Germany more Deutschland, less Europe?
Germany is becoming more Deutschland and less Europe again, it seems.
Angela Merkel is facing all kinds of criticism in her quest to keep the European family together and solvent. The Chancellor faces a tough agenda: tackle the financial crisis, prevent a coalition collaps and replace the German president. The price she pays for her European efforts is high. Loss of home voters and sliding confidence in her local market go together with growing criticism from other European countries on Berlin.
And the German captain does not like it. The Guardian heads with "Germany signals end of Love Affair". Ian Traynor writes the change in Berlin is a tectonic shift in the EU– from pushing Europe forward to balking at the sacrifices Germany has to make. France and Germany are not the united front they appeared to be. Merkel is said to imitate Sarkozy mockingly, while the French Chef is said to boast to his team how he has bested the German Chancellor.
Merkel yesterday went to visit the German soccer team, in preparation for the world cup. To show them support of course. No doubt at the same time to signal she still is first German and then European. Because this is her struggle too. She needs to balance the interest of her market as the central economic power in Europe with that of another power, the EU. And she needs to keep credibility high at home while doing so. Ian Traynor has a point when he says better communications offer the solution to that problem. The message should be loud and clear for all Germans that Europe is good for them. Angela should stress that Germany, as Europe's biggest exporter, benefits the most from a single and strong Europe. But the opposition has a field day. It is easier in politics to criticise 'the outside world' and preach nationalism, than to see that a bigger union of powers, even with major issues to solve, is the best choice.
"In the history of the European Union, " said Charles Grant, director of the Centre for European Reform thinktank in The Guardian, "I've never seen Germany so isolated before." This is not a good state of affairs. Germany should never be an outsider of debate and negociations in Europe. The logic for the German market also applies for Europe as a whole: Germany is both Deutschland and Europe, supporting one is supporting the other.
Euro muscles from Brussels
Europe reached agreement to show some Euro Muscles from Brussels
With a rescue package close to $1 trillion, the European Union confirms its commitment and strenght to hold the Euro fort. It has been under attack for several months now and it was high time to put on a show of force. 'E.U. details $957 Billion Rescue Package', the NY Times headlines. The speculation armies were attacking the gates of Fort Europe and reinforcements seem to have arrived just in time. The finance ministers from the European Union were under high pressure to come up with a strong answer, before the opening of the financial markets in Asia. And they showed that muscles from Brussels are firm in defense of the Euro currency.
High Noon
It was high time to show the financial world the Euro was not the best bet for speculators to mingle with. Hesitation and half action, soothing words without direct and firm steps had weakened the credibility of the Euro. The Greek drama, packed with emotion, mistrust, deceit, rioting and now even death, and the spreading crisis virus to other European markets had to be addressed. When the time frame is defined, suddenly things can come to a conclusion. It is a rule that debate and negotiations expand with the time allotted for reaching a decision. When you know time is running out, things often fall into place. In the early morning hours, a decision was reached. And the markets like it.
Euro response… muscles enough in the long term?
The deal provides $560 billion in new loans and $76 billion under an existing lending program, with the IMF adding $321 billion.
Olli Rehn, the European commissioner for monetary policy, was firm “We shall defend the euro whatever it takes”.
David Marsh, the author of “The Euro,” a book on the history of monetary union“ still shows some doubts on the rocky road to recovery:
"The fact that they are worried is clear. But I don’t think that there is enough commitment or economic firepower in Germany to provide the massive loan guarantees to satisfy the markets.”
At least the first signs in the market are positive, the trend is up. The psychological boost for the markets seems to work on the short term. Now the economies and the recovery plans themselves have to drive down the point. Let us hope the fort holds!
Euro, fairy tale with a happy end?
Will Europe truly come to the rescue of Greece? Germany and France have different views on the role Europe should play, making a clear reply difficult. This difference will continue to dominate every discussion in European financial policy a Charlemagne article in The Economist explains.
The euro was not blessed by political and monetary unity at birth (as was the case with the US dollar). This curse of the bad fairy has come to haunt the blessed princess. The euro pricked her finger on a spindle called Greece, but how the sleeping beauty will come back to life and happiness remains uncertain.
Optimists say France and Germany will play their part as 'good fairies'; pessimists think the euro-curse will hold and the currency will break up. The article says both camps have a "too tidy" narrative. The key to the problem is in the concept of monetary unity. Germany wanted a "European Bundesbank", an independent watchdog to fight inflation, while France wanted a central euro-bank that would be “counterbalanced” by elected politicians, who could tell them when to put growth and jobs ahead of price stability or fussing about deficits. One goal was common to all: end exchange-rate risks within the internal market, including competitive devaluations.
France and Germany still disagree on the next step in rescuing Greece. Fiscal rigour is what German politicians advocate, while their French colleagues hope for more intervention. Jean-Pisani Ferry, director of the Bruegel think-tank says It is a fantasy a fiscal union will slosh out money in the euro-zone to iron out the varying economic development.
A story to be continued… and no doubt followed by a series of other similar tales of the unexpected, in the rescue of Spain, Portugal etc. Not to mention thrillers like the rescue of the automotive industry (or not) and other economical pillars of the European industry.