A hullabaloo has flared up in Germany over squashing democratic discussion on whether or not taxpayers should endlessly pay to keep Greece in the Eurozone and protect bondholders—namely the ECB and national central banks—from having to recognize reality on the worm-eaten Greek debt in their basements. The tools: political pressure, fake moral outrage, and ridicule. And not just in Germany. NPR announced on Sunday that only some “hardliners” in Germany were standing in the way of the world being saved by the ECB and German taxpayers.
The pressure comes from all sides: Chancellor Angela Merkel should forcibly shut up these unruly, inconvenient, sound-bite-hungry “hardliners” that make so much sense to the people who’ll have to pay for it all. Prime target: Alexander Dobrindt, General Secretary of the CSU, Bavaria’s sister party to Merkel’s CDU. His exasperation with successive Greek governments, their lies and broken promises, their extortion efforts and demands for ever more money has bled through. So he told the tabloid Bild that he sees “Greece out of the Eurozone by 2013.” After which it would get a Marshall Plan, he said. And rumors that the ECB would soon buy potentially unlimited amounts of sovereign bonds incited him to call its President Mario Draghi “the counterfeiter of Europe.”
He “is playing with fire in the European house,” warned Andrea Nahles, General Secretary of the opposition SPD. This must be forbidden; Merkel’s reminders to tone down the rhetoric and wait for the big Troika report simply weren’t enough, she warned. Thus has begun the process of strangling democratic discussion on an expensive and risky engagement for taxpayers.
The gagging attempts came even from the ranks of Dobrindt’s own coalition. “Europe is too valuable to endanger it with populist yapping,” said Justice Minister Sabine Leutheusser-Schnarrenberger; she demanded that his boss Minister-President of Bavaria Horst Seehofer gag him personally. Dobrindt was ridiculed as “Stammtisch clown.” CSU colleague Max Straubinger called it “provincial griping.” He was worried that Greece, with a devalued drachma, could no longer afford to buy imports—thus German exports—and that other dominos would fall.
Exports, Germany’s sacred cow, are already being slaughtered, and the country is awash in layoff talk. Friday, it seeped out that Opel, GM’s bleeding subsidiary, had a “secret strategy” of cutting 30% of its workforce—which the company hastily denied. Earlier last week it emerged that Siemens, Germany’s third largest employer, was planning to cut jobs to counteract orders that had collapsed by 43% in the first three quarters! Retailers like Karstadt announced layoffs. Steel conglomerate ThyssenKrupp is cutting hours.
The Ifo Business Climate index, after having dropped sharply in July, skidded further in August as the economy “continues to falter.” All-important export expectations slipped into the red zone for the first time in nearly three years. And retail expectations were down for the sixth month in a row—exacerbating a debacle in the making.
Industrialists are worried that a Greek exit, or its delay, could drag down other countries, and thus demolish German exports—a political nightmare for Merkel. Hence the need to hide behind something big and impenetrable, namely the Troika report, that could protect her both ways.
So she issued a dictum not to invoke Greece’s exit until after the report has come out. Much depends on it. Merkel and her ilk cite it as basis for their future decision on Greece, and they’re all going to hide behind it, regardless of how they will ultimately decide. It will be an effective cover even if an extension of two years and many more billions are approved—highly unpopular in Germany where 72% of the people were against such measures. But it wouldn’t matter; from Merkel on down, they’d all take cover behind the Troika report which would ostensibly tie their hands with incontrovertible “facts,” and it would catch all the blame.
Troika inspectors will return to Greece in September to sort through its economic mess and quibble with officials for much of the month. The report will likely be delayed until October, and a decision on Greece, especially if negative, may well drag into November—past the US elections, just as President Obama was rumored to have requested. Cobbling the report together is “a fairly extensive and complicated process,” said Merkel’s spokesperson Steffen Seibert; and there would be no “prescribed deadline.” Which confirms what has been her strategy all along. Read…. Letting Greece Twist In The Wind.
Enjoy reading WOLF STREET and want to support it? 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.
A pity that discussions about the euro crisis are sparse and opinions of knowledgable people (Sinn,…) are quickly suppressed. People in Germany would need to be confronted with more articles like that one
Not just in newspapers but also in TV. Whatever conclusion they might draw from it – but there's just no real discussion going on – that's what scares me the most, besides the astronomical sums involved. It's weird how public opinion is influenced and canalized by the mass media at the moment. Currently I don't live in Germany but that's the impression I get from abroad. Democracy and our belief in the "Rechtsstaat" is eroding – where will that yield? Thanks for your posts Wolf!
"So she issued a dictum not to invoke Greece’s exit until after the report has come out."
So far, w/o exception, every report by the Troika proved that Greece did not deliver on the promises and contracts made. Despite this, the paymentes were released. Therefore there is no reason to hope that this laughable show will change.
The ECB doesn't want Greece to become the next Iceland and prove countries CAN survive without their corrupt influence. Germany has held Greece up in order to keep German exports flowing to them. Draghi will get his way and blow the Euro to smithereens while Germany exits the Eeeuuuuwwwwwww……
Spent a couple of internet free days in south Bavaria, so respond late. This is a valuable overview of the situation in Germany.
The people that I talked to are fed up with Berlin, and are happy with the "Quertreibers" the lateral movers in Bavaria. A grand old commentator just published a book "Bavaria can make it alone" which appears to thumb that collective nose at what Merkel is doing.
The comments all confirm your proposition that Merkel is hiding and waiting for the Troika to give the signal. The feeling is she will then improvise, and find a way to walk the plank for Germany, a willing hostage to irresponsible debtors.
Thanks for the post- this blog is one of the only sources giving the German mood a fair attention.
I just don't understand how no one is willing to publicly encounter the problem of Germans paying out interminably without some sort of direct fiscal control. It's understandable why constituencies of the beneficiary countries don't want that, and hell, maybe we shouldn't as the world at large, but why shouldn't isn't that explicitly on the table during the media coverage?
If Greece had followed the terms of it's first bailout to the letter (the terms of which, let's not kid ourselves, were going to be horrendous for the Greek economy and people), then I can understand intransigence about further sacrifices by subsequent borrower nations. The fact that they didn't, and are using the same threats to extract further loans and concessions on terms simply forces creditor nations into a corner.
If Germany et al. make concessions again, they're toast. They'll have more unrecoverable debts, more leverage in the hands of every other economically material member of the EU, and less legitimacy in every subsequent negotiation.
They may actually have the resources and credit to subsidize the GIPSI governments through a couple years of adjustment, by which time the world economy may have recovered enough for them to be self-sustaining. However, even in this optimistic scenario, they will never really be repaid the loans.
So the question remains: does Germany benefit more from the existing EU social and monetary order than the cost of transfers to its weaker member states in the medium term? The euro has been phenomenal for German exportive industries, but good enough to justify huge ongoing bailouts. I don't know.
It seens we are reliving the 1920s — Germany destroyed by enemies without and traitors within, followed by recovery under some form of resurgent "national socialism."
Let us hope that this in turn is not again devastated by worldwide "Grosskapital!"