Eurocrash: the Wackelkandidaten shall inherit the earth
Thursday 30 August 2012
"I have to tell you I resent having to find out about the fate of this country by reading German newspapers", writes Mary Ellen Synon, in the Wail's clog. One knows how she feels.
The fact of the matter, though, as we had begun to realise as early as June, is that is where the debate is happening, with the English press standing on the sidelines, obsessed with other matters.Even today (or especially today) it continues, with the latest instalment of the Weidmann versusDraghi spat making the weather in Handelsblatt. And it's not looking good for Weidmann, the paper says. One begins to get a sense of German phraseology here – even if I readily admit I'm too often out of my depth when it comes to deciphering that new language … Googlese. All Weidmann's warnings "are beaten into the wind" by Draghi, says the paper. One can guess that it is telling us Draghi hasplayed a blinder. But if Mary Ellen looks askance at the use of the word Schicksalsgemeinschaft ("destiny community"), what are we supposed to make of Wackelkandidaten, from whom Draghi wants to buy bonds? Are we to assume that the Schicksalsgemeinschaft is now committed to bailing out theWackelkandidaten, and that there is nothing Weidmann can do to stop it? Handelsblatt, like so many others, focuses on Draghi's assertions that the ECB "will remain independent" and "will always act within its mandate", failing entirely to challenge the claims when, manifestly, the ECB is not independent and has clearly exceeded it mandate. But, if you allow these false claims to stand, for Draghi then to say, "When markets are fragmented or influenced by irrational fears … this may at times require exceptional measures", seems eminently reasonable. He fails to say, though, that his "exceptional measures" are driving a cart and horse through the EU treaties. For Weidmann and his co-conspirator Jürgen Stark, this is particularly galling because Germany is isolated in the ECB governing council. The Googlese thus tells us: "As an advocate of a consistent stable exchange German tradition Weidmann is not tired, put his finger in the wound". When you've worked that one out, drop me a line and tell me what it means. You can also add Weidmann's comments: "Whether it's of interest or any special measures - in the end it always works out that the central bank clamped for goals of fiscal policy should be", he says. If I knew what he was saying, doubtless I would agree. You can get the drift of it though, and it is entertaining to read a quote from the employee magazine of the Bundesbank: "We will continue to work with all means and at all levels … so that the monetary union will continue to live as a stability union". But there no now doubt that Weidmann can hold the line. Without a proper and full backing from German politicians, he is no longer secure. Recent statements from Merkel, especially those in Canada, did not help as they apparently support Draghi. Merkel, it seems, is playing a double game, happy to rely on the ECB to keep a lid on the markets, with all the other "euro-weary governments" piggybacking on the ECB as well. If it wasn't for the ECB, the chancellor would find herself under pressure to rescue Italy and Spain sometime before the election. And that would be politically difficult. Thus, we are told that the German chancellor is de facto a euro Inflationierungspolitik. So there we have it. The Schicksalsgemeinschaft, led by an Inflationierungspolitik is committed to bailing out theWackelkandidaten, all – you will be pleased to know – under the fig leaf of "conditionality". But reforms take time and the only thing left to keep the markets in check is the ECB "Bazooka" – so that is how it is going to be. The Wackelkandidaten shall inherit the earth, and poor old Weidmann is out in the rain. COMMENT THREAD Richard North 30/08/2012 |
Eurocrash: Merkel's Euro mission
Thursday 30 August 2012
Somewhere over the Atlantic, there's a presidential election going on, with the Americans showing their latter-day genius for picking a Republican candidate who stands a good chance of losing to lame-duck Obama.
With the military adventures related to the Global War on Terror scaling down, the allies staying resolutely out of direct involvement with Syria, and a lack of any political chemistry between Cameron and Obama, the "special relationship" seems less vital at the moment than it has for a long time. Thus more important in the grander scheme of things is not the US election, but next year's German federal election, where the people of the strongest economic power in Europe will decide on the leader who could well take us into the next and final step of European political integration. The current leader – who on recent performance looks a credible candidate for winning the election – has arrived in China (her second state visit this year) and has met Premier Wen Jiabao, who days he's worried about the worsening debt crisis. Thus the chancellor comes, according to Bild, with a long list of "needs", not least of which is for the Chinese to open the taps on the $3.2 trillion foreign exchange reserves, and pour them into the EFSF. That is what they said they would do in February, but they held back and instead bought tangible businesses such as electricity suppliers in Portugal, ports in Greece and other such assets. But at least they have bought 50 Airbus A-320s, for €3.5 billion, some of which will find its way to the UK, but that is a drop in the ocean. Nevertheless, with all eyes on the outcome, Germany's popular daily is calling the Merkel adventure her "Euro mission". Germany saves the world! Forget Captain Euro. Frau Merkel is on the loose. COMMENT THREAD Richard North 30/08/2012 |
Eurocrash: another Mario at odds with Merkel
Thursday 30 August 2012
 Playing to the script, Monti wants unlimited ECB loans for ailing euro nations from further, but hard (wo)man Merkel holds fast and says that according to the EU treaties, the central bank is prohibited from state financing. Angela and Mario were further divided on whether ailing euro countries should receive virtually unlimited loans, and without strict conditions, from the ECB. Merkel (CDU) refused this option as well, all during her meeting yesterday with the Italian prime minister. Nevertheless, Monti argues that market confidence would return if the ESM was equipped with unlimited firepower. The idea of giving a banking license to the ESM should not be dramatised, he said. It is simply "a possible component of a huge mosaic", he averred, also telling Angela: "It is also my belief that an ESN banking license is compatible with the Treaties". Monti then conceded that, if a license was not politically feasible now, one had to postpone the issue, adding: "Maybe in the future, treaty changes are possible". However, what Monti is really after is ECB support for ailing euro-zone countries in the form of large-scale government bond purchases, without the affected States meeting strict reform conditions. Merkel, on the other hand, remarked dryly that the high bond yields that some governments had to pay would most likely fall if they brought their budgets under control and increased their competitiveness. But her views was that there was no reason why Italy should apply for aid from the euro partners anyway – so there. Handelsblatt picks up the story, using Christoph Weil, a Commerzbank economist, to tell us that the resources of the ESM were way too slender to support Spain and Italy over the longer term in the bond market – all of which makes the Merkel-Monti spat a bit academic. Opinion as to the legality of ESM intervention remains a hotly disputed issue amongst experts and lawyers. The chief executive of the Family Business Association, Albrecht von der Hagenbelieves believes that the ECB would have an "unlimited" capability to print money. The euro rescue then becomes "the gravedigger of monetary stability", he says. That kind of has a nice ring to it … "the gravedigger of monetary stability". And Monti looks as if he is applying for the job. COMMENT THREAD Richard North 30/08/2012 |
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