Politics as television by other means: Mrs Merkel telling us that Greece is here-to-stay and the ESM will co-exist with the EFSF

In television, I was once told, you can never lose money by underestimating the intelligence of the audience. Mrs Merkel seems to have drawn heavily from that nugget of wisdom. Her take on it is that, in European politics, you cannot lose votes if you underestimate the electorate. Just keep telling them the same thing again and again, back it up with dead-end policies that throw zillions of good money after bad and, when things go belly up, send them the bill.

What prompted the angry lines above is the two tandem statements on Greece and on the ESM. They are not, of course, unrelated. Mrs Merkel has made a clear, unambiguous U-turn from her strategy of the past six months: gone are the covert or overt threats that Greece will be pushed out of the euro. Now, once again, «a Greek exit would pose grave dangers for the rest of the Eurozone”. What has changed? Three things:

First, the Greek Parliament was misled into approving Bailout Mk2; the sole purpose of installing Mr Papademos in Maximou (the PM’s Athens residence) having been accomplished. Secondly, the Greek electorate has also been sufficiently terrorised to elect a coalition government of the two major parties (the fact that they have been rendered empty shells being neither here nor there for Mrs Merkel) that will continue to sign on the doted line of whatever document is faxed to them. Thirdly, her own reelection prospects seem pretty good, courtesy of the SPD’s failure to grab the opportunity to advocate European policies that fix the Eurozone without committing German taxpayers’ money to endless bailouts.

Of course, nothing has been fixed in Greece. The only ‘achievement’ is that they have completed smoothly the largest, and most odious, transfer of debt from the shoulders of bankrupt bankers to those of Europe’s taxpayers, at the expense of keeping Greece in an ever accelerating debt-deflationary spiral. «They created a desert and called it Peace»-type of ‘success’. Meanwhile, Spain has well and truly entered precisely the same spiral. Put simply: The Crisis’ dynamic is continuing unabated and there is nothing whatsoever on its path to impede it. The monies that the ECB prints, and extends to the Italo-Spanish banks (primarily, only play a palliative role that is, in fact, detrimental to the patient’s health, as they mask the gangrene that grows under the surface.

And what does Mrs Merkel have to offer as the remedy? The pathetic answer is a readiness to discuss the possibility that, perhaps, the European Stability Mechanism, will be potentially allowed to keep its dowry of €500 billion, i.e. not to take away from its the €250 billion already committed to the fallen member-states (Greece, Ireland and Portugal). Is this not something, rather than nothing? I am afraid not. It is worse than nothing. It is an insult to our intelligence. First, the ESM will not be getting its dowry of €500 billion for years – only €80 billion will be available up front. Secondly, the sums mentioned, compared to the juggernaut approaching (Spanish and Italian debt), are puny (see Wolfgang Munchau’s latest analysis on the matter). Third, the whole structure and logic of the ESM-EFSF is ill equipped to deal with the Crisis: as long as Europe continues to treat the problem on a country by country basis, waiting patiently for the conflagration to move to a place that it has not visited before (while, in the meantime, enforcing growth-destroying austerity left, right, centre, north and south), we have no excuse to hope that Mrs Merkel will be proven right. She won’t and she knows that she won’t. The trouble is that Mrs Merkel also has ample empirical evidence that her strategy is paying off handsomely on the political terrain that she wants to continue to dominate.

In the world of television, cynicism was vindicated. Audiences rewarded those who sought to profit by underestimating the viewers. In the end, audiences had no one but themselves to blame. Will European politics end up similarly? Will electorates continue to reward those, like Mrs Merkel, who understimate their intelligence? So far, it seems that they will. But unlike the idiot box, whose programs we can all switch off by remote control, Europe is our home. No remote control will help us escape a dystopia caused by our capacity to reward those who underestimate our analytical powers.


  • Just a sample of hypocrisy..

    The Hidden Risks Lurk in ECB’s Accounts.

    Some economists warn that the German central bank faces hidden liabilities of 500 billion euros in the form of unsettled claims within the European payments settlement system, and could lose that sum if the euro zone breaks apart. According to SPIEGEL, the German government has said it sees no such risks. But a Greek euro exit could still cost the German central bank billions.


    • The question of a possible Greek Euro-exit should be debated exclusively by Greeks and exclusively on the merits/risks which it would entail for Greece (and irrespective of possible damages elsewhere). I have always argued that Greece should never pursue an exit strategy but I have just seen the talk with Nigel Farage below and I acknowledge that he makes some interesting points.

  • So it would seem, alas, that “mazi ta fagame”, the audience and the perpetrators, the perpatrators are the audience…!

    • Too simplistic Penny. Too simplistic. The majority of Greeks tolerate the junta. It does not mean that they were noefascists or, indeed, responsible for the junta.

    • i wouldn’t dare make a different argument! I just didn’t think that when you referred to audiences having no one but themselves to blame in the end you were casually referring to tolerating their circumstances rather than actively participating in them. my bad

  • Yani, it’s hard to disagree with your logic and polite language so I won’t.

    As I have been saying for months now, the problem is political mixed with an unusual amount of amateurism.

    Merkel’s party promotes the same US Republican nonsense on fiscal matters and economic approaches. Furthermore, Merkel in a sense has taken over the US pending election as a hostage.

    This is truly unprecedented. To have a minor German politician dictating the outcome of US elections. Because if Merkel does what she is supposed to have done a long time ago, the global economy gets a boost and this American President gets re-elected. But if she insists in manipulation and her amateurish economics she then ensures that a Republican will be next US President.

    So, that’s it; the great ideological battle: The neoliberals/conservatives/Republicans/Right wingers on one side and the liberal/centrists on the other. I don’t want to use the word “left” here because the left is not the King’s maker in this fight. It’s a fight between stale Conservatism vs. the vast reasonable middle. (plus I don’t want to get caught in the examination of two extremes).

    And of course in Greece’s case the political reasoning is all upside down since the Right seems to be Merkel’s guaranteed opponent along with everybody else in multiple cute variations.

  • Merkel will have a hard time selling the electorate this next one in her long series of red-line-crossings.

    You know, in 2010 she stated explicitly that the Geman taxpayers will pay ‘no cent’ for the rescuing of Greece and others – now she is talking what, 400 billion Euro plus 500 billion in Taget 2?

    And she can’t try the spin that most of the money is in fact for the finance industry, not for fellow nations. Which is true, but to give money to banks and their friends is even more loathed be the German people.

    The biggest problem we have over here is that the so called ‘opposition’ is even more eager than the ruling coaliton of CDUCSUFDP (after the next election: CDUCSUSPD) to load onto the German people the plight to pay and/or guarantee for 30 (!) years (which in the end means: to pay) things they did not order.

    No, we don’t call at all for a strong hand and anti-european politics, certainly not. We just want a reasonable government that serves the own nation’s interests 1st and doesn’t understand solidarity as one-way street on which to much of the German taxpayers money is for generations to come transported out of our country.

    • NPD (nationalist party) received more or less the same result as Merkel coalition partner FDP in the last state election on Sunday. The pirates (non bailout) went from 0 to 10%.

    • @Dean: “has profitted mightly”

      I see, so the loans did not have a haircut and are paying a market interest rate?

    • Dean Plassaras:

      “Even today, the Germany taxpayer has not paid a cent for Greece.”

      Wrong. For instance, the FMS Wertmanagement lost already 8,9 billion on Greek bonds, payable in full by the German taxpayers.

      And there are more like this bad bank in Germany, the ‘Landesbanken’ who lost also some billion on Greek bonds. And also in these cases the German taxpayers are the ones who have fund the bill at the end of the day.

    • Pedro and Serious Sam:

      The haircut, or PSI, is/was 100% a German idea and a German concept.

      So, if you claim you lost something look yourselves in the mirror and ask: How can we be so dumb? No sympathy here for your “loses”. This is what we call: “John serves and John drinks”.

    • Very serious Sam:

      Do not mix potatoes with apples. When banks buy bonds they gamble that the bonds are secure. The interest rate reflects the gambling danger. That the greek bonds were devalued is the effect of a loss in the gamble, and gamblers should take their losses.

      The new money lent to us, which is what the German taxpayer is grumbling about, is controlled by the Troika and has a fixed interest rate and is not in bonds. It is not a gamble. Germany is taking its fixed interest rate, which justifies the comment that in the rescue loans Germany is not loosing a cent but has already gotten some millions of interest. The new loans are mainly financing all these interest payments. It is a complicated story that they weave.

    • Anna this is incorrect. The opportunity cost are immense. It is not a market interest rate.

      Anyways the real income of Germans (and all foreigners working there) went down 2,9% since 2000. What is the figure for Greece? +20% or +30% or +40%?

  • @Yannis

    “In the world of television, cynicism was vindicated. Audiences rewarded those who sought to profit by underestimating the viewers. In the end, audiences had no one but themselves to blame. Will European politics end up similarly?”

    Why would they not? What makes you think it would be otherwise?

    Was it not the same audience that elected these sadly deficient “leaders” on the same basis? What would make them act differently now?

    This is the World we live in and its not getting better – certainly not before it gets a hell of a lot worse and even then, we have no clue if things will change…

  • Dean’s labeling Merkle an “amateur” is only correct in the context that her ideas on political economy are doomed to failure. So in that context she walks like and amateur, talks like an amateur, etc. She’s demonstrably an amateur.

    But if… her main objective is the same as the neoliberal objective everywhere in the world – to “restructure labor” – then she is, so far, looking like a pro. She’s winning. Wage destruction accompanied by destruction of labor’s bargaining power is what Merkle and all the other neoliberal politicos who have hi-jacked the Euro project are intent upon accomplishing. They’ve been talking about it for years. They are willing to destroy the EZ project rather than give up on their best chance to destroy labor.

    Here’s a blurb from this morning’s Eurointelligence blog:

    Montebourg attacks Merkel’s „egotistic and purely national policies“

    Talking to Frankfurter Allgemeine Zeitung, the prominent French Socialist Arnaud Montebourg attacked Angela Merkel over her „egotistic and purely national policies“. „She has unilaterally lowered the costs for companies and she has unilaterally decided the exit from nuclear energy in favour of Russian gas“, Montebourg complained. „The ECB operates according to a German logic copied from the Bundesbank. The euro is overvalued because this serves German interests. The concept of competitiveness is German. We are asking for a reorientation in all these points. Should Francois Hollande win, this will be a sign that the French will no longer allow the German liberal conservatives to dictate their policies.“

    • David:

      Re: the “pro” argument, it’s all accidental.

      BTW, Montebourg is wrong. An overvalued euro does not serve German interests. Exactly the opposite. It’s a low value euro that serves German interests because it increases export profits.

      Germany’s business is to create never ending, small and manageable crises for this very purpose. To keep the euro low and attract capital into the ridiculous Bunds which are the geriatric instrument of the century.

      Therefore, your argument that she looks like a “pro” has its roots on this dedicated German effort to fabricate artificial crises where none need to exist.

      When amateurism in crisis management blends with professional efforts to undermine the euro, a blurred picture emerges that has some scratching their heads that maybe she on to something.

      Believe you me she is not, other than the self-serving German game of racking in profits at the expense of all other EU-26 members.

    • Wow, what a luatic Montebourg is. What does he expect??? When you would force Switzerland to join the Euro, would it appreciate in value or not? Who dictated this ill fated currency on the people of Europe? It was the French!

      Without the French minority complex of never being able to come up with a sound currency on their own, we would not have the Euro. Youn people in Italy, Spain & Portugal would have jobs and a future!

    • @Dean: An overvalued Euro hurts the PIFGIS more than Germany. An undervalued Euro helps the PIFGIS more than Germany.

      The reason is very simple. The PIFGIS mostly produce price sensitive commodity like goods, Germans produce complex unique or high road products where customers are not so price sensitive. So the line between “sell a lot” and “not sell” is very thin for the PIFGIS, but not for Germany, which you can see in their relatively stable exports during periods with huge USD/EUR swings. For a lot of machinery their is no other option, you pick between a German player and maybe an Austrian player…

      I have to take the North of italy plus French luxury brands out of this statement, but overall it is that simple.

    • Pedro:

      You argument would be good if both Greece and Germany were sellers to, say, China.

      The majority of Greek exports are EU bound. However when Germany sells cars to China, or instrumentation as you like it, a lower euro buys a lot more product for the Chinese consumer and this translates to higher sales.

  • I really start to like this EURO/EU crisis! Taking public transportation you can hear more and more people speaking Italian, Spanish and Portuguese!

    Lot´s of new labor available in Germany!

    – I managed to find someone who paints an apartment I rent out in Munich for 25% less than 3 years ago!
    – My favorite Italian restaurant managed to expand since they have new people working in the service
    – I kicked out the cleaning company that we use for our offices and replaced it by a new one at 35% savings. They employ 100% Portuguese. Did not know, but fine with me.
    – My hotel in Frankfurt has new Spanish staff, so I get my breakfast quicker!

    I will screen the market for maids and cleaning ladies for my wife. Looks like a good time to shop around!

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