Home > Political Economy, The Economy > Thought for the day: Angela Merkel’s grab for power (and money)

Thought for the day: Angela Merkel’s grab for power (and money)

from Merijn Knibbe

Germany did, thanks to regulations, not know a housing bubble. But this did not stop German banks from  fueling real estate bubbles elsewhere, in Ireland, Spain, Slovakia, Bulgaria and the Baltics (Estonia, Latvia, Lithuania). Not coincidentally, these are the seven countries which new the highest post 2008 increases in unemployment. The German banks were not the only players, but they were among the important ones. Except for Estonia – which knows a surprising low government deficit – the bust left these countries with sky high unemployment and ruinous government finances – something made worse by interest rates which are increasing as the ‘financial world’ (the same banks which fuelled the bubbles) does not trust these countries anymore – they are no longer able to finance the losses of the banks. This weekend an European summit will discuss measures which, in effect, will centralize economic power in Europe to an extent which will pale the power of Washington. ‘Brussels’ (read: Berlin) wants, among other things, a veto on ‘irresponsible’ wage increases and ‘irresponsible’ government finances in member states. National parliaments as well as unions as well as companies have to obey to rules from Brussels. It’s the next step in socializing the risks of casino banking. Countries with 20% unemployment and 10% real interest rates have to give up independece to ensure the assets of riskhungry German banks… I think these talks might well be the beginning of the end of the Euro.

  1. March 13, 2011 at 4:49 pm

    The facade may be different, but the power players don’t change from one century to the next.

  2. Podargus
    March 13, 2011 at 6:58 pm

    I do hope that we are seeing the end of the Euro which is little more than an experiment in the centralization of power by peaceful means.
    That has been tried many times before by not so peaceful means and has always failed but usually only after a lot of suffering.

  3. Bernard Mallia
    March 13, 2011 at 10:07 pm

    While I agree with the diagnosis of the situation, I have to strongly disagree with its conclusions. Indeed, if history (especially American history) is any guide, it will not be the beginning of the end of the Euro, but merely the beginning of the next recessions and depressions in the decades to come under the auspices of the Euro.

  4. March 13, 2011 at 10:30 pm

    Weren’t German banks the very first to fail?

  5. Jeff Z.
    March 14, 2011 at 3:08 am

    German and French banks also played a large role in pressuring the Greek government in that recent debacle. As I recall Merkel and Sarkozy were at first reluctant to help the Greek government. Then they got the message from their own banks that their balance sheets were quite weak as a result of large lending to the Greek state and financial sector. Then you saw the calls for a rescue package but with conditions of austerity imposed on the rest of the Greek population, in order to insure that German and French banks got their money. More socialization of risk, privatization of benefits. I would have to agree with Knibbe, at least for the short term.

    What are the conditions for exiting the Euro Compact? That seems relevant here if the Euro might end.

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