History will register his plane struck by lightning on the way to Berlin, no fancy kisses, and asparagus with veal schnitzel on the menu. This is the way the eurozone ends (or begins again); not with a bang, but a … lightning strike. Merkollande – the new European power couple drama interpreted by French Socialist President Francois Hollande and German Christian Democrat Chancellor Angela Merkel – is a go.
Trillions of bytes already speculate whether former President Nicolas Sarkozy spilled the full beans about “Onshela” to Hollande – apart from the fact she fancies her glass of Bordeaux. King Sarko also had a knack for making stiff “Onshela” laugh. That may be a tall order, at least for now, for the sober and pragmatic Hollande.
The good omen may be that both do not eschew irony. In the middle of such a eurozone storm, that’s a mighty redeeming quality. Then there’s that lightning strike on the way to Berlin. Was it Zeus sending a message that his Greeks would have to be protected – or else? Not to mention that Europe is a Greek myth (Zeus made Europa, the beautiful daughter of a Phoenician king, his lover…)
About that German miracle
So now Merkollande has to show results. There’s not much they’re bound to agree on – apart from the possibility of a financial transaction tax (FTT) which could yield up to 57 billion euros (US$72.5 billion) a year to battered trans-European economies, according to the European Commission (EC).
Berlin is not exactly against it. But Britain, for obvious reasons, is – seeing it as curbing the City of London. The EC, applying some fancy models, has already concluded that a FTT would not be a burden on economic growth; that would represent only 0.2% in total by 2050.
Two members of the troika – the EC and the International Monetary Fund (but not yet the European Central Bank) – along most governments in the EU, now at least admit that some countries, such as Spain, will need more time to reduce their deficits. An FTT in this case would come out handy.
At home, “Onshela” is secure her austerity mantra is popular (61%, according to the latest polls). Yet she lost another regional election last weekend, in heavily urbanized Nordrheim-Westfalen, the fourth largest urban concentration in Europe after London, Paris and Moscow – now suffering from deindustrialization and high unemployment. And this after losing in rural Schlewig-Holstein, near the Danish border.
What’s fascinating is that all this had nothing to do with Europe – and the messy fate of the eurozone with the strong possibility of Greece leaving the euro. German voters couldn’t give a damn. They are first and foremost worried about their own eroding purchasing power.
So for the first time the Supreme Taliban of austerity, German Finance Minister Wolfgang Schauble, has admitted in public that a general wage freeze – one of the pillars of the new, neo-liberal “German miracle” – should be revised. Even the Financial Times has admitted that consumption in Germany is “anemic”. Schauble now says that wage increases might help.
The heart of the matter is that whatever “German miracle” is good for Germany’s robust banking and financial system, is not good for a vast majority of its workers. Plus this neo-liberal miracle simply can’t be sold anywhere else in the world.
German weekly Der Spiegel did its best to show whySee The High Cost of Germany’s Economic Success, Der Spiegel, May 4, 2012..
The heart of the “miracle” is – predictably – the deregulation of the jobs market, always against the interests of workers. That implies a tsunami of part time jobs, “non traditional contracts” and sub-contracting. This means masses of workers not eligible for bonuses or participation in profits – coupled with a reduction in retirement payments and pensions. The graphic consequence has been Germany as the current European champion of rising inequality.
Who’s in charge here?
It’s wishful thinking to imagine some German politician seeing the light, Blues Brothers-style, and suddenly preaching a true European political integration. German regional politics is directly linked to the banking industry – the same banks which had a ball speculating on securities all across Europe, especially in the Club Med countries.
Blaming the eurozone abyss on the irresponsible acts of selected European nations, on their mounting public debt, and even their pensioners, is perverse. The real cause is the ferocious deregulation of the financial system and the worshipping of the God of monetarism. The absolute majority of European political leaders do not have a clue about basic economics. They have been at the mercy of technocrats who could not give a damn about the social and political consequences of their actions.
But now the technocrats are finally freaking out because if Greece, for instance, nationalizes its banks, the Spanish and French financial systems will go bust, and Germany’s will be in deep trouble. Once more this is a graphic illustration of how countries across Europe are – in the public as well as the private sector – totally dependent on the financial system of other countries.
The Masters of the Universe in Europe are actually the Institute of International Finance (IIF)See here a lobby representing the 450 largest world banks. They get a privileged seat on every significant euro-summit. The proverbial EU and IMF “officials” actually ask the Masters how much a country – as in Greece – should pay to get itself out of trouble. Europe’s commissioner for economic affairs, Olli Rehn, is a certified servant of the Masters. Obviously the EU leadership will never admit it is in fact controlled by a cartel of bankers.
One currency, 17 debts
It’s hard to believe Merkollande can find a way out of this financial labyrinth. We are facing the uber-surrealist situation of a single currency with 17 different public debts – over which the frenzied “markets” can merrily speculate while individual states cannot fight back, for instance by devaluing their currency. It’s this set up that has plunged Greece into the abyss – and may do the same with the euro.
Thomas Piketty, a professor of the Paris School of Economics, dreams that Hollande might become the European Roosevelt. That may be as unlikely as Prometheus getting rid of his burden. But at least Piketty identifies the problem; imagine if the Fed everyday had to choose between Texas debt or Wyoming debt – it would never be able to conduct a sound monetary policy (not that it actually does…)
That explains why the European Central Bank cannot possibly be a factor of financial stability. Meanwhile, Europe is left wallowing in the mire of loaning buckets of euros to banks, hoping they will loan them back to individual states; or loaning the money to the IMF, hoping they will do the same.
Into this quagmire comes Hollande with an economic Hellfire missile; he says that instead of loaning at 1% so the banks make a killing loaning to individual states at a much higher rate, the ECB should deal directly with European nations. He wants the FTT – now. And the wants the European Investment Bank to extend credit to companies. And he wants euro-bonuses to finance infrastructure works.
“Onshela” is bound to give him a firm “nein” on all this – except, maybe, the FTT. Because this all implies that these debts are part of a common European debt. That would be, according to Hollande’s vision, a conception of Europe true to its construction – less technocratic, less hostage of the God of the market, less constrained by the dogmas of the financial system. Will Merkollande pull it off? Ask “Onshela”.