Merkel's choice: economic reform or populism

As the economy weakens, Ms Merkel faces a choice between the populism preached by a large segment of her conservative troops to win re-election or fundamental reform. Recent history suggests economic woes can bring out the best of German politicians. When the economy was last stagnating and haemorrhaging jobs, Gerhard Schröder, her Social Democratic predecessor, responded with Agenda 2010, a tough and unpopular package of benefit cuts and labour market reforms. The measures led to Mr Schröder's premature ousting from office, ironically a few months before they began to bear fruit.

The record of the grand coalition, blessed by the creation of 1.6m jobs in the past two years, is so far not as impressive. It courageously raised the retirement age by two years and began to fix Germany's ballooning budget deficit - albeit thanks to booming tax revenues. Yet it could not muster the strength to finish Mr Schröder's job of labour market reform and fixing social security. If fact, it has reversed some of the Agenda 2010 reforms.

So could the looming downturn herald a return to bitter medicine? There are reasons to fear it will not. Indeed, next year there is more likely to be a bout of populist rhetoric that could make even Hugo Chávez, the Venezuelan president, blush.

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Germany's rulers face the choice between being honest now or resorting to populism to win re-election and then facing an unpleasant backlash.

Reform always hurts people so is opposed, but it is necessary (for the rich and their "growth"). But opposing it gets you labelled a Chavezist. I wonder what we should do about the permanent use by the neolibs of insults (or, more precisely, of what they have turned into insults by parallel propaganda).

Putin maps the boundaries of greater Russia

We need to get this straight. Vladimir Putin's Russia has invaded a neighbour, annexed territory and put in place a partial military occupation. It seeks to overthrow the president of Georgia and to overturn the global geopolitical order. It has repudiated its signature on a ceasefire negotiated by France's Nicolas Sarkozy and disowned its frequent affirmations of Georgia's territorial integrity. Most importantly: all of this is our fault.

The "our" in this context, of course, refers to the US and the more headstrong of its European allies such as Britain. If only Washington had been nicer to the Russians after the fall of the Berlin Wall. If only the west had not humiliated Moscow after the break-up of the Soviet Union.

Surely we can see now what a provocation it was to allow the former vassal states of the Soviet empire to exercise their democratic choice to join the community of nations? And what of permitting them to shelter under Nato's security umbrella and to seek prosperity for their peoples in the European Union? Nothing, surely, could have been more calculated to squander the post-cold-war peace.

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Moscow's invasion of Georgia and its public scorn at the likely international response speaks to an entirely different mindset: a retreat from integration and a preference for force over rules. Russia's neighbours are told they can be vassals or enemies. Mr Medvedev boasts Russia is ready for another cold war.

I struggle to see what Russia will gain. It is friendless. Governments and foreign investors alike now know that Moscow's word is worthless. The price of aggression will be pariah status. Mr Putin, of course, will blame the west.

I usually expect better from Philip Stephens. There is no mention of Iras, Kosovo or Saakashvili's aggression.

Pathetic.

In the long run, we're all dead. John Maynard Keynes