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Wed Oct 10th, 2012 at 02:27:56 PM EST
Jürgen Donges, a member of Germany’s 5 strong Council of Economic experts, said clearly that when Germany is rescuing Greece or Spain, it is thinking of rescuing German banks with exposure to in these countries.
Nothing we haven't said a 1000 times, but let's just mark it here: it is the German banks being bailed out by the back door.
[editor's note, by Migeru] The story was carried today in Eurointelligence (see the Salon):
German economic advisor says Germany is using bailouts to rescue its own banks
On Sunday Salvados, a TV program from Spanish station La Sexta, aired a reportage (video) on the relationship between Germany and Spain in the crisis, under the title Viva Spanien. The program culminated in an 18-minute interview (see clip with supporting text from La Sexta) with Spanish-born German economist Jürgen Donges, which has had a great impact in Spanish media. Donges is a former German government economic advisor to the Kohl and Schröder administrat[ion]s, mischaracterised in some current press reports as an advisor to Merkel. There is an English-language summary at Forex Crunch.
Some of the key moments of the interview are as follows:
Donges points to household debt as a key indicator that 'Spain had been living above its means', for instance buying high-end German cars. This leads to a discussion of the mutual responsibility of Spanish borrowers and German lenders, which Donges resolves by pointing out that a car buyer informs himself about the car much more than he cares to do about taking a loan. Conversely, on lender responsibility Donges says he never advocated rescues of other countries "if the issue is to save our banks we should give the money to our banks" which is not done for political reasons. He concludes "it is true that, when we talk about 'rescuing Greece or Spain', and we economists say so, we're rescuing our banks exposed to those countries. It is clear to us."
(More below the fold)
To this, I added
I watched the programme last night. There's more than is reported on Eurointelligence:
On politics, Donges first explains that Merkel must insist on conditionality because Germany has a large number of bankrupt municipalities, and social services are being cut affecting the citizens, who cannot then understand that Germany is negotiating the size of large bailouts of other countries. He then says Merkel's hard image abroad 'doesn't fly' in Germany where people know 'she always gives in' (as in last June's summit where she was 'blackmailed by Hollande, Monti, and Rajoy'). Finally, in relation with the 'fiscal pact' or 'golden rule' Donges says he prefers the behaviour of Zapatero and Rajoy, who religiously implement agreements reached at the European level, to that of France.
On cuts to the social safety net, Donges argues that cuts to support for people with dependents "wouldn't have been done in Germany", but that he would have preferred (as Germany has done) to reduce the length of time but not the amount of unemployment subsidies which he calls "a perverse incentive" to not seek work until the subsidy runs out. This leads to a discussion of German reforms, and Donges concludes that the choice is between precarious employment and outright unemployment, and that there is no alternative.
People on twitter reacted to dogwhistles such as when he said men study cars in detail before buying them, like women study washing mashines. Also when he referred to people affected by social cuts as "collateral damage" "as in a war" they had no part in initiating.
To add, the "political reasons" for not bailing out the banks directly were explored in other segments of the programme, but not very explicitly. For instance, the situation of the German banking sector is discussed with the Germany correspondent of La Vanguardia. The German public's frustration over Hypo Real Estate and SOFFIN in 2008 is mentioned. though the name SOFFIN is never uttered (presumably because it would mean nothing to a Spanish audience), the figure of €300bn is given. I am reminded of a Spiegel story from 2008, The Bottomless Pit: Germany's Faltering Bank Bailout Program. The introduction of the debt brake in the Constitution in 2009 at the end of the latest Grand Coalition is also mentioned, though Donges paints it as the culmination of a decade of "reforms" started by Schröder (again, the Hartz reforms are discussed but not mentioned by name). The presence of 5,000 professional lobbyists at the Bundestag is also touched upon. This is a phenomenon that we know is common in Brussels, too, but it is mostly alien to the Spanish political culture which interprets lobbying as outright cronyism (not that it doesn't happen, but it is seen as corrupt and not done openly).
Overall, the programme was well worth watching in full.
Today I also found the following remarkable piece by a Frankfurter Allgemeine editor:
|Merkel in Griechenland: Wir zahlen nur noch für uns selbst - Griechenland - FAZ||Merkel in Greece: We are paying only for ourselves - FAZ|
| Doch beim Besuch von Angela Merkel in Athen an diesem Dienstag muss es nicht um Steuermoral gehen und nicht darum, wie viel Geld jeder Grieche ausgibt. Sondern es muss darum gehen, wie viel Geld der Staat noch braucht. Und Angela Merkel weiß genau: Der Staatshaushalt in Griechenland sieht inzwischen anders aus, als viele im Kopf haben. Griechenland macht Schulden, um Zinsen zu zahlen|| Doch beim Besuch von Angela Merkel in Athen an diesem Dienstag muss es nicht um Steuermoral gehen und nicht darum, wie viel Geld jeder Grieche ausgibt. Sondern es muss darum gehen, wie viel Geld der Staat noch braucht. Und Angela Merkel weiß genau: Der Staatshaushalt in Griechenland sieht inzwischen anders aus, als viele im Kopf haben. Griechenland macht Schulden, um Zinsen zu zahlen|
|Das bedeutet: Das Geld, das die Helfer zahlen, geht fast vollständig als Zinsen an die Gläubiger. Und wer sind die Gläubiger? Der Internationale Währungsfonds, die Europäische Zentralbank, der Hilfsfonds EFSF und die Eurostaaten. Seit dem Schuldenschnitt im März, bei dem die privaten Gläubiger auf einen Großteil ihres Geldes verzichten mussten, hat Griechenland praktisch nur noch öffentliche Kreditgeber.||This means that the money that the helpers pay goes almost entirely to the creditors as interest. And who are the creditors? The IMF, the ECB, the EFSF rescue fund and the Euro states. Since the debt writedown in March, in which private creditors had to lose money, Greece has practically only public creditors.|
| Unter dem Strich zahlen also die internationalen Hilfsgeber das Geld an sich selbst, wenn auch auf einem lauten und beschwerlichen Umweg durch den griechischen Staatshaushalt. Das Hilfsgeld ist vor allem zu einem nützlich: Es hält die Fiktion aufrecht, dass Griechenland eines Tages seine Schulden selbst tragen könnte.||The bottom line is that the International aid givers are paying themselves, even if through a loud and laborious detour through the Greek state budget. The aid money is above all useful for one thing: it maintains th fiction that Greece will one day be able to pay its debts.|
Might this be a sign of a turning political tide in Germany? How will this affect Merkel's reelection bid a year from now?