Germany and Austria may have their differences, and their love for each other may not always be palpable, but when it comes to money, they’re joined at the hip. And have been for decades. The peg of the Austrian schilling to the Deutsche mark that was put in place in the early 1970s survived even external shocks, for example when Italy devalued the lira on January 6, 1990, or again on September 14, 1992.
These devaluations solved, albeit inelegantly, Italy’s competitiveness problem, and by 1993, an export boom led to large and enduring trade surpluses—that gutted the industries in neighboring Austria, particularly in the State of Carinthia. Yet Austria maintained the peg to the DEM. Over the years, it put its economy more or less in order. Italy, however, is once again in dire need of a big fat devaluation.
So as political revolts were breaking out left and right in Germany against—and for!—endless bailouts of troubled Eurozone countries, Austria set off its own fireworks: Frank Stronach announced that he’d form a political party by the end of September for the national election in 2013—with the goal of pushing Austria out of the Eurozone.
He is the billionaire founder, Director, and Honorary Chairman of the Canadian automotive component maker Magna International that wanted to buy bleeding-to-death Opel from bankrupt GM in 2009. What raised some eyebrows at the time was the source of funding: Sberbank Rossii, a big Russian bank majority-owned by the Central Bank of Russia.
The fundamental principles of his party would be “truth, transparency, and fairness,” Stronach said in an interview. A core group of people was in place, the party platform was nailed down, though some polishing would still be required. “We’re against the crony economy in this country, we’re against corruption,” he said. There were elements of Ross Perot. “Government is the management team of a country; unfortunately, this management team is made up of politicians.” Austria is “over-administered,” the fault of the government, not of civil servants. “I’ve always said there are no bad workers, only bad managers.” Europe, he added, should guarantee peace along with free movement of goods, people, services, and capital, “but Europe can only function if every country has its own currency.”
“Insolvency procrastination,” he’d called the ESM, the not yet existing bailout fund that is still hung up in the German Constitutional Court. If people in the private sector perpetrated a similar act, he said, they’d be “punished by imprisonment.” And time would be of the essence: “the sooner Austria gets rid of the euro,” he said, “the better for the Austrian people.”
He is well connected to the political and economic elite—despite his outburst against Austria’s “crony economy.” Unnamed prominent people and frustrated politicians of various stripes are expected to join him. Observers estimate that his party will obtain 10% or more of the vote in the national elections and will be able to enter parliament.
Yet, challenges lie ahead. The 79-year old may have trouble in debates against slick operators who’ve been doing this all their lives. He is being accused of sheltering his money in Switzerland and elsewhere, rather than paying taxes in Austria. And he has a checkered political career: Canadians, who’ve claimed him as their own for decades, watched him lose in the federal elections of 1988.
But in Austria, he will stir the pot and heat up the debate. Ever more people will think out loud if it’s necessary to remain in the Eurozone and pay endlessly for countries like Greece, Spain, and Italy. A chorus of prominent voices will reaffirm that Austria, like Germany, believes in the benefits of hard money and a central bank that doesn’t fund governments. And they’ll admit that other countries might be better off with devaluations to cure their economic and fiscal ills….
The mere fact that these debates have entered electoral politics—rather than being held behind closed doors, or not being held at all because the whole topic is taboo—is another step closer to the ultimate demise of the Eurozone as we know it today.
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.