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Britain and the World Love Germany

What a pleasant surprise! Germany is more widely seen as "having a mainly positive influence" in the world than any other country, according to the BBC World Service's Country Ratings Poll. I doubt, however, whether poll participants really meant Germany's foreign policy.

A three-point increase in Germany's average rating returned it to the top of the BBC list, displacing Japan, which saw its positive ratings drop from 58% to 51%, and fell from first to fourth place overall. (...)

In Spain, the recipient of a bailout with tight German strings attached, 68% said they felt Germany had "a mainly positive influence in the world".

In Britain, it was even higher at 78%. In France 81% - the poll indicates that four in every five French people look over the border with approval!

Only Greece maintains its Germanophobia, with 52% giving a negative rating.

Will the poll matter? It might well. It may confirm German ministers in their belief that tough love is true friendship.

Re the last sentence: I doubt that people consider tough love in the euro-crisis as a true friendship.

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Be Afraid of Young Europeans

Wow, I did not realize the German and Italian Nazi leaders were so young when they came to power. Should I be worried about the political radicalization of youth in Europe today due to the economic crisis? Will some of them turn into Fascist leaders in five years? Walter Laqueur in The New Republic in July:

If youth is the season of hope, it is also the age of credulity and fanaticism; the radicalism on behalf of which youth has served as a vanguard has not always been so admirable.  Consider Italy's fascist movement. Mussolini was not yet 40 at the time of his march on Rome, and those surrounding him were even younger-Achille Starace, the future secretary of the party, was 33; Dino Grandi, the future minister of justice, was 27. Galeazzo Ciano, the future foreign minister, claimed to have participated at the age of 19. (The anthem of the fascists was "Giovinezza primavera di bellezza": "Youth, Spring of Beauty.") 

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"We have become the Americans of Europe"

Although Germany approves one aid package after the other for Greece, "hardly a day goes by without Chancellor Angela Merkel being depicted in a Nazi uniform somewhere. Swastikas are a common sight as well," writes Jan Fleischhauer in both the German and English Edition of Der Spiegel.

He does not blame the imposed austerity measures for our lack of popularity, but rather Germany's success, self-confidence and strength. He concludes that Germans have become "the Americans of Europe":

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Craziest Commentary on Germany and Greece

The NY Times published the craziest op-ed on Germany's policy on Greece that I have seen in a broadsheet. Ever.

After tons of articles about Germany being too slow, too hesitant, too selfish to sufficiently help Greece, the NYT now opened its op-ed pages for the American economist Todd Buchholz to write about "Germany's Love for Greece":

Germany's real motivation to help Greece is not cash; it's culture. Germans struggle with a national envy. For over 200 years, they have been searching for a missing part of their soul: passion. They find it in the south and covet the loosey-goosey, sun-filled days of their free-wheeling Mediterranean neighbors.

In the early 1800s, Goethe reported that his travels to Italy charged him up with new creative energy. Later, Heinrich Heine made the pilgrimage, writing to his uncle: "Here, nature is beautiful and man lovable. In the high mountain air that you breathe in here, you forget instantly your troubles and the soul expands."

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The Euro Comes of Age

Sixteen months ago, I began to grow worried about Greece's debt problems and its implications for the euro. At the time, I wrote,
The euro area has yet to demonstrate its cohesiveness when confronted with the growing economic divergence of its member states and even the specter of a sovereign debt default....Leaders will have to act together to show their commitment to preserving the single monetary policy in the euro area.
Yesterday, EU leaders rose to the challenge and solidified the euro's position in world monetary affairs. The announced $1 trillion package does more than provide indebted countries with a source of funds during periods of crisis; it demonstrates the commitment of leaders to the concept of European integration. In so doing, European officials have significantly increased the credibility of the EU in the eyes of their American counterparts and taken the first step towards some degree of fiscal integration.

A few details of the announced aid package are particularly noteworthy:

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Anxiously Waiting on a Trojan Horse

Guest post by Joe Joe Noory is an Architect, investor, and independent observer of news and opinion:

Somewhere between the emotional populism of wanting to burden the higher performing European states with guilt over resisting to bail out the Greek government, and the risk investors are being offered to take are the hard truths of bailing out of the broke Greek government by investing in their bonds: they might not just default on ?8,5 billion in obligations to bond purchasers due on 19 May, but run the risk of never being paid back for future bond offerings (of perhaps two years or less), much in the way depositors in an uninsured failed bank will never see a red pfennig of their invested savings on a default.

Ifo's Hand-Werner Sinn indicated that very same sentiment on Wednesday morning, according to this wire piece:

The warning came as a new poll showed nearly two-thirds of Germans were opposed to helping Greece, with a majority believing that membership of the EU brought more disadvantages than advantages. Asked on MDR radio if Berlin would ever get its money back, Sinn, who heads the Ifo institute and is one of the top economic advisers to the government, said: "To tell you the truth, no."
Greece "will not be in a position to carry out the necessary budgetary rigour" and will eventually have "to ask for Germany to waive the debt," he said.
He warned that bailing out Greece could set a precedent for other euro area countries labouring under high debt and public deficits. "It would be understandable if the Italians or the Spanish put pressure on us to pay up now because it is an important precedent for them," said Sinn.

Before you react, take the statement for what it is: a warning. It isn't a characterization of the ur-Greek citizen, or a nationalistic reflection, or a cultural issue, but a warning that the discipline to raise revenue and cut budgets in face of the street protests and strikes of civil servants and dependants on entitlements. It isn't a characterization of what they did, but a warning of future events, one which prices them and tells us what something is really worth, just as watching those who short an equity or commodity does.

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Germany is the New Bad Boy

I am quite excited that Germany participates in the Eurovision Song Contest with an original, charming and funny artist, who can actually sing and is a bit crazy and therefore represents the new Germany very well. Lena Meyer-Landrut will perform the song Satellite at the Eurovision Song Contest, which was written by an American-Danish duo.

Although for the first time in years, Germany deserves "douze points," I don't think Lena Meyer-Landrut will get them from the other European countries. Animosities against Germany are too strong. Most Europeans have stronger emotional ties to other countries.

And Germany's current economic and fiscal policies make us the new bad boy. The NY Times writes "Germany Begins to Shed Its Role as E.U. Integrator":

Resisting a bailout for Greece, digging in over economic policy and opposing parts of a strategy for Europe's growth, Chancellor Angela Merkel of Germany will arrive Thursday at a European Union summit meeting ready to play an unfamiliar role: the bloc's naysayer. Once the invisible glue that bound the Union, German policy is now being dictated by less idealistic priorities rooted firmly by national interests.

I guess, we act now like a "normal" country. Well, so be it!

Germany's previously strong monetary and political support for EU integration did not make us popular enough to win the Eurovision Song Contest either. It just paved the way for German unification, but we got that now and have to focus on bigger national interests, like the Eurovision Song Contest and the Soccer World Cup.

My statements to the Russian English language TV station Russia Today probably cost us a few votes from Greek's Eurovision Song Contest community as well. The 10 minutes live interview took place last Friday. The video clip is from a weekly round-up and mentions just a few short statements of mine:

Greece and Goldman Sachs

Investigative reports by the New York Times and Der Spiegel have left Goldman Sachs and Greece squirming in the limelight. For at least fifteen years, the American investment bank has been helping Greece legally massage its public finances. The arrangement enabled Greece to keep its European partners happy without having to make tough fiscal decisions. Specifically, the bank created currency swaps that enabled debt issued in dollars or yen to be swapped for euro-denominated bonds that would be paid back at a later date. Sound fishy? Those on both sides of the Atlantic think so. From the New York Times:

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.... Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.

Der Spiegel has been following the issue for a longer period of time, and the frustration in Germany over Greece's behavior is particularly acute. The magazine notes that the accounting procedures have only delayed the day of reckoning:

At some point Greece will have to pay up for its swap transactions, and that will impact its deficit. The bond maturities range between 10 and 15 years. Goldman Sachs charged a hefty commission for the deal and sold the swaps on to a Greek bank in 2005.

The activities of Goldman Sachs in Greece are neither surprising nor novel. Indeed, Der Spiegel notes that Italy has engaged in similar activities with another bank for some time. The controversy highlights how difficult fiscal reform is in modern democracies. Today was Greece's day of reckoning, tomorrow could be America's. Anne Applebaum at Slate writes, "I have seen America's future and it is Greece."

The revelations come at a very inopportune time for Greece, the bank, and the EU. What do these revelations say about the proposed bailout of the country by the EU? Can the Euro survive when its member states can easily fabricate their numbers? (Imagine California making secret purchases in eurobond markets that are swapped out at a later date for dollar-denominated bonds.) Is the Euro feasible without greater political cohesion among the EU's member states? And what does this transaction say about the value-added of investment banks? As Baseline Scenario notes, are investment banks in sovereign markets really producing "productivity-enhancing financial innovation" or just "a sophisticated form of scam?"