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oh, and, evil, evil Germans:


Germany will not simply end up importing nuclear-generated electricity from its neighbours. It will also have to import much more gas (presumably from Russia, making it even more dependent on Moscow), coal and oil. Inevitably this will push up prices for everyone else. Thus Germany's unilateral decision could impact the competitiveness of not only German industry but of Europe as a whole already under pressure from an overvalued currency, at least against the US dollar.

We have a euro currency crisis, but the problem is that the euro is too strong!

We have a 20-year liberalisation drive which has made our utilities invest almost exclusively (unless pushed by nasty greeny governments) in gas-fired power plants, but the problem is now that nuclear plant closures make us buy more gas.

We have Germany taking decisions unilaterally when I remember distincly that making energy a EU-level policy was violently resisted by ... tadam ... France!

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 06:05:23 PM EST
[ Parent ]
Of course the fact that Germany will have (perhaps) to import more fuel in ten years has not much to do with the current economy. The reactors shut down are old, small, off the net for months and years anyway, All, newer, bigger , important nuclear plants will operate for a decade at least.

Whatever; as things stand, nobody cares much for the opinion of the rest of the world in Germany now, at least regarding energy.

by IM on Fri Jun 3rd, 2011 at 05:14:50 AM EST
[ Parent ]
nobody cares much for the opinion of the rest of the world in Germany now
Ain't that the truth?
Frédéric Lemaitre warns of a German Sonderweg

Writing in Le Monde the paper's Berlin correspondent Frédéric Lemaitre warns of a German Sonderweg (exceptionalism) for which he cites three examples: The country's decision to abandon nuclear energy by 2022, the German stance on the euro rescue programs and the security policy such as Libya or the decision to massively reduce the number of German troops without having consulted with its neighbours. Lemaitre complains Germany engages into those unilateral decisions which have obvious consequences for many and sometimes all other EU countries without even realizing those consequences.



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 05:25:53 AM EST
[ Parent ]
I should have known better then to feed your addiction.

On the merits, ending nuclear power is different. The other positions mentioned have a lot of support around the world. (Doesn't mean they are correct)  

by IM on Fri Jun 3rd, 2011 at 05:39:25 AM EST
[ Parent ]
Easy on the ad-hominems, Mensch.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 05:46:38 AM EST
[ Parent ]
Exasperation, nothing more.
by IM on Fri Jun 3rd, 2011 at 06:24:52 AM EST
[ Parent ]
Yes, I find 16-month-long slow-motion trainwrecks exasperating.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 06:41:22 AM EST
[ Parent ]
And what does that have to do with the subject of my diary?

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Jun 3rd, 2011 at 05:00:25 PM EST
[ Parent ]
I guess I should't get my news from that self-hating German, Münchau.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 05:48:11 AM EST
[ Parent ]
And that has to what exactly with energy policy?

Furthermore the geram stance in the euro crisis, right or wrong, is shard by the other core countries. So it can hardly be a sonderweg.

And stop bringing nationality into everything, that is ad hominem too.

by IM on Fri Jun 3rd, 2011 at 06:21:28 AM EST
[ Parent ]
And please don't use me as a stand in for others, e. g. Merkel, Weber or Stark. I never said anything about self-hating and wuold prefer you only engage my actual words.
by IM on Fri Jun 3rd, 2011 at 06:35:58 AM EST
[ Parent ]
"The German position" on the creditor bailout does not enjoy widespread support. Germany is unique in the insistence and vehemence of their IMF-style conditionalities.

Everybody else I've seen voice an opinion is either of the opinion that the creditors should go whistle for their money, or that the creditors should be bailed out as smoothly as possible. German insistence on conditionalities even the IMF can tell are impossible to meet (and would be insane even if they were possible) is Unhelpful in the latter regard. So is the German deference to Bild Zeitung on matters of foreign policy.

And then, of course, there's the people who actually understand basic national accounting, who insist that the only viable solutions are to either force the ECB to monetise the debt, default and force the ECB to monetise all new debt going forward, or impose export controls. But we are Unserious.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 3rd, 2011 at 05:57:36 AM EST
[ Parent ]
You mean outside the Netherlands or Finland or France or Austria?
by IM on Fri Jun 3rd, 2011 at 06:23:03 AM EST
[ Parent ]
I must no admit to be confused as to what are exactly the positions of "Germany," the ECB and the IMF.

What you seem to hear most on the debate are the (often needlessly provocative) outbursts of semi-dissidents within official entities or the (usually unhelpful) meta-commentary of various officials.

What entities do, what they official say, and what they unofficially think seem to be 3 different things - which you need to multiply by the number of parties involved.

Result = confusion and thus the ever-worsening perception of crisis by outsiders.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 3rd, 2011 at 07:21:28 AM EST
[ Parent ]
Germany is unique in the insistence and vehemence of their IMF-style conditionalities.

Eh? If only that would be the case. But, from Juncker's privatise-national-heritage call to Bini Smagi's utterances, too many seem to sing the same or similar songs.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Fri Jun 3rd, 2011 at 04:58:31 PM EST
[ Parent ]
German deference to Bild Zeitung on matters of foreign policy

Eh²? Bild is reliably Atlanticist.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sat Jun 4th, 2011 at 04:41:11 AM EST
[ Parent ]
Ignoring the confirmation bias and the Atlanticist whining usually behind the Libya thing, it's interesting how this is spun even in a center-left paper in pro-nuclear France. Germany isn't simply standing accused of going it alone in the nuclear phaseout, but of offering an example to follow to Switzerland (where a much slower phaseout by 2034 was proposed by the government) and Italy (where a referendum is upcoming on 12-13 June, which the opposition treats as another opportunity to defeat Berlusconi, who first proposed a nuclear revival) – and even France's reluctance to go ahead with a second EPR (no, cost overruns have nothing to do with it). The dependence on Russia thing also comes up, renewables don't.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sat Jun 4th, 2011 at 04:37:06 AM EST
[ Parent ]

nobody cares much for the opinion of the rest of the world in Germany now, at least regarding energy.

And rightly so. Most of what Germany hears is the "Serious" position that renewables can never take up a meaningful chunk of generation, that dealing with Gazprom is short-sighted and that closing down nukes is backward and ayatollahesque, when

  1. large scale renewables are already a reality today, and plans towards their extension are well under way;

  2. Germany (like France and Italy - no conflict between these countries on this) has been dealing with Gazprom for 40-odd years and they know how to do this. The 3 countries have needed to import close to 100% of their gas all along, so import dependency is not something new or scary like it seems to be for the UK

  3. Germany has been debating its exit from nuclear for more than a few years, so it's not like this is new. The fundamentally different approach of France and Germany on nukes is precisely one of the reasons why there is no EU-wide policy on energy, so Germany going its route there is not exactly an unexpected snub of its euro partners (and on this topic, it's not even like Germany is isolated in Europe, with Italy and others having also suspended plans to go back to nuclear)


Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 3rd, 2011 at 07:16:22 AM EST
[ Parent ]
We have a euro currency crisis, but the problem is that the euro is too strong!

Yes, that is why there is a euro crisis. Currency too strong => deflation => depression.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 3rd, 2011 at 05:35:22 AM EST
[ Parent ]
You are obsessed too.

More energy imports should if anything weaken the euro. That is the obvious contradiction in FT article Jerome pointed out.

by IM on Fri Jun 3rd, 2011 at 05:42:23 AM EST
[ Parent ]
If a working understanding of elementary Keynesian currency policy qualifies as "obsession," then I'm guilty as charged.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 3rd, 2011 at 05:44:10 AM EST
[ Parent ]
Nuclear power in Germany has nothing to do with Keynesianism. And your thesis that more imports of energy will let the value of a currency rise is quite original and has nothing to do with Keynesian currency policy, basic or otherwise.
by IM on Fri Jun 3rd, 2011 at 06:17:26 AM EST
[ Parent ]
But that is not the contention. I was objecting to Jerome's complaint that a currency cannot simultaneously be in crisis and overvalued. My retort is that a currency can only be in crisis when it is overvalued.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 3rd, 2011 at 06:38:27 AM EST
[ Parent ]
Fine. But the Reichsmark between 1920 and 1923 was undervalued and in crisis.

An extreme example (hyperinflation not that common), but that is apossible crisis too.

by IM on Fri Jun 3rd, 2011 at 06:50:16 AM EST
[ Parent ]
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 06:58:57 AM EST
[ Parent ]
  1. Hyperinflation can only occur in a currency collapse.

  2. Whether the Reichsmark was undervalued or not is a philosophical question - there was no exchange rate at which Weimar Germany could have achieved structurally balanced current accounts, given the Versailles reparations.

- Jake

Friends come and go. Enemies accumulate.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 3rd, 2011 at 07:03:07 AM EST
[ Parent ]
That is neither here nor there. The reparations, I mean. The war debt alone would have made inflation tempting.

And you need a "currency collapse" for a hyperinflation is a bit tautological; a currency collapse is surely a currency crisis.

And there are other hyperinflation examples, so it is a possibility to get a currency crisis without overvaluation.

by IM on Fri Jun 3rd, 2011 at 09:26:43 AM EST
[ Parent ]
You're confusing inflation with hyperinflation.

The war debts could be inflated away with mild inflation and that wouldn't have caused runaway inflation.

War reparations was external debt denominated in foreign currency. You cannot pay that by inflating, and attempting to do so can lead to runaway inflation.

Hyperinflation crises always have to do with trying to inflate to pay debts that cannot be inflated away, be it because they debt is itself inflation-indexed (a relatively recent but dangerous development) or because it is denominated in foreign currency.

In the 1980s there were at least two Eastern European countries which had currency crises as a result of too much foreign debt. Romania went the route of imposing a depression domestically in order to pay the debt, Yugoslavia went the hyperinflation route.

Debt in your own currency can never cause hyperinflation.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 09:39:17 AM EST
[ Parent ]
Migeru:
Hyperinflation crises always have to do with trying to inflate to pay debts that cannot be inflated away, be it because they debt is itself inflation-indexed (a relatively recent but dangerous development) or because it is denominated in foreign currency.

Hm, does the French revolution inflation and the US revolution inflation fit this pattern? My assumption would be that the weakness of the states caused it, and rightfully so as fiat money backed by a defeated state in general becomes worthless.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Sun Jun 5th, 2011 at 01:14:53 PM EST
[ Parent ]
A very readable summary of how hyperinflation can come about is contained in Can Central Banks Go Broke? by Willem Buiter. On page 8, there's
even if the resources needed to recapitalise the central bank are less than the maximum amount that can be appropriated through seigniorage (given by the peak of the seigniorage Laffer curve at A in Figure 1), the extraction of these resources may involve an unacceptably high rate of inflation.
Up to here we're talking about politically unacceptable inflation, but still inflation.
Worse than that, even the maximum amount of real resources the central bank can extract though seigniorage may not be enough to close the central bank insolvency gap. This could happen if the central bank had a large stock of foreign-currency denominated or indexlinked liabilities. In that case, without a capital injection from outside the central bank, the central bank cannot meet its funding needs from its own resources. The result would be hyperinflation and/or central bank insolvency.
Weimar experienced hyperinflation because it had unsustainable debt reparations to pay in foreign currencies (or in gold, which under a gold standard regime amounts to the same thing). Domestic debt can always be paid through seigniorage, albeit at a possibly politically unacceptable rate of inflation falling short of hyperinflation.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 09:47:55 AM EST
[ Parent ]
the EU is in crisis, not the euro. At the end of the day, the euro will still be there... EU institutions, we don't really know.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 3rd, 2011 at 07:02:22 AM EST
[ Parent ]
"But the currency was sound" will be the EU's epitaph.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 07:15:59 AM EST
[ Parent ]
Well, with a little IMF/central bank help, it can be in crisis even when it is no (more) overvalued: by choking the economy with expensive credits and cash-strapped consumers after an initial devaluation. (This was the standard route to high inflation in former East Bloc countries.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Jun 3rd, 2011 at 05:06:33 PM EST
[ Parent ]
Jerome:
We have a euro currency crisis, but the problem is that the euro is too strong!
Presumably you find a contradiction there? Let Krugman clear it out for you: The Strength of a Failing Euro (Wonkish)
So what about the European periphery? Well, those are economies in big trouble -- but they also offer very high interest rates. And more to the point, the relevant arbitrage in the foreign exchange market is between bunds and Treasuries; if the euro zone does splinter, the question is what the value of the remaining core will be, and it's presumably quite high.

The only situation in which you would expect the troubles of Greece et al to mean a weak euro would be if you expected the ECB to help resolve the problems by pursuing an inflationary policy. There's actually a pretty good case for doing that -- but the Germans would never allow it.

So the euro is strong even as the euro system, the euro as a project, turns into a train wreck.



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 06:45:14 AM EST
[ Parent ]
debate.

I think this is not a "euro" crisis, but a political crisis about how much solidarity and commonality there should be between the "core" and the "periphery." The core is currently strongly tempted to go it alone and put the responsibility of the breakup on the periphery.

There will be transfers from the core to the periphery, whether it's organised cleanly or whether it's triggered by a serious depression in the periphery which drags down the core.

I don't think we disagree too much on this.

I think we only disagree on what the focus for the solution should be - ie how the transfers should take place - via the monetary framework and policies or the broader political deal on what the EU is about.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Fri Jun 3rd, 2011 at 07:01:08 AM EST
[ Parent ]
The two are complementary.

At the risk of sounding like a broken record, if you do not remove the threat of punitive policy rates against defaulting €-zone economies, you will have a better than even chance of not having a European Union to implement fiscal policy in by this time next decade.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Jun 3rd, 2011 at 07:06:14 AM EST
[ Parent ]
by Jerome a Paris (etg@eurotrib.com) on Fri Jun 3rd, 2011 at 07:17:25 AM EST
[ Parent ]
Meanwhile, Trichet proposes an EU finance minister without a budget whose only role would be to IMF member states. Some European construction, that.

Incidentally, I think we should start calling this "ECB riots" and "to ECB a country". Smearing the IMF is getting old.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 07:22:40 AM EST
[ Parent ]
The cause of the current crisis is the macroeconomic nonsense that makes up the Euro institutional framework and fills the heads of the EU economic policy apparatus. That's a crisis of the Euro, the "asymmetrical shock" that was predicted by its critics in the 1990s.

The EU's political crisis makes it impossible for the EU to deal with

  1. the immigration crisis stemming from the Arab revolutions - EU solution: scrap Schengen
  2. the E.Coli crisis - EU solution: import bans and nationalistic chest thumping about produce quality
  3. the Euro crisis - EU solution: let's cause IMF riots in the periphery.

The fact that the Euro trades at a high exchange value doesn't make the Eurozone healthy.

So there may not be a Euro crisis, but there is a Eurozone crisis.

And an EU crisis.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 07:20:36 AM EST
[ Parent ]
There may be a strong Euro, but there isn't a strong Europe.

Member states are acting as if membership is an inconvenience rather than obligation - and in the case of Ireland and Greece, that's certainly not untrue.

There is no political crisis because there is no politics.

There's a currency, and there's a parliament, and there's a constitution, and there's an impressively large number of apparatchiks and commissioners. But there's no plan, no strategy, no momentum, and no leadership - and that has left a power vacuum which has left the lunatic wankers running the ECB the de facto European sovereigns.

The irony here is that the main British criticism of Europe - that's it fundamentally undemocratic - has turned out to be correct.

Of course the UK isn't any more democratic itself. But it's become obvious that in its current form the EU is now a project by bankers, industrialists, and billionaire investors, for same.

The only way ordinary people can influence it is it by turning up in tens or hundreds of thousands, shouting, and setting fire to things.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Jun 3rd, 2011 at 07:57:06 AM EST
[ Parent ]
I think we only disagree on what the focus for the solution should be - ie how the transfers should take place - via the monetary framework and policies or the broader political deal on what the EU is about.
The ECB, in concert with the markets, can shoot down any broader political deal through recalcitrant monetary policy.

Hey, when Ireland was claiming they could hold out for 9 months on a cash basis without resorting to the bond markets the ECB threatened to crash their banks, and Ireland folded. They are doing the same with Greece as we speak: "any debt writedowns for private investors and we'll instantly crash the Greek banks by refusing to discount their Greek bond holdings for liquidity".

There is truly no hope whatsoever here, politically.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Fri Jun 3rd, 2011 at 08:21:08 AM EST
[ Parent ]

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