Merkel Victory as German Court Backs Euro Rescue Fund

The following is an excerpt from an article in:


The New York Times
Thursday, September 13, 2012

Merkel Victory as German Court Backs Euro Rescue Fund

By NICHOLAS KULISH and MELISSA EDDY

KARLSRUHE, Germany — The Federal Constitutional Court in Germany gave Chancellor Angela Merkel a significant victory on Wednesday in her bid to master the debt crisis that has buffeted the Continent for years and endangered its common currency, granting approval to one of the main pillars of her strategy.

With the ruling, the 17 European Union countries that use the euro will be able to move ahead with the establishment of the European Stability Mechanism, something like a Continental version of the International Monetary Fund. The mechanism will handle bailouts and work in tandem with the European Central Bank to buy the bonds of countries like Italy and Spain that are straining under high interest rates.

The court ruled that Germany could proceed with its contribution to the mechanism, but it set certain conditions, including a requirement for parliamentary approval of any increase in the agreed-upon German contribution of 190 billion euros, or about $240 billion.

The fund, with $644 billion, is intended to buoy struggling countries and help protect the common currency, an impossible mission without Germany, which has the European Union’s largest economy. Although the ruling is unlikely to still Europe’s economic crisis entirely, a rejection could have unleashed new waves of instability and thrown the fitful march toward European integration into question.

“Once again, Germany today sends a strong signal out to Europe and the world beyond,” Ms. Merkel told Parliament. “Germany is decisively true to its responsibility in Europe as the largest economy and a reliable partner.”

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Conciliatory Notes in Germany on Easing Greece's Burden

The following is an excerpt from an article in 

The New York Times
Thursday, August 23, 2012

Conciliatory Notes in Germany on Easing Greece's Burden

By MELISSA EDDY and JACK EWING

BERLIN — Bild, Germany’s most-read newspaper, has accused Greece of “making our euro kaput” and only a few days ago referred to the country as “a bottomless pit.”

On Wednesday, though, the paper featured a friendly chat with the man in charge of that bottomless pit: Antonis Samaras, the Greek prime minister, who pleaded during an interview for more time to repair his country’s shattered economy. The Bild reporter even inquired how Mr. Samaras was feeling after an eye operation.

Coming from a newspaper known for a keen understanding of what its 2.8 million readers want to hear, the shift in tone could be significant. It coincides with signals from members of Chancellor Angela Merkel’s inner circle this week that, within limits, Germany may no longer be so insistent that Greece stick to existing agreements on its finances.

“All that we want is a little breathing room to get the economy going and increase revenue,” Mr. Samaras told Bild, two days before his first trip to Berlin as head of government. “More time does not automatically mean more money.”

Some top officials in Ms. Merkel’s governing coalition continue to insist that Greece stick to agreements it has made to rein in its government finances. But others, including Guido Westerwelle, the foreign minister, and Michael Meister, the deputy leader of Ms. Merkel’s Christian Democratic party in Parliament, have indicated a willingness to extend the schedule for meeting the terms that international creditors imposed on Greece.

“It is essential that the government in Athens presents a credible plan to implement the measures,” Mr. Meister told the newspaper Handelsblatt on Wednesday. But if the government did, Mr. Meister said, “maximum flexibility” was possible.

The debate about Greece has intensified before a report to be issued next month on the country’s progress in attaining its fiscal goals. Officials have been hinting that parts of the report from the troika of international lenders — the International Monetary Fund, the European Commission and the European Central Bank — may be more positive than expected. But the debate is also pressuring euro zone leaders to acknowledge that the austerity program imposed on Greece by the troika has taken such a toll on living standards that it has become counterproductive.

Some members of Ms. Merkel’s government, including the finance minister, Wolfgang Schäuble, have continued to talk tough on Greece. Volker Kauder, head of the Christian Democrats in Parliament, said repeatedly this week that lawmakers were in no mood to grant concessions to Athens.

“The agreements stand,” Mr. Kauder said in remarks to the Passauer Neue Presse newspaper on Wednesday. “Only when agreements in Europe can be upheld, can we rebuild trust.”

The seemingly conflicting positions taken by key figures in the chancellor’s party may be designed to prepare the German public for a shift in policy. Hard-liners like Mr. Kauder are trying to remind the Greek public that Berlin remains steadfast in its demand for a major overhaul of the economy. The more conciliatory statements are designed to bring Germans around to the idea that granting Greece more time to meet its goals is essential to saving the euro and so, ultimately, is in their best interest.

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Referendum on Europe Gains Support in Germany

The following is an excerpt from an article in 

The New York Times
Sunday, August 19, 2012

Referendum on Europe Gains Support in Germany

By MELISSA EDDY BERLIN — It has become the buzzword of the summer in Berlin: referendum. The foreign and finance ministers as well as opposition leaders have all come out in favor of allowing Germans to have a direct say in whether to give up more power to European Union institutions.

Although the idea of a referendum is for the moment more notional than concrete, it is gaining currency in Germany’s political debate. Approving it would amount to the exceptional step of a national vote to change the Constitution to allow Germans to relinquish some executive authority to Brussels.

Proponents say that if such a referendum were approved, it would send a strong signal of Germany’s commitment to the euro. It would also streamline the steps needed to save the common European currency, they argue, and appease mounting complaints by Germans that even as they are being asked to pay more to bolster or bail out their troubled euro zone partners, they have no say in where their taxes are flowing or how they are being spent.

Such a referendum comes with the built-in risk that Germans could vote against Europe, with potentially damning consequences for the common currency and the future of the European Union.

Chancellor Angela Merkel has consistently promoted a vision of “more Europe” as the answer to the euro crisis, meaning tighter integration but also stricter oversight of European fiscal policy. Currently, steps in that direction have ended up in Germany’s highest court, facing legal challenges from opponents who say that handing over more money and authority to the European Union violates the country’s Constitution.

On Sept. 12, the high court is poised to rule on the constitutionality of the fiscal pact arduously negotiated among European Union members that is the cornerstone of Ms. Merkel’s plans. It will also rule on the legality of Germany’s $27 billion commitment to back up a permanent bailout fund for the union.

Should the challenge prevail, and German support be withdrawn, it would almost certainly doom the project of greater integration and send a potentially calamitous signal to financial markets looking for urgent steps to buttress troubled euro zone economies. Both measures passed the German Parliament by a clear two-thirds majority on June 29, but they were immediately challenged in court by dissenting lawmakers, delaying them from taking effect as envisioned on July 1.

Proponents of a referendum argue that changing the Constitution would avoid such delays, and the frustrations that accompany them.

For more, visit www.nytimes.com.

German Small Businesses Reflect Country's Strength

The following is an excerpt from an article in 

The New York Times
Tuesday, August 14, 2012

German Small Businesses Reflect Country's Strength

By JACK EWING

FRANKFURT — A growing number of Germans may want to see the euro zone dissolve, but Dagmar Bollin-Flade, owner of a small machinery company here, is not among them. Like many German businesspeople, she is keenly aware of the economic benefits of a common currency — and willing to pay a price to keep the euro intact.

“All those who say, ‘We want to get out of the euro’ — they don’t remember how it was,” Ms. Bollin-Flade said.

Her company, Christian Bollin Armaturenfabrik, belongs to the country’s vast swath of small and medium-size companies that are known as the Mittelstand and account for 60 percent of German jobs. Most feel no nostalgia for the days when they and their customers had to keep an eye on the value of a dozen European currencies, a time when the German mark sometimes became so strong that it threatened to price them out of foreign markets.

Amid loose talk about letting Greece leave the euro, or even reintroducing the mark, German business leaders are often the ones reminding the public what the economic consequences might be. Markus Kerber, president of the Federation of German Industry, last week called for more European integration and criticized what he said was “persistent political indecisiveness and disunity” that has undermined trust in the euro.

More than most, the Mittelstand has benefited from the euro, which has made it easier for small companies to behave like multinationals. Bollin, with about 30 employees in a small factory, sells its specialty shut-off valves to customers in China and around Europe.

So far, companies like Bollin have endured the euro zone debt crisis remarkably well. Ms. Bollin-Flade said she has not seen any effect on sales. But she and her peers are concerned about the future. In a poll commissioned this year by the industry federation, the number of Mittelstand companies that expected business to improve in the next 12 months slumped, while the number expecting a turn for the worse soared.

Ms. Bollin-Flade, who was one of about 10 businesspeople invited to discuss Mittelstand issues with Chancellor Angela Merkel in her office last year, said she supported the German leader’s strategy of insisting that financial aid be granted to troubled euro zone countries only if they show more fiscal discipline and economic reforms.

“We should get something in return,” Ms. Bollin-Flade said.

For more, visit www.nytimes.com.

The Rest of Europe vs. Germany

Excerpt from an article in The New York Times

I am a little confused by the statement: "its (Germany's) currency is undervalued".  Germany uses the Euro, just like many of the other European countries, including the ones that are in trouble.  But the German economy is well-managed.  No doubt about that.

Friday, February 17, 2012

The Rest of Europe vs. Germany 

By FLOYD NORRIS

The German economy has been one of the wonders of the world over the last couple of years. While the rest of Europe staggered, German unemployment fell to the lowest level in decades.

This week the Organization for Economic Cooperation and Development, the club of developed economies around the world, issued a new “Economic Survey of Germany.” The biggest challenge it could find facing the country was finding enough workers.

It recommended steps to encourage more women to work.

“Please accept our sincere congratulations for a well-managed economy,” said Angel Gurría, the O.E.C.D.’s secretary general, in a speech in Berlin. The country’s “growth model has been so successful in navigating through the stormy waters of the crisis.”

The German labor system, with its incentives to move workers to part time rather than lay them off, does appear to have been critical in keeping the country’s unemployment rate from rising more than it did during the credit crisis.

But the decline of unemployment since then has more to do with the fact that Germany — perhaps unintentionally but certainly effectively — has managed to assure that its currency is undervalued, both relative to that of its neighbors and to much of the rest of the world. That has helped the country’s exporters and brought more business to the country.

In the Great Depression, many countries tried devaluations to gain export advantages over rivals. The strategy became known as “beggar thy neighbor.” It generally failed to work because other countries responded with their own devaluations.

Now some of Germany’s neighbors have been reduced to begging. They cannot take a page from the Depression playbook and devalue their own currency. They no longer have one.

Happy Birthday, Euro!

Yesterday (January 1), I was watching Fareed Zakaria's program on CNN.  He began by talking about his predictions for 2011 and how some of them worked out and some of them did not.

One thing he was sort of right and sort of wrong about was the financial crisis in Europe.  At the beginning of 2011, Mr. Zakaria expected Germany to bail out its less responsible neighbors because Germany had the money.  Well, Germany did dole out some money, but it did not do so freely and it was not happy about it.  Furthermore, Mr. Zakaria said that in 2012, he expects Germany to continue to help out its southern neighbors, but that Germany would try to get the best deal that it could before doing so.  So look for more austerity in Europe.

Towards the end of the program, Mr. Zakaria mentioned that the Euro had turned 10 years old.

Mr. Zakaria played a video that had been played all over Europe when the Euro was launched.  The video spoke of Europeans moving forward into the future with hope and confidence.  After the video was over, Mr. Zakaria asked, "Hope? Confidence?"  Those emotions are not exactly what most Europeans of feeling right now.

Mr. Zakaria ended his discussion of the Euro by considering the Euro note's physical appearance.  There are no politicians, statesmen, or human figures of any kind.  This was a deliberate decision made so that no one would be offended.  When you look at the Euro note, what you do see are bridges and architectural forms.  What is interesting is that these bridges and architectural forms do not really exist anywhere in the real world.

We were left to draw our own conclusions.