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Posted by
Olog-hai
on Mon Jul 2 06:44:41 2012, in response to EUEUEUEUEU Olog, posted by RockParkMan on Sat Nov 12 14:58:17 2011.
fiogf49gjkf0d german-foreign-policy.com
All or Nothing2012/06/25Just days before the opening of the EU crisis summit at the end of the week, the German government is increasing its pressure on the crisis-ridden euro countries to surrender their national sovereignty. The German finance minister rudely rejected Italy's demands to receive the badly needed help, without having to concede its sovereignty. Germany recently turned down similar Spanish efforts. The measures are part of a comprehensive program to consolidate German hegemony over the continent, under the motto of converting the "European integration" into a state-like eurozone structure, based on the right of interference in national budgets of the economically weaker countries. Around the globe, the protest against Berlin's austerity dictate is growing, because the German government's power ploys are driving not only European crisis countries into impoverishment but are also threatening to critically damage the global economy. A failure of the German va-banque game could provoke even a serious setback for the German economy.Time is Running OutJust days before the special EU summit opens in Brussels, national antagonisms, fueled by the dynamics of the developing crisis, are escalating between the strongest European countries. Resistance to German austerity dictates is particularly growing stronger in countries, falling ever deeper into recession, because of these measures. Last Friday, Italian Prime Minster Mario Monti warned in reference to the upcoming summit that "we have a week to save the eurozone."[1] At the summit on June 28 and 29, the EU heads of states and governments with again discuss further measures for overcoming the crisis.Fighting for SovereigntyThe recent exchange of blows began when Mario Monti demanded that the European Central Bank (ECB) massively buy bonds from the distressed Euro zone countries. According to Monti, the purchase should be automatically initiated as soon as the interest rate differential between Germany and the crisis countries exceeds a certain threshold. With this proposal, the Italian prime minister was hoping to achieve a containment of the Italian debt crisis, manifesting itself in rising interest rates and a prolonged recession. Through unlimited purchases of bonds, Rome would benefit from the falling interest rates and achieve a relaxation of the Italian debt crisis, without having to risk the loss of its national sovereignty, associated with the recourse to the European Financial Stability Facility (EFSF) rescue fund. According to Monti's game plan, the EFSF and European Stability Mechanism (ESM) rescue funds should "only protect" the ECB "against part of a possible loss due to the purchases," reported the business press.[2] German Finance Minister Wolfgang Schäuble immediately criticized the proposal by pointing out that the European "rescue funds" already now can directly buy government bonds — but only if an "agreement has been reached on a corresponding adjustment program." Schäuble, therefore, insists on infringing on Italy's sovereignty.Germany as ProfiteerThe German-Italian episode is an example of the current front lines within the EU: Berlin is granting assistance only in exchange for the surrender of sovereignty, whereas the governments of the crisis countries are trying to limit these restrictions on their national sovereignty as much as possible. By heightening the pressure on countries to abdicate their sovereignty, Berlin willingly takes the risk of exacerbating the crisis. If the interest burden grows, time will be running out for Spain and Italy, because of the unacceptably high interest rates, they can "barely refinance themselves on the market," noted the business press.[3] For Germany however, the crisis is economically also very advantageous. In times of crisis, German government bonds are considered a "safe haven." Therefore, Berlin reported extremely low interest rates. In addition, the euro's value has sharply dropped in comparison to the value of other currencies, which in turn will benefit the German export industry. The Federal Republic has therefore no interest in changing the current constellation, which enables Germany to increase its economic preponderance over the rest of the eurozone — at least as long as the turmoil on the financial markets seems manageable. This is why, in Rome, last Friday, Chancellor Merkel again blocked serious measures aimed at stimulating economic growth. The announced stimulus package of €130 billion turned out to be a sham, based mainly on a reshuffling of the EU budget by simply relabeling already long planned investment funds, for example, from the EU's regional funds.Global ProtestsThe ruthless instrumentalization of the crisis dynamics for the purpose of reinforcing its power, has provoked growing protests against Berlin in numerous countries, even outside of Europe. At the G-20 Summit in Mexico the "Germans, seen as bigoted and egotistical" were blamed for the escalation of the Euro crisis, according to an article in the German Spiegel-Online. "From US President Barack Obama all the way to the heads of governments of India, Brazil, Argentina, and Russia, there was only scathing condemnation of Merkel's policy, which is driving the global economy into a recession."[4] The conservative press sees Germany being cast in the role of the "crisis scapegoat," which is being mainly propagated by "Anglo-American politicians and media."[5] In fact, now even left-leaning liberal media organs, such as Britain's "New Statesman," have begun to sharply attack the German Chancellor. Just a few days ago, the magazine characterized Merkel as currently the most dangerous politician, who, with her "mania for austerity" is pushing the world "towards a new depression." A wide chasm has developed also between Washington and Berlin, because the escalation of the euro crisis is threatening the US economy and US President Barack Obama's chances of re-election. Merkel is also encountering growing opposition in Europe. France's newly elected President Hollande is seeking to build a common front with Rome and Madrid against Berlin. In mid-June, for example, the right-wing Spanish government accused Berlin, with unusual bluntness, of exacerbating the crisis. If Germany "throws one country to the wolves, that will affect everyone," warned Foreign Minister José Manuel Garcia-Margallo.[6]Disempowerment of the PeripheryThe European integration plans, just recently imposed on the EU primarily by Berlin, sheds light on why the German government would risk its isolation. The realization of these plans would transform the eurozone into a sort of state structure under German hegemony, shattering the very foundations of national sovereignty, at least, of the weaker eurozone countries. According to these plans, within the future eurozone state, the member countries will no longer be in a position to independently take out credit. All expenditures, not covered by autonomous revenue, must be requested from a central EU body. At EU level, this would "then be decided in common which country will be allowed how much in new debts," it was reported.[7] The "approval process" is to be supervised by representatives of the individual parliaments. In exchange, common European loans, the so-called euro bonds, will be issued — to finance the approved debts at the eurozone level. Until now, Berlin has rejected the idea of Euro Bonds, because they would lead to increased interests for German state credits. The new considerations, being propagated by various media organs, correspond to proposals made public in late May by the German ECB presidium member Jörg Asmussen. The USA's Wall Street Journal recently picked up this theme. It writes that the new European "steps toward integration" are part of a "shift" in German crisis policy. Berlin is sending "strong signals" that it would eventually be willing to "lift its objections to ideas such as common eurozone bonds" if other European governments were to "agree to transfer further powers to Europe."[8] In the New York Times, the economist Jacob Kirkegaard explains that "if German taxpayers are going to be liable for Italian debt, then they have to have some democratic say in how Italy runs its affairs and spends German money."[9] Berlin is aware that a renunciation of the disastrous austerity policy is economically necessary, but wants to do so only under complete German control. By way of the bureaucracy in Brussels, the German government is seeking nothing less than the direct supervision of the crisis countries' kernel of national sovereignty — their budget planning.The Transfer UnionIn fact, Berlin could use this means to consolidate its hegemony over Europe — imposed under the constraints of its economic pauperization strategy. Currently, Germany, due to its low budget deficits, would hardly be affected by these imposed limitations. It could use its enormously bloated current account surplus, accumulated over the past few years, to rehabilitate its own budget at the expense of the euro zone. The extremely accelerated, highly aggressive export orientation of the Federal Republic of Germany was made possible by the introduction of the euro, which removed the euro countries' possibility of devaluing their currency to defend their economies against German competition. The infamous German Hartz IV labor laws, introduced by the Social Democrat/Green coalition government, was an exports-favoring intensification — sinking German wage levels, in comparison to those of other euro countries. The German industry's export offensive — which, since the introduction of the euro, has accumulated a current account surplus of approximately €800 billion within the eurozone[10] — has decisively contributed to the debt crisis inside the eurozone. The German export industry, profiting from the precarious low-wage sector, has accumulated the current account surplus. This naturally corresponds to the deficits, particularly in the southern eurozone countries, some of which have entered a process of deindustrialization.Possible SetbackBerlin's power ploys to consolidate its hegemony over Europe is not without risks, even for Germany itself. A glance at the most recent economic data shows possible dislocations. With their eurozone austerity dictate, the German government has allowed the German industry's most important export markets to dry up. Last month, German industrial export contracts dropped to their lowest point since April 2009, when Germany, along with the rest of the eurozone — and a large portion of the global economy — was suffering a deep recession. The purchasing manager index (PMI), which fell to a pre-recessional 48.5 points also indicates a sudden downturn. "In German enterprises, the opinion is gaining ground that the turbulence in the eurozone has already damaged business prospects for the second semester of 2012," explains the Markit Institute.[11] The IFO Business Climate Index, which records prognoses of German enterprises, sank in June, for the second month in a row.Collateral DamageThe financial sector's instability is another risk factor. Germany's continued refusal to support the stimulation of economic activity with credit financing, is threatening an irreversible exacerbation of the euro crisis, in which a collapse of the financial system could plunge the entire global economy into a deep depression. The consequences could even surpass the dislocation of the socioeconomic established order following the global economic crisis of the 1930s. If it surpasses the breaking point of the already battered global finance system, such a cascade of crises would take on enormous speed and, at a certain point, render any effective countermeasures impossible. Even minor incidents, such as a breakdown in negotiations at the upcoming EU summit meeting, could trigger an irreversible shock. Berlin is playing an "all or nothing" power game. For the European crisis countries, nothing less than their national sovereignty is in jeopardy. For Germany, the stakes are on the consolidated hegemony over Europe. Berlin is even prepared to risk a global economic crisis of unfathomable dimensions as collateral damage.[1] Mario Monti: we have a week to save the eurozone; www.guardian.co.uk 22.06.2012
[2] EZB soll für Euro-Retter Bonds aufkaufen; www.ftd.de 21.06.2012
[3] Spanien und Italien läuft die Zeit davon; www.handelsblatt.com 21.06.2012
[4] Drei gegen Deutschland; www.spiegel.de 22.06.2012
[5] Deutschlands neue Rolle als Krisen-Sündenbock; www.welt.de 11.06.2012
[6] Greek Election on Sunday Looms Large, whilst Rajoy Battles ECB for Loans; www.theleader.info 19.06.2012
[7] Der Traum vom neuen Europa; www.spiegel.de 12.06.2012
[8] Germany Signals Crisis Shift; online.wsj.com 03.06.2012
[9] German Rectitude Has Its Risks; www.nytimes.com 15.06.2012
[10] see also Die deutsche Transferunion
[11] Schlechte Stimmung in deutscher Industrie; www.ftd.de 21.06.2012
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