Tuesday, February 07, 2012

Is Angie practicing "Anschluss economics"?

Marshall Auerback isn't quite ready to go that far. But he does spell out the argument for that interpretation in Anschluss Economics – The Germans Launch a Blitzkrieg on the Greek Debt Negotiations Naked Capitalism 01/30/2012:

So to repeat the question: how do you preclude Portugal, Ireland and, indeed, Spain from asking for the same deal as Greece, if the negotiations succeed?

Answer; you can’t. So the Germans throw a politically impossible demand in front of the Greeks, in effect saying, "No more money unless you effectively surrender your national sovereignty." And that’s the implied warning ahead for the other periphery countries which look to secure the deal currently on the table for Greece.

In effect, the Germans (behind the auspices of the troika) are saying, "It’s fiscal austerity on our terms. You try to renegotiate like the Greeks and we take you over. The other alternative is that you leave."

Anschluss economics, plain and simple.

Is this too harsh an assessment? Well, when their national interests are at stake, the Germans are perfectly prepared to shed the "good European" persona and play hardball. Think back to how the Bundesbank engineered the departure of Britain from the ERM back in the early 1990s, and you’ve got the template for today. By publicly suggesting that sterling was overvalued and refusing to offer support to the British pound (in contrast to its subsequent defence of the French franc), then BUBA President Helmut Schlesinger virtually assured the UK’s ejection from the Exchange Rate Mechanism. Let’s face it: history shows that Germany doesn't do "subtle" very well. This looks like a blitzkrieg, plain and simple. Spain, Ireland, Portugal and Italy – you have been warned. [my emphasis]
But this is not the notoriously conservative Bundesbank of the 1990s doing this. It's the elected government of Germany. And previous governments since Konrad Adenauer, i.e., every government the Federal Republic has had, was more committed to being "good Europeans" in this sense than Angie is.

On the other hand, it's an old diplomatic cliche that "German diplomacy" is an oxymoron.

Still, even taking that into account, Angie is the worst Chancellor the German Federal Republic has ever had. Ludwig Erhard included.

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