Josef Ackermann, Deutsche Bank’s CEO until a couple of weeks ago, who knows a thing or two about skeletons hidden in the bank’s vast closets, said at the Atlantic Council that he is “grateful the US is pushing Europe to act faster.” Just like his US counterparts on Wall Street in 2008, he wanted massive taxpayer-funded bailouts of the banks and exhorted the Eurozone to complete the latest bailout fund, the ESM, quickly. Together with the existing EFSF, they would create a €1 trillion firewall—enough to bail out Spain and its banks, but not enough to do the same for Italy.
He pushed Chancellor Angela Merkel to permit banks to draw on these funds directly—though these funds were designed to bail out countries, not corporations. And the German parliament approved them on that basis. He had “no doubt” that the German people would support rescuing the Eurozone, he said, though he left unclear why he exempted, for example, the French or his own compatriots, the Swiss, who’re also suffering from the Eurozone’s woes.
But the German people weren’t so sure about that—and started to demonstrate. So they were in the streets in Munich to express their opposition to what was being shoved down their throats. The demonstration was organized by Freie Wähler (Free Voters), an organization of voter groups with 19% of the seats in the Bavarian parliament. In addressing the crowd (video), their leader Hubert Aiwanger called for a “Europe of democracy” that would be “open to the world.” He was worried about the “future of our children,” a future where a “child, just after being born, is already liable for the bailout umbrella that great-aunt Merkel had signed.” Rousing applause.
“It’s on us to take our fate into our own hands so that we don’t learn by watching TV what was signed once again in Brussels,” he said. “These people believe they can turn this very big wheel, but they’re historically forgetful and don’t remember what they promised two or three years ago.”
Money that people put aside during a life of hard work would be “taken hostage by the policies of speculation,” he feared, and would “lose its value in a few years because now we calculate in trillions….” And he added, “we must create a future for our children and grandchildren where not every euro is already in hock.”
But President Obama, feeling Mitt Romney’s hot breath on his neck, didn’t care about German children. He cared about being reelected—and any effluent from the Eurozone quagmire oozing into the US economy over the next few months would impact his chances. So Friday, he exhorted Europeans to act, and as fast as possible. He had a whole laundry list of tasks for them. Most importantly: recapitalize the banks—that is, socialize their losses across borders. He sounded increasingly desperate. Earlier in the week, he’d had a private phone conversation with Merkel. Fruitless probably. But the one he’d had with British Prime Minister David Cameron led to a message targeted at Merkel and her government: come up with an “immediate plan” to solve the crisis and to reestablish the “confidence of the markets.”
And French President François Hollande was dealt a resounding defeat in Germany … that went mostly unnoticed in Germany. But it was front and center in France. He and his country had been under the illusion that he could impose his campaign promises on Merkel’s government—after having antagonized them during the campaign by coddling up to the opposition SPD. So he pushed for Eurobonds and for more government deficit spending to create stimulus. Merkel vehemently brushed off his Eurobonds, though she left a door open for them way in the future, if the Eurozone ever became a political and fiscal union.
Then he tried to implement his campaign promise to renegotiate the fiscal union pact, a hastily drawn-up treaty to induce budgetary discipline into the 25 governments that signed it. Merkel’s grand oeuvre. Hollande wanted to include provisions for additional deficit spending, his “measures of growth,” and he’d block ratification if he had to. He even had the German opposition SPD and EU officials in his camp. But EU officials were just decoration. And Merkel made a side deal with the SPD; she’d support their pet project, a financial transaction tax, and they’d support the fiscal union pact. Hollande was left to twist in the wind.
Humiliation was the word used in the French media. Perhaps the French had thought that the election would change everything in Europe, but it changed nothing.
The German government hasn’t deviated from its principles yet, despite rumors to the contrary: cleanup of budget deficits and implementation of structural reforms in exchange for bailout billions. Growth would come through the private sector, increased competitiveness, and removal of barriers—not from government boondoggles. And her nod towards a political union appeased the federalists in Brussels, but the conditions she attached to it, including ceding sovereignty to Brussels, remain unpalatable everywhere (except in Brussels), thus eliminating any risk it would ever be accepted.