Sunday, July 01, 2012

Did Angela Merkel lose at the EU summit last week?

That's the most common spin on the EU summit, that Germany's Chancellor Angela "Frau Fritz" Merkel was forced by unexpected resistance from Prime Minister Mario Monti of Italy and Mariano Rajoy of Spain to make important concessions on bank bailouts. Even Paul Krugman, who agrees with Charles Wyplosz that there wasn't a whole lot of actual substance in the EU summit decisions (Krugman, What Did the EU Summit Accomplish? 06/30/2012) is willing to believe that "in effect, the Latin bloc forced Merkel to bend, at least slightly."

I've previously explained my sympathy for the analysis of Philip Faigle in Madame Non bleibt bei ihren Prinzipien Zeit Online 29.06.2012 that the Monti-Rajoy-Merkel confrontation was very likely coordinated political theater.

The real smackdown pulled off was by the Angienator against French Socialist President François Hollande. He agreed to accept a "stimulus" package that is mostly ephemeral and rhetorical in exchange for his support of the fiscal suicide treaty he and his party had successfully campaigned against, demanding that it be renegotiated. (Wolfgang Proissl, Hollande lenkt beim Fiskalpakt ein Financial Times Deutschland 29.06.2012) The mainstream "left" parties in major countries continue to show themselves singularly unwilling to oppose neoliberalism and austerity during this depression. That's been the case with the Democrats in the United States, Labour in Britain, the SPD in Germany, the PSOE in Spain. The social-democratic party Pasok in Greece may be on the verge of going out of existence over their complete capitulation to Angienomics.

In other words, this 06/28/2012 cartoon by the invaluable Γιάννης Ιωάννος (Yannis Ioannou), in which Frau Fritzdeclares that the EU summit will now be the German Imperial summit:


But here are some analyses arguing that Frau Fritz was the one who got punked:

Erik Kirschbaum and John Irish, Merkel seen as big loser in euro zone showdown Reuters 06/30/2012

Luke Baker, How all-night Brussels showdown pulled euro back from brink Reuters 06/29/2012

Peter Coy, What Really Happened at the European Summit? Bloomberg Businessweek 06/29/2012

Peter Ehrlich et al, Spanien und Italien siegen beim EU-Gipfel Financial Times Deutschland 29.06.2012

James G. Neuger and Helene Fouquet, Merkel Outflanked in Crisis Summit as Hollande Backs Italy-Spain Bloomberg News 06/28/2012: this one takes a French spin that the summit was a big victory for Hollande. This is remarkably credulous.

Here is a more cautious take, which I find far more sensible:

Noah Barkin, Euro defeat for Merkel? Only time will tell Reuters 07/01/2012:

But if the euro zone is still intact years from now, the marathon session in Brussels may be remembered as much for what the German leader extracted from her combative partners as for the bitter policies she was forced to swallow.

"That Monti, Rajoy and Hollande are now happily selling this as a victory says a lot about the diplomatic skills of Ms. Merkel," said Holger Schmieding of Berenberg Bank.

With her plans hinging on parliamentary votes scheduled for hours after the summit, Merkel took an unyielding public stance in advance. That made it appear as if she had retreated, when in fact she may have got much of what she wanted. ...

According to the post-summit narrative, she flinched after Monti threatened to withhold his backing for a new European "growth pact" Merkel desperately needed to win crucial votes in the German parliament later that day.

Several senior European officials in Brussels told Reuters however that Merkel had in actual fact signaled privately in the days before the summit that she could live with the idea of direct bank recapitalizations.
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