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Eurointelligence Daily Briefing: The implosion of Mario Monti (08.06.2012)
Handelsblatt worries about the cost of Europe to Germany

Under the headline "What does Europe cost" Handelsblatt worries about the huge cost Germany will have to shoulder to safe the euro and European integration. "The Americans say Germany has to supply money to Europe", the paper writes in its leading front page story. "The French request that Germany has to share the advantage it gets because of its low interest rate. Only Germany has the financial power to safe the euro, Brussels says." The paper goes on to add up the sums that Germany is already paying for the euro rescue: €280bn for the EFSF, €57bn as the share for the ECB's SMP, €79bn as Germany's net contribution to the European budget since the year 2000. But all of that was not enough, Handelsblatt writes. "Now the crisis managers develop new ideas on a daily basis: there is the banking union, an attempt to use the German savings for bankrupt banks in the South and there are Eurobonds in which the South would profit from the good German creditworthiness." In an editorial Gabor Steingart, the paper's editor in chief, notes: "It is not the European idea that has failed. It is the belief that one country can live on the expense of the other."

(my emphasis)

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Fri Jun 8th, 2012 at 05:47:43 AM EST
Steingart is right - Germany has freeloaded on the rest of Europe to build up the export machine while holding down the exchange rate and inflation.  Now the instability caused by German irresponsible mercantilism proves that the German economic attitude of living off the rest of Europe is not sustainable.
by Metatone (metatone [a|t] gmail (dot) com) on Fri Jun 8th, 2012 at 06:09:18 AM EST
[ Parent ]
Worth noting, as I haven't seen it noted elsewhere that the Euro allowed Germany to export inflation to Spain and elsewhere...
by Metatone (metatone [a|t] gmail (dot) com) on Fri Jun 8th, 2012 at 06:11:20 AM EST
[ Parent ]
But that's not what Steingart means, he means the rest cannot be living off Germany.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Fri Jun 8th, 2012 at 07:21:34 AM EST
[ Parent ]
Steingart counts a total of €416bn (including EU budget contributions as far back as 2000 -- shades of Maggie Thatcher!).

But, according to Bundesbank balance of payments statistics (pdf), the German current account surplus with the rest of the EU for just the past five years amounts to €564bn.

So, if we're going to get niggly about accounts, Germany is up by at least €146bn.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 8th, 2012 at 09:58:26 AM EST
[ Parent ]
Or he could see this for the euro area, also from the BuBa (PDF):

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 8th, 2012 at 10:15:18 AM EST
[ Parent ]
Here is another estimate of the cost of the Euro crisis to Germany.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Fri Jun 8th, 2012 at 10:15:21 AM EST
[ Parent ]
Those are projections, not established numbers.

Anyway, if Germany's stupid policy blows up in their face, they will have no one else to blame.

Though, of course, they will try...

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 8th, 2012 at 10:22:53 AM EST
[ Parent ]
Though this is interesting:

The whole problem being, of course, one of political will. In which it is clear that German power circles have no intention of respecting the essential stated principles of the treaties they signed.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 8th, 2012 at 10:39:08 AM EST
[ Parent ]
That is what I was referring to.

The cost is, by now, several multiples of the maybe €50 billion it would have cost for the ECB to forcefully prop up Greek bond prices in February 2010.

But a small country had to be thrown against the wall to show that the Ecofin meant business, and here we are.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Fri Jun 8th, 2012 at 11:20:54 AM EST
[ Parent ]
Right.

I don't think German governing and financial elites ever wanted Greece in the euro, and were happy to seize the wall-slamming opportunity. Yet there's a contradiction between their debt-sinner-needs-punishment attitude, and their manipulation of the single currency to their advantage -- both by using internal devaluation to gain a competitive advantage wrt euro area countries (and the "converging" countries whose currencies are euro-pegged), and in benefitting on world markets from improved terms of trade thanks to a softer currency than the DM would have been, as a result of the very presence of weaker economies in the euro-mix.

That contradiction is fundamentally Protestant: judgemental puritanism on the one hand, hard-nosed business attitudes on the other -- and some self-congratulatory bullshit about how you deserve your success because you are virtuous (not underhanded and greedy).

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Jun 8th, 2012 at 12:16:13 PM EST
[ Parent ]
I think the inflation story (which I personally only just realised in this thread) is even more important. Without the Euro, all the hot money that inflated the Spanish real estate bubble (and others) would have needed to stay in Germany - and it's hard to see how it would not have caused inflation in Germany...
by Metatone (metatone [a|t] gmail (dot) com) on Fri Jun 8th, 2012 at 12:28:01 PM EST
[ Parent ]
I don't think German governing and financial elites ever wanted Greece in the euro, and were happy to seize the wall-slamming opportunity.

I wouldn't concentrate on Germany in this instance. It's clear from the record that it's the EU-wide economic policy establishment, irrespective of nationality, that has been responsible for the wall-slamming. The Ecofin and the Commission in particular.

The critique by Daniel Cohn Bendit in May 2010 is forceful and on point.



If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 01:33:32 AM EST
[ Parent ]
"It is not the European idea that has failed. It is the belief that one country can live on the expense of the other."

That two opposite interpretations of the implications of this statement can coexist irreconcilably vividly indicates the limits of our culture in providing for the common good. The cultural power of denial, a tradition of respect for authority  and the imperative to think well of one's self and country, combined with leaders who instinctively play to those traits have, in Germany, led to the majority of the population self righteously assuming that policies that were pursued, in no small part, for the benefit of a few powerful interest groups represented virtuous sacrifices by all for the common good. It is both easy and powerful to frame an issue in terms of common prejudices and traits.

Thus it is scarcely surprising that most Germans react with anger at those in the periphery when lying leaders tell them that the problem is the result of lazy southerners and their corrupt governments and societies not honoring their obligations. This, of course, omits any mention of the fact that the real problem is with corrupt German elites collaborating with corrupt peripheral elites for mutual profit at the expense of the people of both countries. Unfortunately, the citizenry of peripheral countries has also been subjected to comparably idiotic framing, carefully tailored to the history and circumstances of their country, but incorporating the same wealth serving biases that underlie all 'capitalist' cultures.    

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Jun 8th, 2012 at 09:37:10 AM EST
[ Parent ]
Spiegel: Playing Until the Germans Lose Their Nerve (06/08/2012)
We've now reached a phase in the euro crisis when everyone is trying to feather their own nest at someone else's expense.
Except for Germany, it's understood.
Hollande is campaigning to have the European Union help the Spanish rehabilitate their banks without involving itself in their business dealings. But, in doing so, he's much less focused on Spain's well-being than on France's. Once the principle stating that countries can only receive financial assistance in return for allowing external oversight has been contravened, one is left with nothing more than a pretty piece of paper to insure against the vicissitudes of economic life. And, of course, the next banks that will then be able to (and presumably also will) get a fresh injection of cash straight from Brussels are the ones in Paris.

...

The next stage in the crisis will be blatant blackmail. With their refusal to accept money from the bailout fund to recapitalize their banks, the Spanish are not far from causing the entire system to explode. They clearly figure that the Germans will lose their nerve and agree to rehabilitate their banks for them without demanding any guarantee in return that things will take a lasting turn for the better.

...

Germans have always expected that being part of a united Europe meant that national interests would recede into the background until they eventually lost all significance. One recognizes in this hope the legacy of political romanticism. Indeed, only political simpletons assume that when people in Madrid, Rome or Paris talk about Europe, they really mean the European Union.

...

Jan Fleischhauer is the author of "Der Schwarze Kanal," or "The Black Channel," SPIEGEL ONLINE's weekly conservative political column. Black is a reference to the political color of Chancellor Angela Merkel's political party, the center-right Christian Democratic Union.



If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Fri Jun 8th, 2012 at 11:37:36 PM EST
[ Parent ]


If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sat Jun 9th, 2012 at 04:22:34 AM EST
[ Parent ]

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