wikipedia.org/wiki/Tourism_in_Greece state that there have been more than 19 million visitors in that year. But that doesn’t really matter.
And lastly: i don’t believe german media when they talk about Greece. I can’t stand our press when it informs us about southern europe (i’m not that stupid).
But the growing number of russians visiting greece might actually validate my point: In the last years many russians have been visiting egypt.
I think Germans understand that there are no easy answers and that departing from the Euro would shake things up too much hence Merkel retains the confidence of her demographic since she shifts as things shift but not too far.
The European political/economic situation is very complicated much more so that ours here in the U.S. where major-league chicanery is the new normal and that’s all you need to understand to grasp political reality here. Germans can count their blessing and at least know that rationality has not been entirely banned from the culture.
Think militarily. After a century of devastation (1870, 1914, 1939) the Europeans sure did. They knew they needed “something” to shore up the Balkan flank. Especially against darker skinned folks who live next door and believe in a different holy book. Turkey wasn’t it, too Oriental and on the wrong team. Greece fits the bill: they’re olive-skinned, it’s true, but at least they’re Christians.
Manning the outpost is very expensive, as Rome, Portugal, Holland, Spain, England, and the US found out.
And debt forgiveness is officially off the table until after the election. An explosive topic. Since European central banks and bailout funds hold that debt, it would hit taxpayers – and German taxpayers more than any other – if it were forgiven. Wolf Richter
Why are bailouts for the general population almost never mentioned, i.e. Steve Keen’s “A Modern Debt Jubilee?” Because they would have to be combined with new credit creation limits to prevent price inflation and the right of banks to create debt is sacrosanct?
It is all so reminiscent of German literature ie. Greece being Das Schloss with its’ citizens taking a stand against the EU system in the futile pursuit of an unobtainable goal ie. re-building their nation, and re-establishing Greek economic sovereignty to boot.
But in reality, it is more like the tragedy of Der Prozeß as Greece strikes a Faustian bargain with Germany and its’ Eurohounds of Brusselsville, exchanging their beautiful Greek islands and Acropolis on-the-cheap, for comical crisis-aid farce which won’t stop the inevitable complete breakdown and collapse, the “Weltuntergang” of Greece. Even Weimar had better options than Greece does today.
As for Merkel and the Krauts……their soul was sold decades ago to the “EUvil” by Adenauer. They will be damned if they prop up everyone else, and damned if they don’t, so they are indeed the Götterdämmerung in Europe.
And it won’t inevitably be too long before the triumphant recovery of Mr Dollar leads him back outside, to occupy the best sunbeds in the Med instead! A kind of Marshall Plan 2 solution…..
Olive skinned and weimarer republic..
It is funny to see all these repeating stereotypes even in a more left leaning blog.
One last word about the german elections.I guess even the last german has at least heard about the fact that none of these “bail outs” are going to any greek or any “PIGS” but went directly into the throats of the deutsche bank and general societe banksters.
I also heard that the voter participation will be at 60% or even lower.This means that almost half of the germans are as tired about corrupt politicians and this post-democracy we live in since 2008 as the rest of europe or the USA.
It is time for more “direct democracy”.Actually we dont have any other choice.Uwe^^^ and me could sort it out without any problems.We could find a solution within 5 minutes.Our politicians and our media who are corrupt,criminal and only obey to banksters and mobsters cant.
Charis
Just a quick question. Have you heard of Dimitris Kazakis?
Yes.Ofcourse.He is the “greek Roubini”..but he is not the only one.
Would you ever consider voting for him?
I have also been watching these polling numbers from Germany and as you say, while the opposition does not have the numbers to stop Merkel, Merkel and her current partners also don’t have the numbers to govern alone .
And so what happens if she does enter a grand coalition with say the SPD and then Greece blows up on Germany this year or next? One would think, it would be a pretty good reason for the SPD to blow up the grand coalition as well.
Maybe I don’t quite get it, but the equation would seem to be, Euro crisis= new German elections.
Don’t trust these polls too much. The quality of our election forecasts may be good, but is still nothing to brag about, anyway. This shows how good the quality was in 2009, comparing the actual votes with the polls taken just 10 days before the date.
It’s vacation time around here, meaning that the forecast quality is even more doubtful. Vacation in Nordrheinwestfalen (NRW), the federal state with the most people, ends this weekend, and the FDP in NRW managed to surprise in the last local election.
Also often a number of CDU voters have voted tactically for FDP, especially when the forecasts for the FDP were bad.
>it would be a pretty good reason for the SPD to blow up the grand coalition as well.
That is unlikely to work. SPD would have to show different politics regarding the european crises long before the new election, and SPD cannot do that in any coalition with the CDU.
Besides: The SPD has already lost a lot of voters (forecasts for 22% were unthinkable 20 years ago), most of them left and progressive leaning ones (i think). The top people in SPD might think that they cannot risk to alienate the more conservative ones.
Now if AfD manages to get a respectable number of votes, then CDU might not want to break a coalition, too, for similar reasons.
Any grand coalition has to try to avoid the breaking of the euro zone at all costs.