Tuesday, June 5, 2012

Germany: A Builder, Not a Wrecker

The Lehmann Letter (SM)
It’s easy to characterize Germany as content, self-satisfied and disdainful of its southern, debt-plagued neighbors.

But Germany has been a builder, not a wrecker since WWII. This letter believes Germany will continue to fulfill that activist role.

Germany is not fiddling while Rome and Madrid burn. And it’s not just that Chancellor Angela Merkel must please her constituency. Germany has a record of putting its money where its mouth is. Germany not only apologized to Holocaust victims; it offered restitution. When West and East Germany unified 20 years ago, the West created a fund to rebuild the East. Germany then paid $1 trillion to do so. That’s right: ONE TRILLION DOLLARS. That’s a lot for a nation whose economy is much smaller than ours.

Germany has already paid substantially to bail out southern Europe. But it knows the price of putting its money where its mouth is. So Germany wants to be sure that any further assistance will include measures that further unite the fiscal and monetary policies of Europe. That seems reasonable.

In that light consider these articles in this morning’s New York Times:

Germany Is Open to Pooling Debt, With Conditions

E.C.B. Under Pressure to Ride to the Euro's Rescue

Here’s the last paragraph of the first article:

“’Merkel is slowly adapting to different times because she is afraid of not jumping on the train in time,’” said Stefan Kornelius, foreign editor of the German newspaper Süddeutsche Zeitung. “’She doesn’t want to be the gravedigger for the euro.’”

That’s not a description of an obstructionist.

Now read these paragraphs from the same article:

“Pressed by a banking crisis and turmoil in the markets, Germany has indicated that it is prepared to accept a grand bargain that would provide greater support for its most indebted euro zone partners in exchange for more centralized control over government spending in Europe.

“’The German chancellor, Angela Merkel, said that finding the way to “more Europe, not less’” was the next task for Europe’s leaders. “’The world wants to know how we expect the political union to complement the currency union,’” Ms. Merkel said at a news conference here Monday with José Manuel Barroso, the president of the European Commission. “’We have to find an answer in the foreseeable future….’”

“The worsening crisis has led to a sweeping effort to chart a new path forward for the (European) union, one that encompasses fiscal integration, Europe-wide banking supervision, and tighter coordination of economic policies.”

That’s a builder, not a wrecker.

The same is true for Mario Draghi, president of the European Central Bank. Take a look at these lines from the second article:

“…Last week, in a rare public rebuke to the region’s elected officials, Mr. Draghi outlined the steps he said were necessary to strengthen the euro currency union, including requiring member nations to take shared responsibility for bank bailouts. If he walks this tough talk, the central bank might not take action until political leaders have made tangible progress in that direction.
“To help leaders head down that path, the European Commission on Wednesday is expected to propose steps toward a so-called banking union — measures that would include requirements that nations set up funds to deal with failing banks, with the money possibly shared by countries, and give the national authorities greater scope to intervene in troubled banks.”

Europe has forged a stronger union in response to past crises, and can do so again.

(To be fully informed visit http://www.beyourowneconomist.com/)

© 2012 Michael B. Lehmann

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