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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."



I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Carrie (migeru at eurotrib dot com) on Wed Oct 10th, 2012 at 03:59:14 AM EST
[ Parent ]
A swedish kind of death linked to the Forex Crunch story in yesterday's Salon.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Carrie (migeru at eurotrib dot com) on Wed Oct 10th, 2012 at 04:09:53 AM EST
[ Parent ]
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.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Wed Oct 10th, 2012 at 04:13:54 AM EST
[ Parent ]
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.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Carrie (migeru at eurotrib dot com) on Wed Oct 10th, 2012 at 05:32:28 AM EST
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