Friday, May 28, 2010

Charlemagne's Notebook (European politics)



AMAZON SUBSCRIPTION LINK: Charlemagne's Notebook, by


BLOG DESCRIPTION: In this blog, our Charlemagne columnist considers the ideas and events that shape Europe, while dealing with the quirks of life in the Euro-bubble.

MY REVIEW: For those people who don't want the US to end up like Europe, or perhaps I should say the European Union (and among those I must count myself) it is important to keep abreast of what is happening over there, in these socialistic, welfare states that are starting to topple because of unsustainable entitlements. And yet our own goverment wants us to accept the European model...and indeed, we do seem to be moving toward "one world order." Considering how crooked, and how incompentent, politicians are, I really don't want to see us living in a world where those that rule over us are in Bruges or wherever...

In any event, this blog is written for a college level audience (as regards vocabulary), but with lots of "Britishisms" (what's a wonk?) and talks about the news and doings in all the EU, with a special emphasis on the UK since he is from the UK. Very fascinating reading...and something I wish our own politicians would read. (He who does not learn from the mistakes of others, is an idiot.)

Sample post
The euro crisisGermany: Europe's fed-up sugar daddy

May 20th 2010, 11:57 by Charlemagne
IS Germany becoming Eurosceptic? That is the charge in Brussels and other EU capitals, as politicians and senior officials grumble about Chancellor Angela Merkel and her reluctance to join bail outs of first Greece and now, potentially, the whole eurozone.

I am not sure Eurosceptic is the right word. I think fed up is a better term. And that is not a small development. A fed up Germany could have big consequences for Europe.

I am in Berlin right now with a clutch of EU correspondents invited by the German government, and the message from ministers and politicians is that Germany still wants the European Union to work, and would like to see deeper integration of the EU. But, and it is a big but, Germany has changed. The days of France having all the ideas and Germany meekly paying the bills are over, we have heard.

Germany is fed up of paying more than any other country into the EU budget, and being taken for granted. Germany feels unfairly attacked in this euro crisis. Mrs Merkel's government thinks it is outrageous that it is taxed with euroscepticism for insisting on tough conditions before bailing out members of the euro who caused their own problems. Germany is just trying to defend the law, monetary stability and taxpayers across the union, we keep hearing.

Germany's position on bailing out eurozone countries has changed since the former finance minister Peer Steinbrück said that Germany would not allow any member of the single currency club to go bust. That was an unconditional guarantee.

Germany's guarantee of help is now conditional on countries accepting ferocious budget discipline, backed by the threat of having all EU funding withheld from the most profligate countries. Senior figures keep saying this is necessary to preserve monetary stability. Alas, their position is not coherent: because punishing horribly indebted countries by publicly cutting their EU funds would surely push them into a messy default. And it is hard to see how that is good for monetary stability.

Oh, after a country has all its funding frozen, we would send EU emergency aid, said one senior figure. I fear to me that sounded like a new system of justice in which we stone misbehaving members of the club half to death, then send them an ambulance.

The problem is that Germany is stuck, I think. Discipline failed to keep the eurozone stable, so now they want to try really, really tough discipline. Others, like France, think the answer is transfers from the rich to the poor, either directly or by pooling EU credit ratings to lower the union's overall borrowing costs. The German government is convinced that Germany's parliament and taxpayers will not wear that.

Instead of making the positive case for the euro, the German government has got stuck in a loop of blaming everything on speculators (hence their startling decision to ban naked short selling of government bonds this week, which will achieve precisely nothing beyond reducing liquidity in German markets), and on profligate countries who lack budget discipline. Meanwhile they talk about how the rich will be ok even if the euro is unstable, because they can always move their money overseas or buy gold, in the words of one senior figure. It may be, I think, the world's first sighting of populist monetarism.

Most of our meetings have been off the record, but one was entirely on the record. It was with a close ally of Mrs Merkel, Thomas de Maizière, who is currently the interior minister but was head of her chancellery for a long time. German ministers are often frustratingly cautious, in my experience. To his great credit, Mr de Maizière was extraordinarily candid with our group of visiting reporters.

As this is a blog, I think I will put a long (very long) transcript here so you can judge for yourselves. Just wait till you get to the bit where he compares Germany to a fed-up adult, fighting off demands from small children because that only leads to still more demands later.

[Q: have DE attitudes to EU changed?]

TDM: After 1990, Germany underwent a fundamental change. Until 1990, Germany was a divided country. It was economically strong but politically weak, and not really a fully sovereign state. This political weakness was comfortable for many others, even for many Germans who did not have to shoulder big international responsibilities.
It was convenient for many of our partners, as our foreign policy was partly replaced by money: we called this chequebook diplomacy.
After 1990, not only the map of Germany but the map of Europe changed dramatically. And American views of Europe changed. At least under President Obama, it is clear that America does not look first to Europe any more.
We now send troops all round the world.
All this has positive and negative effects for the German government and the German people. This change of mentality is only now taking root among our population. Maybe it is not coincidence that this is happening around the time of the 20th anniversary of German reunification: it takes 20 years for a generation of young people to grow up.

It may be new for Europe that Germany is representing its interests with new vigour. But for Britain, France or Italy, it was always a matter of course. We are also using new language in putting our arguments. We have to get used to this. The biggest net payer into the EU budget has to defend its interests.
And we have a very strong federal constitutional court, as became clear with respect to its ruling on the Lisbon Treaty. The idea that German law can be interpreted strictly on the one hand, but that EU law can somehow be more political than legal, on the other, is not acceptable to Germany. It is not Euroscepticism when a German chancellor has to check that a new EU law is compatible with German law. It serves the cause of building law and justice in Europe. You cannot just say the law does not matter, and we have to take a decision quickly.

As for public opinion in Germany, for the majority of Germans the EU was fairly remote, apart from the Common Agricultural Policy, and Brussels was fairly remote. Germans are now just slowly understanding that the EU affects their lives.
Just a year ago, we had major demonstrations against globalisation, as if you could stop globalisation. Now, people have understood that you can only shape globalisation. In a way, an era of looking at things in a purely national way is coming to an end.

When I meet German journalists here in Berlin, they say to me: you are the largest net payer, you should simply tell small countries what to do. Then I go to Brussels and meet German journalists based there. They say to me: Germany is just one country, you have to be more pro-European. Part of striking a balance between those two positions is to tell Germans, we now have to assume our international responsibilities.

When it comes to the financial crisis in Europe or sending troops overseas, this was new for us, and we had to learn very quickly. Perhaps our first reaction was to hide. But this is a learning curve and will lead to changes on all sides. Germans will have to learn that Germany is the most important part of the European Union, but is also only one part of the European Union.
Germany is going to have to act just as other countries do in Brussels, that does not make Germany anti-European.

[At this point, it was impossible not to ask about the Franco-German alliance. Because when he talked about German chequebook diplomacy, it was so clearly a reference to the old model of the French having the political ideas in Europe, and expecting the Germans meekly to pay the bills. And in the current crisis, his talk of countries pushing Germany to take decisions quickly and put politics ahead of the law, was unmistakeably a reference to President Nicolas Sarkozy of France. The minister did not demur from either of these suggestions.]

TDM: For Germany, it is and remains true that Franco-German relations are the most important we have. This is reflected by the number of preliminary talks we have with France [before EU meetings], which far exceeds the number of talks we have with other countries.
That also means we don’t always agree, there are some differences. Firstly, the French sometimes feel that if Germany and France agree, everyone else should fall into line. But Germany feels—and it is a long established tradition of ours, even if Chancellor Schröder did not always follow it—that we should take into account the interests of smaller countries, and since 1990, the interests of smaller countries in central and eastern Europe especially.

So we think about central and eastern Europe, while France often asks: what does this mean for the Mediterranean? We have different interests. But this can be a wonderful alliance, if it does not impose its views on Europe.

Secondly, regarding industrial policy and [monetary] stability, we have traditions that diverge. Sometimes these differences come to the surface: this is true of Airbus, it also applies to the stability and growth pact.

Finally, the Chancellor and the French president have their own approaches based on their personalities. And the combination of being quick and thorough is of value for Europe, for the G20 and also for the crisis in the eurozone.

If Germany and France get on too well, other countries say: we don’t want a Franco-German axis. If Germany and France disagree, everyone asks what happened to Franco-German friendship. As so often, the truth is somewhere in between.

[Q. What about Britain’s new government?]

TDM: Without referring to the financial crisis, in general the UK has always added a dash of pragmatic Euroscepticism. Sometimes that is a problem for us, but sometimes it is a good thing. And when British ministers come to Brussels, they are often more positive than they sound at home.
Now, with regard to the financial crisis, we now have a real disagreement. We are in the process of drawing certain lessons from this crisis, that certain forms of financial market activity have to be changed. And there the UK and America are the most hesitant, there is real disagreement. Yesterday [May 18th] you saw a disagreement on hedge funds. These disagreements will continue.
But my assumption is the new British government will maybe start off by being a little more Eurosceptic and will become more and more Euro-friendly. It is usually the way.”

[Q. on euro zone bailout]

TDM: The philosophy of Europe is based on everyone doing their homework, so there are no bailouts.

Article 122 [the emergency aid article of the Lisbon Treaty invoked by the European Commission to launch a rapid-reaction €60 billion loans mechanism for eurozone members, which Germany said could not be used as the legal basis for a much larger €440 billion eurozone defence fund] is an article intended to cover natural disasters. It is not a legal basis for helping countries that have caused their own problems by overspending.

What reasons can there be for deviating from this principle? One is if the euro is in danger. A second precondition is that countries being helped must do everything to help themselves. Those two preconditions have now been met, and [the eurozone defence fund] is in line with German law: we are providing loan guarantees under strict conditions, including conditions set by the International Monetary Fund.

[on French calls for the eurozone defence loan mechanism to use a common interest rate, and the European Commission's suggestion, rejected by Germany, that countries should extend unlimited loan guarantees to the fund]

TDM: Germany wants to provide its loan guarantees on the basis of its own credit worthiness, and not to take on some unlimited liability. All Germans have worked hard to achieve better financing conditions [than others]. If we provide loan guarantees for a country that is in trouble, we want to provide those guarantees on the same conditions that we encounter, as Germany, on the markets.

We don’t want to turn the EU into a transfer union. France is not as strict as us. The French said it would send a strong signal to the market and facilitate French financing possibilities if we used an average European financing rate. That was not our position, and that is why the negotiations went on so late into the night.

Now, the Chancellor has said we have to make use of the crisis to develop a stability culture in Europe. The basis of the EU is that everyone does their own homework, not that we share an average of our homework.

[on the Greek bailout]

TDM: Ok, we have now assisted Greece. The German position is as follows, and has led to a lot of criticism in Europe, but was a precondition for the German parliament. The assistance came with a budget consolidation programme with IMF and EU reports every three months and sanctions if consolidation requirements are not met, and not just promises.

We no longer provide unconditional assistance, but conditional assistance.

[on charges that Germany cost the EU billions by delaying the eurozone bailout]

TDM: Spending money too early would have been too expensive. In the banking crisis and now with the euro, it is a difficult decision to know when an individual case has become a systemic problem. And if you take the decision too early, it leads to more speculation.

If someone says: the situation is serious and we need taxpayers’ money, the first reaction of a politician is to ask if the situation is really so serious. Companies come to us every day and ask for help. If we gave money to all of them, we would all be bust by now.

The basic principle of capitalism is that companies are liable [for losses] but reap benefits [when there are profits].

The basic principle of democracy is that nation states are liable [for losses] but reap benefits [in good times].

We feel that if we had acted earlier, without conditions, it would have led to even higher demands later on. Look at the example of the Americans. They have a 12% deficit, we have a deficit of 5.3%, that is not bad news for taxpayers.

Wilhelm Busch, a famous German children’s writer, said that every wish granted gives birth to new wishes. Everyone here who has raised children knows that if you give in too early it will be more expensive later, especially if giving in violates all your principles. And our principle was that we are not going to bail out all those who caused their own problems.
You could say that we violated our own principle. Our philosophy was to do it as late as possible and only as a last resort. That was cumbersome, it was not popular, but it was necessary.”

--Of butterfly wings, Basque politicians and Cordoba's turbulent priests
--The new British government and the EU
--Fight! Fight! Fight!
--Mr Cameron visits Mrs Merkel
--Germany: Europe's fed-up sugar daddy
Ms. Cairo writes several blogs including:
Seaborn: Oceanography Blog
Star Trek Report: Space Sciences
Topical Murder and Dated Death

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