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German report German report
by Euro Reporter
2012-10-10 10:42:41
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Germany demands more power on banking

Germany is demanding greater power on the board of the eurozone’s new bank supervisor, a politically charged request that further complicates Europe’s fractious talks on a banking union. Berlin’s proposal for voting weights to match the bigger size of its banking sector gives voice to longstanding German concerns about being outgunned under the European Central Bank’s one-country one-vote governance system.  But the idea – raised privately in talks with European officials – touches on some of the founding principles of the single currency and is likely to rile smaller eurozone countries fearful of Germany’s growing willingness to flex its muscles.

It opens a contentious new front in talks on a European Commission proposal to give the ECB supervision powers over all 6,000 eurozone banks, which EU leaders are still aiming to agree in December despite big outstanding concerns.  Given the possible fiscal costs of a supervision failure under the new system, Germany wants the balance of power to better reflect the risks shouldered by member states with large banking liabilities.  The boost in influence would give Germany and other states with big financial sectors a much better handle on the supervision work of the ECB – extra clout that EU officials fear could hamper its independence. EU finance ministers meeting in Luxembourg on Tuesday again aired fundamental concerns about elements of the proposal, including over the terms offered non-euro countries that wanted to join the supervision system.  Michel Barnier, the EU commissioner responsible for financial services, proposed some compromises to make the ECB more accountable to national parliaments and to marginally increase the influence of non-euro countries.

But the changes failed to satisfy critics. Anders Borg, Sweden’s finance minister, said “severe problems” remained, particularly over non-euro states voting rights. Mr Barnier said an “equitable and fair” solution needed to be found, hinting that part of the solution had to propose by the ECB. Wolfgang Schäuble, Germany’s finance minister, also reiterated his long list of worries about the design of the supervision system and called for the reforms to be phased in more slowly and for the focus to be on Europe’s biggest banks.  “It is clear that the current state is not yet a solution – work has to continue,” said Mr Schäuble. “Quality supervision must take priority over an unrealistic timeframe.”  Some of Germany’s objections are so far reaching that diplomats are questioning Berlin’s commitment to reform. “Is this a wrecking strategy?” asked one.  During a long discussion Mr Schäuble, for instance, even floated the idea of splitting some work of the European parliament so that it could better oversee eurozone institutions – a big change to the workings of the EU.

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The Illusionary Giant

“Mr. Tur Tur, the illusionary giant, is a gentle and modest person, and tragically alone because everybody is afraid of him when he seems to be a giant from the distance.” Increasingly, Germany’s stance in Europe looks like Mr. Tur Tur from Michael Ende’s fairy tale: Jim Button and Luke the Engine Driver. While I write these words, protesters are crowding the streets of Athens to protest the austerity measures that Greece has been subjected to. They blame the European giant: Germany. Clearly, when people make a national past-time out of burning your flag you have reached a special status as a country. This privilege is reserved for powerful and despised states (such as the US or Israel). For Germans this sight is new and understandably uncomfortable. They ask what they have done to deserve such treatment. The complexities of the financial entanglement escape the normal citizen and they perceive the behaviour of Greek protesters as ungrateful at best; after all Germany has bailed out Greece with their tax money. The current German government has avoided explaining the benefits of the Euro and a stable Greece to its population leaving a lot of frustration on both sides; Greeks affected by the austerity measures and Germans mistreated for their charitableness. Germans have forgotten what happened when the former social democratic and green government reformed the social and unemployment system (in Germany the reforms are known as Hartz IV and Agenda 2010). The reforms brought down the government. And while it is those reforms that many today say are responsible for German stability and good performance, it is nothing compared to the revolution in Greek society that has been taken place over the past months.

This mismatch between public perception and reality extends further. Germany is really not the giant that many believe it to be. In addition to a lack of strategic vision, Germany is losing political clout in Europe; it has lost key European allies and its ability to dominate the direction of anti-crisis policies in Europe. The Paris-Berlin axis was destroyed by the election of Francois Hollande, and other traditional allies have either withdrawn from rescue mechanisms or have increased the demand for regulation of recipient countries. In contrast to smaller countries, Germany cannot veto policies when such a veto might cause chaos on the financial markets. A German exit from the Euro is not a credible threat: it has long been noted that such a manoeuvre would lead to a rise of the new currency’s value and a disaster for the export-dependent German economy. Domestically, Germany might be less stable than the mainstream perception currently suggests. Instability related to currency has high impacts on the German economy and a renewed crisis in the US economy would have a severe impact on German exports. For the past years Chancellor Merkel has dragged her feet on several important issues. The demographic development in Germany is dramatic, and dwindling immigration will soon have an impact on the country’s economy. When it comes to education Germany ranks far bellow the level that would be necessary for a major industrial nation today. Merkel’s government has taken any steps to address those issues and in general has proven to be rather inefficient when it comes to policy-making.

I have said before that it is a mistake to depict Germany as a hegemonic power; in fact Germany is an illusionary giant, it yields much less power within the EU than many believe and its influence is actually decreasing. With necessary reform left unattended, the economic success the perception is based on might also be a straw fire.

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Germany faces image problem in Greece, thanks to its growing clout

Amid a massive security operation that locked down much of this ancient capital, German Chancellor Angela Merkel on Tuesday staged a gutsy foray into the heart of Europe’s debt crisis. If her protest-plagued trip shined a spotlight on struggling Greece, it also highlighted a problem for a resurgent Germany: its image. As Europe’s largest and healthiest economy, Germany has risen to the height of its post-World War II power over the past three years, effectively serving as the region’s paymaster through a series of debt-crisis bailouts. As Germany has led demands for harsh cuts in exchange for cash, Merkel has emerged as Europe’s symbol of austerity.  A country keenly attuned to any perception of itself as aggressor, Germany witnessed the price of its rising clout Tuesday as 7,000 police officers sought to contain tens of thousands of chanting demonstrators who at least partly blame Berlin for Greece’s economic nightmare of soaring unemployment and cascading bankruptcies.

Berlin is also coping with the inevitable memories of the last time German influence reigned on the continent. Virtually no one here or elsewhere in Europe fears a renewed military threat from Germany, a modern nation that still largely clings to a cathartic form of pseudo-pacifism. Yet an undercurrent of distrust inflamed by the present is nevertheless increasingly evident. Nowhere is that more true than here in Greece, where rising resentment underscores the obstacles ahead for Merkel’s quest for a more thoroughly integrated European Union. With Germany’s weight poised to grow even further, Merkel sought to show solidarity with the Greeks here, hailing how far they’ve come and commiserating with their “suffering.” But with signs growing that Greece will not meet bailout demands without dramatically accelerated cuts or watered-down loan conditions, she gave no sign Berlin was willing to be more lenient. If Greece doesn’t deal with its debt problems now, she said, “They will only resurface in a more dramatic way.”

For left-wing parties that often rail against the United States, Germany has already become the new target here. Anti-Merkel chants echoed through the streets of Athens on Tuesday, and the searing scent of tear gas lingered. A walkout by state workers temporarily shuttered schools, hospitals and transit stations. Some protesters carried banners depicting the German chancellor in an SS uniform, under the words, “No to the Fourth Reich.” Along with the usual cast of protesters were well-dressed, middle-class Greeks such as Monolis and Anastasia Moraitis. The two retirees, in their mid-60s, have seen their pensions cut 35 percent under several waves of German-backed austerity here, and they came out to vent their rage. “I believe the Germans have been and still are the enemies of the Greeks,” said Monolis Moraitis as his wife and other bystanders nodded in agreement.



        
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Emanuel Paparella2012-10-10 13:26:09
And so we are back to the metaphor of the conquering of Mount Everest as proposed by Joseph Jaffa, publisher editor of the German weekly Die Zeit, in a recent debate on the EU in Toronto who proclaimed that “Europe has transcended a thousand years of war, but 27 nation-states will never grow into one.”

In other words, only the fit can ascend Mount Everest (the summit of the confederation called EU),the fittest of them all is of course, Germany; and fitness is of course measured in purely pragmatic financial economic terms. The fit rule and the unfit perish.

Sounds like the social Darwinism of Ayn Rand, also popular here in the US within the Republican party which, come to think of it, was also quite popular with a party in Germany not so long ago called the Nazi party.

One wonders how many Germans, or EU citizens for that matter, are aware that such a lopsided hegemony is bound to bring back old memories and open up old wounds of past German hegemony on the European continent and give the lie to idealistic talks of solidarity and true confederation. The philosopher Habermas is surely aware of it and has sounded the alarm a long time ago, not so the blind visionless EU politicians now governing the EU.

Indeed, those who forget their history, or better, those who misremember their history paying mere lip service to solidarity and confederacy, are bound to repeat it. The EU founding fathers must be turning in their graves.


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