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The wild hog and the cucumber troops

by DoDo Thu Jun 17th, 2010 at 06:22:06 AM EST

Since my Merkel Above All diary and the sudden presentation of a massive budget cut package, the German federal government sank into a much deeper crisis. In opinion polls, disapproval with the performance of the conservative-(neo)liberal government rose to 86%, and only 23% think that sustaining the current government coalition would be the best for the country. Satisfaction with the work of chancellor Angela Merkel herself is diving like BP shares:

Over the last week, the media was abuzz with wild speculation about possible government changes: a replacement of Merkel as chancellor, or her party replacing the neolib FDP with the Social Democrats (SPD) as coalition partners, or new elections. None of these is realistic at the moment, so I didn't plan an update until the next potential crisis for the government: the election of Germany's next figurehead Federal President, which many a disaffected member of the conservative-liberal majority might choose as occasion to rebel against party discipline by voting for the SPD's popular candidate.

However, a recent discussion indicated that one element of the government's doldrums I omitted in the Merkel diary has significance. That Merkel got rid of all pretenders to her throne and ended the FDP's tax cut amok run doesn't mean that the government is now all yes-men. Instead, there is disarray, because there is still strife and there are attacks, in particular from the direction of the other junior coalition partner: the Bavarian CSU.


The wild hog

Germany is a federal country, which is also reflected on the party landscape. In particular, the centre-right consists of Merkel's Christian Democrats (CDU), which is present in 15 of the 16 states, and Bavaria's Christian Socialists (CSU), currently led by former healthcare minister and party left-winger Horst Seehofer (also PM of Bavaria).

Some key differences: the CSU is more social conservative, it has a strong Eurosceptic streak, it does dare to use unveiled Germany-first and Bavaria-first rhetoric when it comes to money, and, as the name implies, it professes to protect the common people. At federal level, both in the lower (Bundestag) and upper (Bundesrat) houses of parliament (the latter consists of representatives of the state governments), the CSU has regular bouts of rebelliousness, when it tries to demonstrate its independence by playing opposition within the government (or within the joint CDU/CSU parliamentary faction when it is in opposition).

Seehofer started one of these bouts already before the elections, which escalated into an amok run by the time of the Greek crisis. And it was about the CSU's social profile. On one hand, when Seehofer took over the CSU from a neolib predecessor, he kept tax cut plans aimed at middle and lower classes, believing that that is a social measure and a good compromise policy for the coming coalition with the FDP. On the other hand, he wanted to play himself up as the protector of the small people from the big bad wolfs of the FDP. The result was a schizophrenic course in which the FDP was both to be an ally against the CDU for tax cuts and an enemy on everything else.

Seehofer kept attacking both FDP and CDU during the intra-government tax cut debate and the simultaneous dive in the polls. Then came the Greek crisis and the Euro crisis, which gave occasion for more populist posturing, using the CSU's nationalist and Eurosceptic lines too. Seehofer demanded that if money is given to failing Eurozone members at all, it shouldn't be given for free and shouldn't benefit financial institutions only, and later condensed this into three demands for Bavaria's consent for the Euro stability package in the Bundesrat:

  1. democratic control over the spending of German money: allowing any EU member state to tap into the fund shall be conditional on the approval of the budget committee of the Bundestag;
  2. the failed Growth and Stability Pact should be overhauled, to include automatic punishments and a loss of voting rights in the Council;
  3. a tax on financial transfers should be introduced.

The first two proposals were just insane. When push came to shove, that is the Bundesrat's vote on the Euro package on 25 May, seeing that his blackmail came to naught, Seehofer folded. As for the tax on financial transfers, that was good for another war between the coalition partners: despite a general coalition agreement on supporting the idea, finance minister Wolfgang Schäuble (CDU) as well as the FDP kept questioning its merit in public.

In the context of the budget cuts, it should be noted that Seehofer's predecessor achieved and required a balanced budget for Bavaria four years ago -- but last month, with many ministers unwilling to cut, the CSU faction leader in the Bavarian parliament proposed that the balanced budget be voided temporarily...

Meanwhile, after the CDU's high losses in the Northrhine-Westphalia regional elections (and the consequent loss of upper house CDU/CSU-FDP majority), Merkel shelved the tax cut plans, and the demoralised FDP acquiesced in the decision -- leaving the CSU all alone. The irate Seehofer intensified his attacks against the FDP. He put the blame on them for the government's problems, and made a last stand on another (social) issue: he chose total opposition on the FDP health minister's healthcare reform plans.

The battle with the FDP intensified into a trading of insults. An FDP state secretary in the health ministry said that "the CSU acts like a wild hog, it showcased only destructiveness". In response, the CSU's party secretary described the attack as a venting of frustrations indicating lack of political maturity, then added his own frustrated immaturity: "They are evolving into a healthcare policy cucumber troops: first they play badly, then they mouth off". ("Cucumber troops" is a term from football for a band of amateurish losers.)

It was at this point that the chancellor broke her silence, and admonished the two coalition partners. However, by that time, criticism of Merkel for lack of leadership was loud in the party and the media. On the other hand, in an interview on the sparring in the coalition, Elmar Brok, the influential CDU MEP and onetime member of the now defunct Merkel-rivalling Andenpakt power block, defended the chancellor, saying that "leaders need people ready to lead, if people are just running to get into the media with expletives, anyone who has to lead will have difficulties".


The wild speculations

Such a war of words of course raises doubts about the survival of a government. But none of the versions discussed by German media in the last week seem realistic.

  • Replacement of the chancellor: who would be the replacement? Merkel just neutralised her last serious rival by sending him into the race for figurehead Federal President.

  • The CDU/CSU ditches the FDP and invites the SPD to form another Grand Coalition: this may look attractive to many voters and Merkel, but not to the SPD, which indeed dismissed the rumours.

  • Snap elections after a failure of government majority: this again would fail both on the FDP and the SPD. The FDP is currently skirting the 5% limit in the polls, causing new elections by blowing up the government would be suicide for them. As for the SPD, as polls and the federal SPD's relations with the Left Party stand now, the only way they could get into a government would be in a Grand Coalition, and that as a shrunk junior partner. The SPD would rather wait for the government's crisis to last a little longer so that its poll numbers improve more.


The wild youth

There was reportedly one more personal conflict in the government: one concerning its defence minister Karl-Theodor zu Guttenberg (CSU).

In the same poll which I quoted above the fold, Guttenberg leads the politicians' job approval list with 68%. This is rather weird when you consider that a similar majority of German citizens rejects a key policy he is currently responsible for, the German part in NATO's Afghanistan mission. Apparently, being a good-looking aristocrat and the government's second-youngest member (at 38) was enough to fool most people.

Guttenberg also has some talents: the talent of brazening it out. In the scandal of the bombing of stolen fuel tankers with many civilian deaths in Afghanistan and its cover-up, which led to the resignation of Guttenberg's predecessor, Guttenberg blamed everything on subordinates whom he fired for not informing him, and kept denying while those subordinates contradicted him.

Now a Sunday paper reported that Guttenberg told friends that he is thinking about resigning. The reason: the chancellors' office allegedly prepared a legal opinion saying that it would be legal for the parliamentary commission on the fuel tanker bombing to order a confrontation of witnesses between Guttenberg and the two fired top soldiers.

Guttenberg denied the rumours, but is causing another intra-government (even intra-CSU) conflict: as part of the budget cuts, he called for an end to conscription (potential savings are supposed to be €400 million). He earned approval from the FDP, but rejection from his own comrades and Merkel.


Now what?

Personally, I don't see the end of Germany's current federal government in the near future, even if Merkel's candidate for Federal President fails. But the government is certainly in disarray, with warring factions, and no consistent policymaking will come out of this. Which, given the direction these people would want to take us, might even be for the better of the EU and Germany...

Display:
The wild hog and the cucumber troops | 19 comments (19 topical, 0 editorial, 0 hidden)
Seed comment (4.00 / 11)
Meanwhile, news on the party insisting on defeating itself at every turn, the SPD.

You may remember that in the Northrhine-Westphalia elections, the CDU stayed just ahead of the SPD despite heavy losses, and SPD+Greens was one seat short of majority.

  • So, first, the SPD and the Greens held apparent alibi coalition talks with the Left Party, which lasted only hours until the SPD declared it pointless due to Left Party unfitness for government.

  • Then the SPD held talks about a Grand Coalition with the CDU, but it had nothing at hand to force the acting PM to give up his demand to keep his job.

  • Then the SPD held long talks with the FDP and the Greens about the bizarre "traffic lights coalition" [named for the colours of the three parties], but these failed too.

  • Finally the Northrhine-Westphalia SPD boss delcared that they give up, let the acting caretaker government stay in playe, and the SPD will attempt to govern via parliament... She is now under attack from both Merkel and the co-heads of the Greens.


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jun 17th, 2010 at 06:30:31 AM EST
Re: Seed comment (4.00 / 4)
Heh, outdated already: it seems the push from the Greens had its effect, NRW SPD leader Hannelore Kraft and her green counterpart are to declare the formation of a minority government. (In NRW, a minority government can be formed with simple majority if three rounds of voting failed with absolute majority.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jun 17th, 2010 at 09:48:09 AM EST
[ Parent ]
Wheee! (4.00 / 2)
Apparently they took this step because the FDP essentially declared that they were a free agent.

Wow.

(Sorry no trans. - I'm not at my own computer).

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt ät gmail dotcom) on Thu Jun 17th, 2010 at 10:00:14 AM EST
[ Parent ]
Re: Wheee! (none / 0)
Stern agrees, though they emphasize pressure from the Greens and note that the FDP was back in the right-wing block in its reactions to the announcement; SPIEGEL however thinks that the FDPs semi-rebellion was only the excuse.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jun 17th, 2010 at 04:43:18 PM EST
[ Parent ]
Re: Seed comment (none / 0)
BTW, your "recent discussion" link above points back to the graphic. Is that intentional?

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Thu Jun 17th, 2010 at 09:50:55 AM EST
[ Parent ]
Re: Seed comment (none / 1)
No, it is an effect of having put the diary together in a hurry. I now corrected that and also complemented the diary with some missing stories: (1) more on the financial transfers tax, (2) a note on the Bavarian budget, (3) Merkel's reaction to the wild hog and the cucumber troops, (4) Elmar Brok's comments.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jun 17th, 2010 at 11:09:36 AM EST
[ Parent ]
Etymological digression (4.00 / 9)
German insults: Wild pigs versus cucumber troops | The Economist

Gurkentruppe, literally a troop of cucumbers. Anglophone journalists have been puzzling over how to turn this into recognisable English. The Guardian honoured both literal meaning and homonymy by rendering it as "gherkin troops" and explaining that it means "rank amateurs". The Financial Times opted for the colloquial "bunch of losers". The Economist went with "bush leaguers", which kept the sporting connotation it has in German but was a little unfair to non-American readers: it is a term drawn from baseball.

But why compare incompetent athletes to cucumbers? We have no definitive answer yet. Some internet chatter holds that the term originated among English cricketers: for some reason the second-raters played with green bats. Falco Pfalzgraf, a linguist at Queen Mary, University of London, says via e-mail that he has seen no evidence for this. Cucumber words tend not to be complimentary, he points out: herumgurken means to amble about in a useless or aimless way. The "Etymologisches Wörterbuch der deutschen Sprache" notes that Gurke is a loan word from Polish (ogurek or ogorek), which in turn comes from the Middle Greek agovros, meaning "unripe" or "immature". Callow people are noch grün hinter den Ohren (still green behind the ears). On the football pitch, or in the Bundestag, they're a Gurkentruppe.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Jun 17th, 2010 at 06:41:38 AM EST
Re: The wild hog and the cucumber troops (none / 1)
Dodo

the powers that be in Spain got fed up with Merkel and the DB and attacked full force unilaterally publishing the stress tests of german banks...

the spanish intelligentsia and propaganda machinery is insisting that german banks are dead-man walking... that Santander is so fine...

Merkel was forced to say yes to all the European countries against the will of the german banking community...

How much real power the german banks have? Can they get the head of Merkel?

Do they need her there for the next bail out? or will they be pissed off by the betrayal? What can and would they do?

Is really merkel doomed or has still power?

And, is she useful if she fails her purpose of getting to control the UE finances and monetary policies?

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Thu Jun 17th, 2010 at 12:39:01 PM EST
Re: The wild hog and the cucumber troops (4.00 / 2)
the powers that be in Spain got fed up with Merkel and the DB and attacked full force unilaterally publishing the stress tests of german banks...

Was that really focused on German banks, or on Spanish banks?

At any rate, in Germany, it is reported that the banking sector didn't like the idea at all, while anonymous government people say that the rest of Europe should follow or else be suspect of hiding dark secrets. DB boss Ackermann for his part demanded that stress tests not be published before bailout packages are prepared for the weak banks that will inevitably be attacked after publishing. But that was yesterday, today the Council approved the release of the stress tests, and the German bankers' association gave up resistance.

Can they get the head of Merkel?

I doubt it. But, if Germany is still Germany Inc, maybe the entire economic elite can.

European Commission wants Spain to cut even more

Germany elites have lost confidence in Merkel and her government

An poll, regularly carried by Capital Magazine, shows that Germany's elites have lost confidence in the Merkel government, and also in the chancellor personally. The poll is not representative of the country's at large, but those polled, which include CEOs and state premiers, tend to lead public opinion, which is why this poll is taken seriously. 92% of those questions expressed disappointment about the government. Three quarters believe the government is too weak to master the challenges ahead.  49% think that Merkel is weak chancellor, her worst rating since she became chancellor in 2005. Interesting are some of the reasons for the discontent. The elites want Merkel to step up the drive to austerity, and believe that the recently announced measures are insufficient. The only highlight was Merkel's handling of the Greek crisis, which was generally approved.

Then again, whom would they replace Merkel with.

Is really merkel doomed or has still power?

It is way too early to bury them, she still has power and so have her ministers (in this context: Schäuble the finance minister). But what they elect to use that power for, is another thing...

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

by DoDo on Thu Jun 17th, 2010 at 03:37:56 PM EST
[ Parent ]
Re: The wild hog and the cucumber troops (4.00 / 3)
the powers that be in Spain got fed up with Merkel and the DB and attacked full force unilaterally publishing the stress tests of german banks...

Was that really focused on German banks, or on Spanish banks?

The powers that be in Spain threatened to unilaterally publish the results of the stress tests of Spanish banks. This put German banks in the awkward position of publicly warning that would be a bad idea, and Merkel went to the European Council to try to prevent an agreement to publish the tests for all (30 or so major) banks. She must have found herself totally isolated arguing against transparency.

Basically, Germany overplayed its hand when Frankfurter Allgemeine last Friday gave credence to the rumour that Spain would have to ask for a bailout possibly even before yesterday's bond auction. The Spanish Central Bank called FAZ's bluff, and Merkel folded today.

The Spanish government's bond auction yesterday was successful, too.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan

by Carrie (migeru at eurotrib dot com) on Thu Jun 17th, 2010 at 03:58:04 PM EST
[ Parent ]
Re: The wild hog and the cucumber troops (4.00 / 6)
Merkel went to the European Council to try to prevent an agreement to publish the tests for all (30 or so major) banks

That's why she went? The government announcement heads the agenda with the financial transfer tax, as something on which a strong joint position would be needed as signal ahead of the G20 summit. Next is the Franco-German push for punishing deficit violators... the stress tests aren't mentioned.

As for what the government thinks and says behind closed doors, we can only speculate, but in this article, written during negotiations,

  • they claim that the German government supported the idea in principle, but raised the problem that such a publication would require the consent of the banks themselves according to German law;
  • the speaker of the finance ministry is quoted with an argument countering the bank lobby, saying rumour-feeding markets could be cooled down with transparency;
  • a state secretary of the finance ministry is quoted with the more combative "if a bank has nothing to hide, it can publish a stress test without demur";
  • the same state secretary is quoted countering Axel Weber -- who supported the release with forked tongue and echoed DB boss Ackermann in calling for preemptive bailout funds -- saying that Germany already has one (Soffin) and other countries could use it as model if they don't have their own already.

(On the financial transfer tax, they note that Britain and Sweden were against.)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jun 17th, 2010 at 05:12:47 PM EST
[ Parent ]
More tidbits (4.00 / 5)
  • Apparently, there is also a proposal of a bank tax that is separate from the financial transfer tax, on which there was consensus at the Council.

  • All the articles I read claim that the institutions really threatened are not the big banks but the savings banks, which won't be exposed in the stress tests.

  • In Austria as well as Germany, it is claimed that Merkel was for the publication from the start, and the one against it until the bitter end was Austria's PM, with the argument that the publication of worst-case scenarios considered in the stress tests, which escalated over the last two years, will only scare markets even more.

  • Merkel is quoted with explicit formulations in her post-summit declarations:

"Ich bin für größtmögliche Transparenz", betonte Bundeskanzlerin Angela Merkel nach dem Gipfel. ..."Ich kann mich der Kritik des Bankenverbandes nicht anschließen", betonte Merkel. "Stresstests machen keinen Sinn, wenn die Ergebnisse in der Schublade verschwinden. Wenn es dagegen Transparenz gibt, dann entstehen keine Gerüchte und keine Undurchsichtigkeiten. Da kann man dann besser reagieren.""I am for the maximum possible transparency", federal chancellor Angela Merkel said after the summit. ..."I cannot go along with the criticism of the [German] bankers' Association", Merkel emphasized. "Stress tests make no sense if the results disappear in the drawer. However, if there is transparency, then no rumours and opaqueness will emerge. Then one can govern better."


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Thu Jun 17th, 2010 at 05:36:28 PM EST
[ Parent ]
PN (4.00 / 3)
Merkel:
"Da kann man dann besser reagieren.""Then one can governreact better."
Reagieren, not regieren.

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 12:46:44 AM EST
[ Parent ]
Re: The wild hog and the cucumber troops (none / 1)
So, if Merkel was for the publication of the results from the beginning, what do you make of this?

Berlin Supports Transparency: German Flip-Flops on European Bank Stress Tests - SPIEGEL ONLINE - News - International

According to an article in the Financial Times Deutschland on Thursday, Berlin is prepared to buck the intense opposition of German financial institutes and back the publishing of stress-test data. The report was confirmed by a Finance Ministry spokesman on Thursday.

News of the course change comes a day after the governor of the Bank of Spain, Miguel Angel Fernandez Ordonez, said that Spain would move forward on its own even if the rest of Europe did not. The central bank, he said, "plans to disclose stress-test results ... so markets can perfectly assess the situation of Spain's banking system."

Fretting About Health

Madrid's push to reveal the results of the tests stems partially from a German media reports earlier in the week and repeated in Spanish business paper El Economista on Wednesday that the EU, the International Monetary Fund and the US Treasury were assembling a €250 billion ($335 billion) credit line for Spain. Both Spain and the European Commission were, however, quick to deny the rumor.

Coupled with the following, I was assuming "Berlin's opposition" was Merkel doing what Ackermann told her. Though by the time the summit came along yesterday, Spain's Central Banker had upped the ante.

European Tribune - Barroso to plebes: nice indebted democracy you have there...

El Banco de España publicará las pruebas de estrés a la banca para demostrar su solidez · ELPAÍS.comThe Bank of Spain will publish the stress tests of [Spain's] banking to prove its solidity.
El gobernador del Banco de España, Miguel Ángel Fernández Ordóñez, ha revelado hoy que se propone hacer público "el resultado de las pruebas de estrés a la banca" para demostrar la solidez del sistema financiero español.The governor of the Bank of Spain, Miguel Ángel Fernández Ordóñez, today revealed that he intends to publish "the result of the banking stress tests" to prove the solidity of Spain's financial system.

This on the heels of yesterday's

European Tribune - Comments - European Salon de News, Discussion et Klatsch - 15 June

España quiere que se publiquen los resultados del examen a sus bancos · ELPAÍS.comSpain wants the results of stress tests of its banks to be published - ElPais.com
"Si se conocieran los resultados de los test, habría más de una sorpresa", alegan las fuentes consultadas, que subrayan la buena nota obtenida por las entidades españolas. No todos quieren que se conozcan. Josef Ackermann, máximo ejecutivo del Deutsche Bank, declaró el viernes que sería "muy, muy peligroso" difundir los resultados de las pruebas."If the results of the tests were known, there would be more than one surprise", claim the sources consulted, who underscore the good grade obtained by Spanish entities. Not everyone wants them to be known. Josef Ackermann, chief executive of Deutsche Bank, said last Friday that it would be "very, very dangerous" to release the results of the tests.

Who will be the loser (politically) as a result? Ackermann or Merkel?

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 12:43:18 AM EST
[ Parent ]
Re: The wild hog and the cucumber troops (none / 1)
if Merkel was for the publication of the results from the beginning

The beginning of the summit. The swing was first reported last morning by FTD. As for a reason for the swing, there is that first article I paraphrased, "anonymous government people say that the rest of Europe should follow or else be suspect of hiding dark secrets" (I could post a full translation in an hour).

Who will be the loser (politically) as a result? Ackermann or Merkel?

On this, neither. The German media coverage of the summit focuses on the austerity consensus and the Merkel resp. Franco-German failure with the financial transfer tax. But surely this is a loss of face for Ackermann for speaking out personally, now that the whole bankers' association folded.

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

by DoDo on Fri Jun 18th, 2010 at 01:44:28 AM EST
[ Parent ]
Re: The wild hog and the cucumber troops (none / 0)
Ackermann is the one who comes across as maybe hiding something...

By laying out pros and cons we risk inducing people to join the debate, and losing control of a process that only we fully understand. - Alan Greenspan
by Carrie (migeru at eurotrib dot com) on Fri Jun 18th, 2010 at 02:08:43 AM EST
[ Parent ]
German media coverage of position change (4.00 / 2)
I first quote an FTD article posted tuesday afteroon, that is before the full swing of the German government.

Die Bundesregierung lehnte die Veröffentlichung von Stresstests nicht grundsätzlich ab. "Es wäre eine Möglichkeit, Stresstests zu veröffentlichen, um Spekulationen den Boden zu entziehen", hieß es am Dienstag in Regierungskreisen. "Es gibt aber auch andere Möglichkeiten." Welche Alternativen man in Berlin vorzieht, blieb allerdings offen.The German federal goverment did not reject the publication of stress tests on principle. "It would be a possiblity to publish stress tests, to take the ground from under speculations", it was said in government circles on Tuesday. "However, there are other possibilities." However, it was left unanswered which alternatives Berlin prefers.
Mit dem Vorstoß, die Resultate der Stresstests offenzulegen, versucht Madrid wohl, von den eigenen Schwierigkeiten abzulenken. Insbesondere die Sparkassen - Cajas - tun sich momentan mit der Refinanzierung schwer...With the thrust to publish the results of stress tests, Madrid is obviously trying to distract from its own difficulties. Above all the savings banks - Cajas - have difficulties with refinance at the moment...
Im restlichen Europa - darunter auch Deutschland - dürfte der spanische Vorschlag keine große Begeisterung auslösen. Denn während die beiden größten iberischen Kreditinstitute BBVA und Santander solide kapitalisiert sind, dürfte das für andere große Banken der Euro-Zone nicht im gleichen Maß gelten. Der Vorteil ist nicht zuletzt der spanischen Zentralbank geschuldet. Sie verlangt seit längerem einen moderaten Verschuldungsgrad, setzt also den Banken beim Abbau des Eigenkapitals enge Grenzen. Gleichwohl sind spanische Sparkassen durch die geplatzte Immobilienblase im Land in Not. Diese werden allerdings nicht von dem EU-Stresstest erfasst.In the rest of Europe - including Germany -, the Spanish proposal might not incite great enthusiasm. Because while the two biggest Iberian credit institutions, BBVA and Santander, have a solid capitalisation, this might not be valid in the same dimension for other banks of the Eurozone. The advantage is not least owed to the Spanish central bank. It demands a moderate level of indeptedness for some time now, that is, it sets tight limits for banks in the depletion of equity. At the same time, Spanish savings banks are at danger because of the burst of the real estate bubble in the country. These however aren't included in the EU stress tests.

In short, FTD views the stress test publication as a deception, because the problematic Spanish banks aren't covered by the stress tests. Later on the FTD article writes that the German federal government s now more open than in the past, and recounts that the Grand Coalition government was vehemently against a publication when stress tests were first agreed in 2009, suggesting that that was grounded in the low capitalisation of some German banks.

Then the FTD was first reporting the change of opinion on Wednesday (below from the online summary of a print-only article):

Die Veröffentlichung bislang vertraulicher Daten zur Finanzlage europäischer Banken rückt laut einem Pressebericht näher. Die deutsche Bundesregierung sei trotz massiven Widerstands der deutschen Geldinstitute inzwischen dafür, dass die Ergebnisse sogenannter Banken-Stresstests öffentlich zugänglich gemacht werden, berichtet die "Financial Times Deutschland" (Donnerstagausgabe) und beruft sich auf Regierungskreise. Dadurch könne an den Märkten für mehr Transparenz und Vertrauen gesorgt werden.According to a press report, the publications of the hitherto confidential data on the financial situation of European banks is getting closer. The German federal government, in spite of the massive resistance of German financial institutions, is by now for [the idea] that the results of so-called bank stress tests shall be made accessible to the public, reports "Financial Times Deutschland" and references German government circles. That way, it would be possible to create more transparency and trust on markets.
Eine Sprecherin des Finanzministeriums sagte dem Bericht zufolge am Mittwoch, derzeit stimme sich die Bundesregierung mit den EU-Partnern über eine gemeinsame Linie ab. Aus Regierungskreisen hieß es dem Blatt zufolge, man habe den Europäern und auch den G7-Staaten signalisiert, dass Berlin "grundsätzlich dafür" sei, die Ergebnisse von Banken-Stresstests offenzulegen. Eine Einigung könne bereits beim EU-Gipfel in Brüssel an diesem Donnerstag zustande kommen.According to the report, a speaker of the finance ministry told on Wednesday that at the moment, the German federal government is negotiating a joint line with EU partners. According to the paper, German government circles said that they signalled both Europeans and G7 states that Berlin "supports in principle" that the results of bank stress tests be made public. An agreement could emerge already at the EU summit in Brussels on Thursday.
...Dass sich Deutschland für eine Veröffentlichung starkmacht, gilt als Kehrtwende. In der Vergangenheit hatte Berlin dies strikt abgelehnt......The fact that Germany is campaigning for a publication counts as an about-face. In the past, Berlin was strictly against this...

Most other media reported the change by paraphrasing FTD, for example in SPIEGEL's version, only the intro line can be viewed as commentary:

Rückschlag für die Lobby der deutschen Banken: Die Bundesregierung macht sich einem Zeitungsbericht zufolge für die Veröffentlichung der Ergebnisse sogenannter Banken-Stresstests stark. Bislang hatte sie stets für die Vertraulichkeit der Daten plädiert.Setback for the German bank lobby: according to a newspaper report, the German federal government is campaigning for the publication of the results of so-called bank stress tests. Until now, it always pleaded for the confidentiality of the data.

It is again interesting how the "flip-flop" SPIEGEL International article you quote (signed as "cgh -- with wire reports") has a different spin than the articles in the German edition.

In Handelsblatt, I find a more complete report on what Axel Weber and the finance ministry state secretary said. Turns out I interpreted Weber wrong, he was more proactive (calling for an expansion of stress tests), mentioned Soffin himself; and the state secretary only endorsed that, while adding further expansionary proposals himself:

Der derzeit laufende Stresstest des europäischen Bankenausschusses CEBS umfasste nur 22 große grenzüberschreitende Institute. In dem nun von Weber vorgeschlagenen Stresstest würden mehr Banken erfasst werden, darunter auch Landesbanken, so Weber...The currently running CEBS stress test covers only 22 transnational institutions. In the stress test now proposed by Weber, more banks would be covered, including regional banks [Note: banks of the German states; which are commonly assumed to be the most endangered in Germany _DoDo], Weber said...
Erste Ergebnisse sollten bis Mitte nächsten Monats vorliegen. Wann sie dann institutsspezifisch veröffentlicht würden, sei aber noch offen. ,,Das geht erst, wenn eine Verpflichtung zu den notwendigen Rekapitalisierungs-Maßnahmen der einzelnen Staaten vorliegen", sagte Weber. Denn parallel zur Veröffentlichung der Stresstests müssten die Staaten klare Verpflichtungen eingehen, welche Kapitalisierungsmaßnahmen sie bereit stellen, für den Fall, dass sich die für die Banken ungünstigen Krisenszenarien bewahrheiten sollten. In Deutschland könne diese Aufgabe der Bankenrettungsfonds Soffin übernehmen. Eigentlich waren dessen Hilfsmaßnahmen befristet. ,,Gegebenenfalls muss man diese Programme dann verlängern", sagte Weber.First results should be ready by the middle of next month. When they will be published for each institute, is as yet an open issue. "This will go only once there is a commitment from each of the countries for the necessary recapitalisation measures", Weber said. Because, in parallel with the publication of the stress tests, countries should enter a clear commitment regarding which recapitalisation measures they will make ready for the case that the crisis scenarios unfavourable to the banks come true. In Germany, this task could be taken over by the bank bailout fund Soffin. Its supporting measures were supposed to be temporary. "If necessary, these programs should be extended", Weber said.
Auch Bundesfinanzminister Wolfgang Schäuble (CDU) ist nach den Worten von Staatssekretär Jörg Asmussen für neue und umfangreiche Banken-Stresstests. ,,Auch mein Minister unterstützt europaweite Stresstests mit mehr Banken und mit mehr Szenarien", sagte Asmussen in Frankfurt. Wie Bundesbank-Präsident Weber stimmte auch Asmussen der Veröffentlichung der Ergebnisse zu: ,,Wenn eine Bank nichts zu verbergen hat, dann kann sie den Stresstest ja veröffentlichen."According to state secretary Jörg Asmussen, German federal finance minister Wolfgang Schäuble (CDU) is behind new and more comprehensive bank stress tests, too. "My minister supports Europe-wide stress tests with more banks and scenarios, too", Asmussen said in Frankfurt. Like Bundesbank president Weber, Asmussen supported the publication of the results too: "If a bank has nothing to hide, then it can publish the stress test."
Die Bundesregierung will die Stresstests womöglich auch auf Versicherungskonzerne ausweiten. ,,Wir haben es gegenüber der Eurozone mit einer wachsenden Vertrauenskrise zu tun. Darauf muss man antworten", sagte Asmussen. Den bisherigen Maßnahmen wie dem Euro-Rettungsschirm und dem EZB-Aufkaufprogramm für Staatsanleihen müsse man noch einen Baustein hinzufügen, so Asmussen: ,,Man muss Transparenz über die Lage des Bankensektors und möglicherweise des Versicherungssektors herstellen".The German federal government might want to expand the stress tests to cover insurance companies. "We are up against a growing confidence crisis vs. the Eurozone. One must respond to that", Asmussen said. According to him, one must add another building block to the previous measures like the Euro rescue package and the ECB state bond purchase programme: "One must create transparency regarding the situation of the banking secotr and possibly the insurance sector".

These proposals to widen the stress tests explains something that did not make sense to me before: the resistance against the publication drive came not just from Ackermann, but representatives of smaller banks and even the head of the association of savings banks, none of which is currently under the reach of EU stress tests.

The article I paraphrased first upthread, is a Die Welt article on the banks' opposition, and the bit giving a possible reason for the German government's swing is:

..."Wenn die Spanier über ihre Finanzlage informieren, müssen die anderen Institute nachziehen", hieß es in der schwarz-gelben Koalition. "Ansonsten würde so viel Intransparenz mit Misstrauen beobachtet."......"If the Spanish inform about their financial situation, other institutions must follow", they said in the black-yellow [CDU/CSU-FDP] coalition. "Otherwise, this much lack of transparency would be observed with distrust."...

Ahead of the EU summit, the expected EU consensus for publication was even spun as a result of the German government's swing:

Stresstest: Berlin erhält Unterstützung für Banken-Outing | FTD.deStress test: Berlin receives support for bank-outing | FTD.de
Wir haben in Sachen Banken nichts zu verheimlichen: Diese Meinung teilen immer mehr europäische Länder, seitdem sich Deutschland für die Veröffentlichung der bislang geheimen Stresstest-Ergebnisse ausspricht. Die deutschen Banken laufen Sturm, die Zentralbank ist dafür.We have nothing to hide regarding banks: this opinion is shared by ever more European countries since Germany is endorsing the publication of the until now secret stress test results. German banks are up in arms, the central bank is for it.

The Spanish central bank is only the trigger rather than the forcer of everyone's hands in this spin. Note that on the same day, FTD wrote a lead article opposing the publication (echoing Ackermann about a supposed lack of mitigation preparedness, and arguing for more strict own capital requirements instead).

Handelsblatt was more moderate (but their source missed Austria from the oponents' list). After noting Spain's lead,

Neben Deutschland gehören auch Frankreich und Schweden zu den Befürwortern einer Veröffenllichung der Stresstests. Widerstand komme aus Großbritannien und Tschechien, sagte ein EU-Diplomat. Offen sei auch, welche Einzelheiten veröffentlicht werden könnten, da Geschäftsgeheimnisse berührt würden.Alongside Germany, France and Sweden also count among the supporters of the publication of the stress tests. Resistance comes from Great Britain and the Czech Repubic, an EU diplomat said. It is also an open question which details will be published, because business secrets are touched on.
Der Position Deutschlands, der größten EU-Volkswirtschaft, wird maßgeblich dafür sein, wie die Union insgesamt mit der Veröffentlichung von Stresstest-Daten von Finanzinstituten umgeht.The position of Germany, the biggest national economy in the EU, will be instrumental in the way the [European] Union as a whole will deal with the publication of the stress test data of financial institutions.

So overall, it is a policy win for the government and a loss of the banking sector in the eyes of the German business media.

A final remark: it seems that one central rationale of the German government that was reported, but was not recognised in the media comments with their focus on countries is: the hoped-for positive effect of the publication on interbank lending. But before the FTD report of the German government's swing, Handelsblatt wrote without specifying sources:

...Schon jetzt leihen sich viele Banken aus Misstrauen, dass der Partner pleitegeht, gegenseitig kein Geld mehr aus. ,,Die Lage ist ähnlich dramatisch wie direkt nach der Lehman-Pleite", sagt ein führender Notenbanker in Frankfurt......Already now, motivated by the distrust that the partner will go bankrupt, many banks won't lend money mutually. "The situation is dramatic in a similar way as right after the Lehman bankruptcy", says a leading reserve bankier in Franfurt...
Vor diesem Hintergrund fordern die Finanzmärkte selbst mehr Transparenz, die Front der Geheimniskrämer in Nadelstreifen bröckelt. Immer mehr ahnen, dass nicht Offenheit, sondern die Heimlichtuerei das Misstrauen an den Märkten schürt.With this background, financial markets themselves demand more transparency, the front of the secrecy-mongers in pinstripes is crumbling. Ever more sense that it is not openness but secretiveness which foments distrust on the markets.
Deswegen wuchs gestern nicht nur in Spanien das Drängen auf neue Offenheit...That's why the push for new openness grew yesterday not only in Spain...


*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Jun 18th, 2010 at 05:12:37 AM EST
[ Parent ]
Re: German media coverage of position change (4.00 / 4)
Huh, that ended up being diary-length...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Fri Jun 18th, 2010 at 05:13:04 AM EST
[ Parent ]
Re: The wild hog and the cucumber troops (4.00 / 4)
good diary, thanks. no wonder that merkel hides behind cautious smile ruthlessness otherwise how she could creep to the top of german politics. the ease she disposes her rivals is terrifying while her ability to take unpopular decisions or even policies which are against her instincts is admirable.
by FarEasterner on Thu Jun 17th, 2010 at 03:07:04 PM EST
The wild hog and the cucumber troops | 19 comments (19 topical, 0 editorial, 0 hidden)


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