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View Diary: Bank Run in Cyprus, Will it Spread to Southern Europe? (322 comments)

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  •  You have to contextualize this in German politics (13+ / 0-)

    The basic facts are something like:

    (a) Germany has had its right-wing government in power the entire economic cycle, and, among other things, German workers have over-performed Danish, Swedish, Swiss, Austrians, etc and under-performed (by a large margin) in wage growth.

    (b) This was an intentional policy to boost exports and savings, with a lot of the resulting cash put into paper from other EZ countries.  Needless to say, people are unhappy with how it went.

    (c) Merkel's coalition has lost basically every local election, quite badly, in the past 1.5 years, and she has another one coming up.

    So, basically, much like GWB with the Iraq War, the current government's whole stack is in the middle of the table on austerity.  Merkel has been talking big about how the bailouts are over, etc.  (e.g., her "Es ist Zeit for ein bisschen Strenge" statement) for a while, and to not put a bit of stick about would not play well with her base.

    •  Something Key Is Missing Here (8+ / 0-)

      And that is a transfer mechanism from Germany to other Euro countries to equalize the trade imbalance within the currency. Without that, Germany just becomes the "sink of wealth" for Europe.

      "I'll believe that corporations are people when I see Rick Perry execute one."

      by bink on Sun Mar 17, 2013 at 08:38:19 AM PDT

      [ Parent ]

      •  The EZ is a kind of uncanny valley (7+ / 0-)

        Which is integrated enough to get into this situation and not integrated enough to get out of it.  If the banking system actually had a single regulator/backstop and labor markets and budgeting processes were truly as free as the capital markets, a unified response would have been easier.

        The present approach isn't working that well, though.  (And, honestly, it is hard to say that the Northern countries that aren't in aren't doing better over the same period.)

      •  Wealth Transfer (8+ / 0-)

        don't forget that germany is footing a very big chunk of the Bill for the EU and a lot of people think that is more then enough

        and if you then have governments who say yes - and turn around and do the complete opposite thing - people tend to do not like that

        The real wages in germany are kind of stagnant since close to 20 years now - in complete opposition to what happened in southern Europe before the crisis and yes people do not forget that as well

        In the end the dangerous thing is that it can build a anti-german mood in Europe and I think that is very wrong because again the people are hold responsible for the government and unfortunately that is also nothing new in Europe

        We really need a new government in Germany in the elections this fall - unfortunately we have even less credible options then you in the US and  that really hurts.

        Merkel should not be in a position to win any election but I'm afraid she will pull it off in september - because the opposition is so weak - and the greatest boulevard newspaper is I think in her corner.

        And as long as they can harp on the people in southern Europe they will have a jolly good time :(

        "How many years since you found yourself staring at an endless sky? " VNV Nation - Endless Skies

        by Kavalor on Sun Mar 17, 2013 at 09:34:39 AM PDT

        [ Parent ]

        •  A Lot of People Think (2+ / 0-)
          Recommended by:
          northsylvania, Just Bob

          Germany may believe that it is footing a enough of the EU bill, but it's not. It's trade imbalance with other EU nations far exceeds the amount that it is sending back in terms of EU payments. It's not enough.

          If Germans fear anti-German sentiment, they should change their government from one that is predatory to one that believes in stable cooperation with other European states.

          "I'll believe that corporations are people when I see Rick Perry execute one."

          by bink on Sun Mar 17, 2013 at 12:20:50 PM PDT

          [ Parent ]

          •  Why not just eliminate the Euro? (3+ / 0-)
            Recommended by:
            mmacdDE, isabelle hayes, Joieau

            I'm surprised that so many Kossacks who would otherwise condemn such an anti-democratic institution known as the EuroZone, continue to support it.

            This is the mentality of the Eurozone architects in Brussels.

            We don't care what the people think.  Germans and Italians who oppose the Euro are too ignorant to know what's good for them.  
            Many similarities between the GOP and the architects of the Eurozone in Brussels.

            Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

            by PatriciaVa on Sun Mar 17, 2013 at 12:59:53 PM PDT

            [ Parent ]

            •  Euro (5+ / 0-)

              the Problem with the Euro is not its existence itsthe democratic control behind it. And the taxation/socoalsystems.
              I personally live outside of germany (first in Ireland, now in czech republic which does not have the Euro)

              On a personal level I find it very convenient to pay with the same money in most of Europe without having to think about exchange rates and such.

              Before the Euro - and IIRC that were just the 12 original states - someone calculated that if you  travel around with 100 DM and visit every country without spending it - just exchange into the local currency - you had less then half of it left when your back home. And this is just fees.  Also in an so tightly woven economy if you need accounting in more then one currency - just imagine you live in california and need to pay with a different currency in New York and with another currency in Texas and in lots of states in between.  As a businesss you need to keep track of exchange rates and such if you want to do business outside of california.
              That is actually what the purpose of the Eure ideally should be . The problem is that the states still have the last word on everything - f.e ragrading taxation . Just imagin ethat thefederal government would like to raise the income tax and Alabama could say no - just because.
              The ECB is basically modelled after the Fed - as politically independent. But with the head of the ECB part of the political games thats not worth much .

              I'm a big fan of the european thought and i like the states to come together even more - with all the different cultures and different religions. But weneed democratic control and as long as that does not happen and the national government s take all the credit and shift all the blame to the european level you do not need to wonder why more and more people have negative thoughts about the EU.

              "How many years since you found yourself staring at an endless sky? " VNV Nation - Endless Skies

              by Kavalor on Sun Mar 17, 2013 at 02:24:45 PM PDT

              [ Parent ]

            •  Because it is a huge win (1+ / 0-)
              Recommended by:
              Jeffersonian Democrat

              Integration has a lot of upsides that people aren't excited to throw away.  The costs of blowing up every contract, the liberalized labor markets, etc. would be large.  Putting in a more unified budgeting and borrowing system seems more likely.

          •  change of government (4+ / 0-)

            its so easy to change a government if you have 2 major parties who are basically following the same principles of economic policys if they ar ein power . One slightly more radical - but as did the US under Clinton it were the social democrats who introduced welfare reform in Germany in the early parts of the last decade - to prove that they are sufficiently market liberal .

            The workers paid for it.

            And with the tax policies which for example Ireland pursued (and I lived there for 5 years) . Pretty much every major project in the country was financed by the EU - and at the same time the government kept the taxes low to lure companies into the country.  

            And regarding the budget - Germany pays more then 20% of the EU Budget - a big net contribution every year.


            How much do you think would be enough . Our people just want to work and we do this quite efficient . Our industy profits  a lot from the EU - I know that . But it is not the peoples fault that we lived austerity for 20 years on a certain level (and still have no balanced budget)  . And no most people would be fine if the money was spent to effect. But the money is wasted (especially in cartain parts of Southern Europe) and the country who pays a lot of the bills gets blamed for every single negative thing which happens - and all positive effect are caused by  the local polititians . And that is a dangerous game .  
            In the US parts of the county also finances the south - and is repaid by laxer labour laws and lower taxes because certain states don't need to pay all their bills themselves but the tab is picked up by the federal government.
            In the EU its pretty much the same - with the major difference that it is a lot of different cultures with lot of different languages and not that far removed form a certainly violent history. And everybody who does not take that into consideration plays with fire.

            If I follow your argument I would need to conclude that every american is responsible for the wars in Afghanistan and Iraq because you elected GWB . Not sure you like that either.

            "How many years since you found yourself staring at an endless sky? " VNV Nation - Endless Skies

            by Kavalor on Sun Mar 17, 2013 at 01:19:14 PM PDT

            [ Parent ]

          •  You are a little confused (4+ / 0-)

            Kavalor is trying to explain what is really true: the average German on the street has been played for a sucker.  Despite the high productivity, wages are a lot lower than in peer countries and the austerians have convinced ordinary people to accept this and also a high savings rate that got pumped into paper from the other EZ countries and, incidentally, shitty US mortgages.

            So, basically, Merkel (or the other parties to some extent, except maybe the Pirates) really can't come out and just announce this.  If she wants to win reelection against a weak opponent, either the paper will perform or she'll put a beatdown on the working class in the South, just to keep the base happy and in line.  (It is not that different than American pols and high house prices or wars.)

            This is, clearly, not a practical solution, but, honestly Germany's major parties are a little short on leadership of the type that will take Europe to the next step.  Merkel, in particular, is a kind of weak player who starts with big talk and then eventually gets backed down into the situation that was supposedly was "impossible".  Cyprus is, however, too weak to do much.  So here we go.

            The problem with a lot of the comments is that they are ignoring the path-dependent politics in the EZ.  Different governments, with different commitments, would probably do something different.  But they aren't.

            (A running joke is members of her party being forced to resign because of bogus PhD theses, after Merkel backs them and expresses confidence.  To me, this is basically a decent summary of her skills.)

        •  absolutely (1+ / 0-)
          Recommended by:

          because Spitzkandidate "the chancellor deserves a bigger paycheck" Steinbrück (SPD) is just the neo-liberal to carry this shit even further

          what happened with the SPD is a variation of what happened with DLC US Democrats

          Don't be a dick, be a Democrat! Oppose CPI cuts! Support Social Security and Veteran Benefits!

          by Jeffersonian Democrat on Mon Mar 18, 2013 at 04:19:34 AM PDT

          [ Parent ]

      •  Why should Germans transfer wealth? (1+ / 0-)
        Recommended by:

        Isn't Germany a sovereign country?

        Moreover, 41% of Germans own their own homes.

        82% of Italians do.

        Bink, you want Germany to transfer resources to the South.

        Should Italians transfer their housing stock directly to middle-class Germans?

        I have a better idea.

        Why not have each country revert to their legacy currency?

        Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

        by PatriciaVa on Sun Mar 17, 2013 at 12:55:21 PM PDT

        [ Parent ]

        •  Properties (6+ / 0-)

          Patricia , yes in germany not that many people own homes . My parents never did and I don't as well . And tbh its pretty dangerous to do it .
          There is difference in the laws for example.

          In the US if you cannot pay your mortgage you walk away - the bank forecloses and you have a bad credit rating but no further debt from that house - please correct me if I'm wrong .

          In Germany you can't get rid of the debt that way. If the bank takes the house - the sell it in an auction - the proceeds (minus fees) will be applied to your debt and you still owe the rest.

          On the other hand ourrecent welfare laws - once you get the so called "Hartz 4 " - they will force you to sell any property you have andlive from the proceeds before you get any help from the state - so even if you save and buy a home and you lose your job - you have no chance to keep it. Same in retirement - if your pension is to low and you live below the minimal standard which is not that uncommon and will just get worse with the current low wages - the states pays you the difference between your pension and the welfare level - once you own nothing of value anymore.

          The one thing i really abhore about my country is that we still do not have a minimum wage law on the books. It was introduced for certain branches of the economy but not generally. This is a big part of the issue - because the government subsidisies cheap companies - and then pays the difference what someone earns and the minimum existence level - once you do not own anything of value anymore.
          So we have several millions of people who are so called "Aufstocker" - people who receive welfare despite a full time job .
          I have to admit that we as a culture are way to compliant with this. We should take a little bit of France - they throw a general strike every few months (not always with good cause). I can't remember that there wa sone in germany in the last decades .

          "How many years since you found yourself staring at an endless sky? " VNV Nation - Endless Skies

          by Kavalor on Sun Mar 17, 2013 at 01:56:02 PM PDT

          [ Parent ]

          •  You can not "walk away" in the US (0+ / 0-)

            If the bank forecloses on you or even if you negotiate a short sale in which the lender agrees to let you sell the house for less then the outstanding mortgage the lender can still get a  deficiency judgment for the money owned. Unless the homeowner has zero assets and no income or files bankruptcy (something that is now hard to do) they can be pursued essentially forever for the money.

            The one big advantage the US has is that your Primary residence can not be seized for unpaid debt. So some homeowners have decided to buy another house and default on their underwater home because the bank can't go after their new home. Of course this doesn't stop the banks from going after every other asset and the "clever" defaulter might end up in a very bad financial situation with no ability to borrow any more money.

        •  You may want to let this go (1+ / 0-)
          Recommended by:
          Jeffersonian Democrat

          Since you seem a little weak on certain market dynamics.  Mortgages are a lot worse of a deal in Germany, but there is also rent control and unlimited term leases, so owning is less of a win as well.  (Since you are protected from rent inflation, and anyway, inflation is tightly controlled...)

        •  What transfer of wealth are you referring to? (0+ / 0-)

          By last count, Germany had contributed 20% of the bailout money for Greece. It received back $5 billion. While this was going on, its banks were recapitalized on Greek debt from owning 50% of it to 5%, am amount that dwarfed the German input. This means that the European taxpayer--not the German taxpayer--is footing the bailout which largely benefits German and French banks (since Greece has a primary surplus).

          All of this also neglects what happened in the past when Germany owed everyone else a ton of money. Their debts were forgiven. That too was a wealth transfer.

          There are two kinds of people in this world. The kind who divide the world into two kinds of people, and the kind who don't.

          by upstate NY on Sun Mar 17, 2013 at 04:21:39 PM PDT

          [ Parent ]

    •  key comment (5+ / 0-)

      explains the situation quite well.

      There was hope until recently in Germany that the Merkel period could be ended in the upcoming elections, and an SPD chancellor could team up with Hollande to reinject a bit keynesianism into european politics. But the SPD chose a candidate that has stumbled from gaffe to gaffe and frankly its now not too likely that the conservative hold on european politics will be weakened. Italy fell just short of what was needed.


      •  You're forgetting that there isn't a US of Europe (0+ / 0-)

        And you're not the only one.

        Let's recall the bargain between the ECB and the German voters.

        The ECB would NEVER EVER resort to the type of monetization that you are encouraging.

        You want the ECB to embrace a Bernanke-like acquisition of assets?

        Let's have the citizens of the countries in northern Europe vote on it.

        That is, unless some believe (like the Euro architects in Brussels) the people are too ignorant to know what's good for them.

        Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

        by PatriciaVa on Sun Mar 17, 2013 at 01:03:04 PM PDT

        [ Parent ]

        •  Inflation (4+ / 0-)

          patricia ,

          a lot of people in Germany (especially the older generation) have really a fear of inflation . This usually comes from bad experience . My grandparents lost basically everything the had 3 times in 30 years - and that is the experience of most of their generation.

          Twice from war and once from the Hyper Inflation  

          So yes money stability is a psychological concern in Germany.  And every government who will work openly with the printing press (not that they can) would suffer for it.

          And there is another point of blame Europe - people say that everything got more expansive , just the wages stayed the same. And it  is true that a lot of things cost now the same in Euro then what it cost in German Marks 12 years ago.  But the reason for that is notthe Euro itself, its the the businesses which exploited the currency change for profit gains - 2002 was not for not without cause a year of record profits.
          Out at that time social democratic government just asked the business world to promise not to raise prices , when they did the did not issue a law regulating it. Other countries in the EU did - they were freezing the prices for 2 three month until the biggest confusion about the new numbers was over.  

          "How many years since you found yourself staring at an endless sky? " VNV Nation - Endless Skies

          by Kavalor on Sun Mar 17, 2013 at 02:43:04 PM PDT

          [ Parent ]

          •  Except that wages did not stagnate in all of EZ (0+ / 0-)

            In Spain, for instance, wages increased dramatically since 1999.

            Kavalor, if the citizens of each country want to cede local control to Brussels/Berlin, I'd have no problem with the EZ.

            But, today, a German and Greek feels even more German and Greek than two decades ago, not less.  This dream of an Italian feeling more European than Italian hasn't happened.

            And I don't think it will.  Twenty years from today, we'll have more countries represented in the UN, not fewer.

            I believe that the Euro was a bad bet made against the viability of the nation state.

            And now that so many Greeks, Italians and Germans continue to "cling" to their mother country, the overpaid Eurocrats in Brussels have no choice except to (a) admit defeat and unwind the EZ, or (b) insist on the EZ at the expense of democracy.

            Regrettably, they have chosen (b).

            Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

            by PatriciaVa on Sun Mar 17, 2013 at 02:55:25 PM PDT

            [ Parent ]

            •  But (0+ / 0-)

              the wage increase in Spain and Greece is part of the prolems this country have because it wa sonly made possible with the cheap interest rates and basicallylimitless amount of credit - I mean no really economic changes necessary - everything will take care of itself.

              So at one point I definitely agree with you. The lack of democratic control in Europe is an issue , but its not caused by the bureaucrats themselves. Its cause dby the national governments who have absolutely no interest in a democratically legitimit Europe which would be able to tell them what to do.

              The EU (or EC as it was known pre-93 ) was always a economic project and it was businesses who wanted the Euro most. Every step to a democratisation has to be fought hard about.
              The original contract about the Euro viewed it as just one step in a process - it was commonly acknowledged that it would require adjustments in taxation and social systems all over Europe, but the political will to touch this topics was not there in fear of the Voter.

              That lobbyist pressured for it as soon as possible is a complete different topic. Even the watered down stability pact was not really wanted by most Governments but without Germany the Euro would not have happened.

              And if you look further back in History the first steps (European Coal and Steel Community) which regulated the production of coal and steel and the EURATOM /which regulted the nuclear research and production ) were mainly done to prevent war (and a resurgence of an independent germany) which at that time was completely understandable.

              Not a lotof people know that already in 1954 a proposal of a military/economic Union with common taxation and a common currency was proposed and basically agreed to with the original 6 members (BENELUX/FRA/ITA/WESTGERMANY) but DeGaulle pulled out at the last minute .



              So yes the lack of democratic control was built in flaw and all attempts to correct it are mainly  blocked by the national governments.

              I don't personally think that the majority of people wants back to completely independent nations, and if then mainly because it is promised to be much better but no one has a clue what it would mean .
              For me it would mean a disaster as well politically as also economically and people would regret it soon - i'm convinced of that. But if it happens we will , as always , find someone else to blame :(

              "How many years since you found yourself staring at an endless sky? " VNV Nation - Endless Skies

              by Kavalor on Sun Mar 17, 2013 at 03:34:17 PM PDT

              [ Parent ]

              •  "commonly acknowledged"??? (1+ / 0-)
                Recommended by:

                I doubt it was "commonly acknowledged" in Germany that the EZ would necessitate fiscal transfers from rich "states" to poor "states", in the same way that California sends money to Georgia.

                And I would also dispute the following statement.

                The lack of democratic control in Europe is an issue , but its not caused by the bureaucrats themselves. Its cause dby the national governments who have absolutely no interest in a democratically legitimit Europe which would be able to tell them what to do.
                I would argue that most national governments, especially in southern Europe, care more about their standing in Brussels than domestically.  Monti, for instance, couldn't care less about how he was perceived in Italy.  His focus was always on Brussels.  Same in Greece, where the current ruling class cares more about future jobs in Brussels than ensuring the dignity of the Greek people.

                Who wants more democracy in southern Europe?  I would point to brave and courageous pols like Alexis Tsipras in Greece or the Grillo movement in Italy.

                Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

                by PatriciaVa on Sun Mar 17, 2013 at 04:45:51 PM PDT

                [ Parent ]

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