Friday, October 05, 2012

Euro miseries

Spain lately has been a continuing fountain of bad economic news. Paul Krugman updates us on how the news isn't likely to get better enough to keep Spain in the eurozone with impoverishing the country on a more-or-less permanent basis: The Economic Consequences of Mr. Rajoy 10/03/2012.

Wolfgang Münchau as usual has insightful things to say on the euro crisis.

In Warum schon die deutsche Einheit ein Fehler war Spiegel Online 26.09.2012, he makes a provocative argument that today's problems with the euro lie in Helmut Kohl's approach to German unification:

Die deutsche Vereinigung ist nicht die Kehrseite der europäischen Einheit, sondern ihre Antithese. Die Wiedervereinigung ist nicht nur eine der tiefen Ursachen der Euro-Krise, sie ist auch eine der Ursachen unserer Unfähigkeit, die Krise zu lösen. Genau darin besteht die eigentliche Tragödie des Helmut Kohl: Mit seinem größten politischen Streich (deutsche Einheit) säte er den Kern für die Zerstörung seines größten politischen Traums (europäische Einheit).

[German unification is not the flip side of European unity, but rather its antithesis. The reunification is not only the deep cause of the euro crisis, it is also one of the causes of our {German} unwillingness to solve the crisis. Exactly there lies the real tragedy of Helmut Kohl: with his greatest political strike (German unity) he sowed the seeds for the destruction of his greatest political dream (European unity).]
His argument is that the continuing economic subventions from the western German states to the eastern ones has in reality badly handled and, among other things, build understanable skepticism on the part of German voters for the necessary eurozone transfers to day. And he suggests that if the unification had first taken the form of a confederation of two separate German states, that eastern voters would have been less eager after a few years of that to become part of a unified state with West Germany. And that West German voters and leaders would have been more likely to handle a crisis like the euro crisis better.

This is intriguing. I've thought for a while that Chancellor Angela Merkel has been especially heavily influenced by her perception of the German unification, taking it as a model for managing the EU, and likely understanding it as mainly a takeover of the east by the west. And Münchau hints that he thinks that if Angela Merkel had stayed in East Germany and made her political career there, she wouldn't have the chance to make the mess she's making and continuing to make in the eurozone crisis.

He rightly gives Merkel's Christian Democratic Union (CDU) the main blame for the euro problem, though he clearly understands that the Social Democratic Party (SPD) has some share of the blame.

And in Peer Steinbrücks größte Fehleinschätzung Spiegel Online 26.09.2012, he looks at the likely SPD candidate for the Chancellorship in 2013, Peer Steinbrück, who served as Merkel's Finance Minister during the Grand Coalition (CDU/SPD) of 2005-2009. "Die SPD hat den einzig möglichen Kandidaten nominiert, der die Finanzkrise damals genauso falsch einschätzte wie die Bundeskanzlerin." ("The SPD has nominated as the only candidate possible who misjudged the finance crisis [of 2007-2008] as badly as the Federal Chancellor [Merkel].")

Im September 2008, kurz nach der Pleite der amerikanischen Investmentbank Lehman Brothers, stellte sich Steinbrück vor den Bundestag und polterte, die Krise sei vorwiegend ein amerikanisches Problem. Es war eine der größten Fehleinschätzungen im gesamten Krisenmanagement überhaupt. Steinbrück hatte kein Gespür für die Verflechtungen im internationalen Finanzmarkt, auch nicht für die Auswirkungen auf die Realwirtschaft, die er lange herunterspielte.

Kurz nach der Lehman-Pleite haben Merkel und Steinbrück zusammen die bislang verheerendste politische Entscheidung in der Euro-Krise getroffen. Als man sich am 12. Oktober 2008 zum ersten Euro-Gipfel überhaupt in Paris traf, einigte man sich auf deutschen Druck hin darauf, dass jedes Land für sich einen Schutzschirm über das eigene Bankensystem spannen sollte. Diese Entscheidung war der Auslöser der Euro-Krise.
Steinbruck, writes Münchau, "war der klassisch national orientierte Finanzminister."

And he gives a very good description of how compromised the SPD really is in the euro crisis:

Die Nominierung dieses Kandidaten ist nicht der eigentliche Fehler der SPD, sondern das Versagen, eine inhaltliche Alternative zur Euro-Krisenstrategie zu entwickeln. Es gab keine inhaltlichen Gegenvorschläge zum Fiskalpakt, lediglich die Kopplung eines Ja der SPD im Bundestag an eine Finanzmarktsteuer. Das war purer Populismus, denn eine solche Steuer wird in der Praxis kaum umgesetzt werden, und schon gar nicht im Alleingang. Auch mit seinem Vorschlag, Griechenland mehr Zeit zu geben, unterscheidet sich Steinbrück nicht wirklich von Merkel. Denn das Allerletzte, was die Bundeskanzlerin will, ist eine Griechenland-Krise, die auf den Rest Südeuropas überschwappt, und sicher nicht im Jahr vor der Bundestagswahl.

Die Alternativlosigkeit sozialdemokratischer Politik ist somit konsistent mit der Wahl des Kanzlerkandidaten. Mit Steinbrück als Herausforderer hat Deutschland jetzt schon eine Große Koalition. Und da die Grünen ebenfalls ihre europapolitischen Konturen weitgehend verblassen ließen, von der FDP einmal ganz zu schweigen, bleibt für echte Pro-Europäer nur Platz ganz links außen; bei den Linken und den Piraten, wenn es die dann noch geben sollte. Es ist die eigentliche Tragödie von Steinbrücks aussichtsloser Vizekanzlerkandidatur.

[The nomination of this candidate is not the real error of the SPD, but rather than failure to develop and conceptual alternative to the euro crisis strategy {of Merkel}. There was no conceptual counter to the fiscal pact, merely the coupling of a Yes by the SPD in the Budestag to a financial transaction tax. That was pure populism, because such a tax will in practice hardly be enacted, and certainly not on a single-nation basis. Even with his demand to give Greece more time, Steinbrück doesn't really distinguish himself from Merkel. Because the very last thing the Federal Chancellor wants is a Greece crisis that slops over into the rest of Europe, and certainly not in the year before the Bundestag election.

The alternative-less Social Democratic politics is thereby consistent with the selection of the Chancellor candidate. With Steinbrück as the challenger, Germany really already has a Grand Coalition. And because the Greens in any case have squandered their Euro-political contours, and forget the FDP, for true pro-Europeans there is only a place on the far left; by the Left Party and the Pirate Party, if they still exist. That is the real tragedy of Steinbrück's hopeful candidacy for Vice-Chancellor.]
By that last comment, he means that Steinbrück and the SPD expect to come in second place and form a Grand Coalition, in which the junior party gets the Vice-Chancellorship. Steinbrück may also want to serve as Finance Minister, which he could along with being Vice Chancellor. Joschka Fischer served as Vice Chancellor and Foreign Minister simultaneously during the red-green coalition.

Münchau provides a very good description of how badly the "center-left" parties have failed badly in this depression and euro crisis. He's talking about the German case. But similar observations could be made about the social-democratic parties in France, Spain, Portugal, Greece and other countries.

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