News & Analysis
Austerity Staggers, Germany Blows Up?
Hollande's 'Growth Bloc' spells end of German hegemony in Europe ... For two years Germany has had its way in Europe, treating historic nations much as Bismarck treated Bavaria – sovereign only in name ... The French-led counter-attack and rumblings of revolt through every branch of the EU institutions last week have brought this aberrant phase of the eurozone crisis to an abrupt end ... "If I am elected president, there will be a change in Europe's construction. We're not just any country: we can change the situation," he said. European allies are flocking to his cause from left and right, he claims. Not even Austria supports Germany's austerity drive any longer. This then is the birth of a Euroland growth bloc with well over 200m people and a commanding majority vote in the European Council, a defining moment in this saga. Mario Draghi at the European Central Bank is quickly bending to the new political dispensation with calls for a "Growth Compact". The Commission - liberated at last - is finding ways to "extend deadlines" on fiscal targets. – UK Telegraph
Dominant Social Theme: Everything is under control, and EU austerity is working ...
Free-Market Analysis: Here's another winning analysis from UK Telegraph columnist Ambrose Evans-Pritchard, in our view. As spectacularly wrong as he was about Spain avoiding a collapse (and we called him on it then, months ago) so we think he's correct about the demise of austerity in Europe.
This will be a big blow to the one-world government plans by the elites that have seemingly been moving quickly to secure a more integrated world in all aspects, legislative, judicial, monetarily and militarily.
They use fear-based dominant social themes to generate these preferred consequences. People are to be prevailed upon to give up power and wealth to globalist institutions as a result of these faux, fear-based promotions.
The result? Such a world would be a nightmare, with all moving parts converging at once. A depression in one part of the world would extend to all parts; a war in one region would manifest itself globally.
There is no need for such globalization, of course. Marketplaces are NOT flawed by "market failure" because failed market-efforts are soon tamed and reduced by competition (the Invisible Hand).
The palliatives that government officials seek to offer cannot ever be more than price fixes, transferring wealth from those who earned it to those who didn't and likely won't use it as well.
The terrible driver of modernity is monopoly-fiat central banking that causes first terrible booms and then horrible busts. This is the tool that top Western elites have imposed around the world.
One hundred years ago there were very few central banks. Today, there are about 150 of them, guided by the strange and secretive Bank for International Settlements.
It doesn't matter whether governments produce monopoly fiat money or whether the money system is controlled by private interests via mercantilism. The results are the same – ruinous booms and busts.
But in the 21st century, pushback against this system is increasingly evident. What we call the Internet Reformation has dispersed knowledge far and wide about the Way the World Really Works. More and more understand enough about their own manipulation to resist the worst of what the Eurocrats have planned for Europe.
Those at the top who push for one-world government wished to use the EU as a stepping stone to a global political union and the euro, apparently, as an introduction to a true world currency.
The idea behind all this is apparently to make people so miserable via threats of war (and war itself) plus economic chaos (and depression) and resultant legislative authoritarianism that they won't have the willpower to resist.
But it's not working so well now. From Greece to Spain to France as well, a movement is growing against austerity. Here's some more from the article:
Mr Hollande plans an EU-wide call for renegotiation of Europe's punitive pact on his first day in the Elysée. For this he was instantly rebuked by Angela Merkel. Pacta Sunt Servanda. "The treaty cannot be renegotiated," she said, forgetting the Kohl maxim that every German chancellor must bow three times before the Tricoleur.
The unratified treaty can of course be renegotiated, or disappear into the dustbin where such reactionary rubbish belongs. Mrs Merkel cannot push it through the Bundestag in any case without the Social Democrats, who are warming to Mr Hollande.
Mrs Merkel will have to relearn the forgotten art of compromise. Unable to dictate terms, she may struggle to deflect the ruinous implications of monetary union onto other EMU countries for much longer.
It is worth remembering that German taxpayers have not yet bailed out anybody, whatever they may believe. Berlin has rejected all forms of debt pooling, Eurobonds, or fiscal transfers, understandably since full budgetary union would violate Germany's constitution and eviscerate their democracy.
Chancellor Merkel has agreed only to a "Stability Union", with greater power to police debtor states. The rescues for Greece, Ireland, and Portugal are loan packages at stiff interest, not grants.
I heard an official from the chamber of industry and trade (DIHK) say with disarming candour that the euro has put Germany in an almost perfect position, even if the single currency was thrust upon a reluctant German nation in the first place - and even if 56pc would prefer a return to the D-Mark now. "Imagine how strong the D-mark would be today and how much higher interest rates would be if we weren't in the euro."
This is true. It is also a surreal state of affairs. Germany cannot ride a perpetual trade surplus with Club Med without blowing up the system (which must balance), nor can it hope to escape the inflationary revenge of such a policy mix on its own internal economy. The advantage is a short-term illusion, a trap.
Exactly. Germany must take its "bitter medicine" if the rest of the EU and euro are to be salvaged. The pan-European central bank must inflate, and inflate quickly, to "spread the pain."
The trouble with this prescription is that from what we can tell – and we've written this over and over – the Germans as a culture are most indisposed to inflation. A constant inflationary campaign by the ECB will likely serve to aggravate German agitation over monetary expansion on a regular basis.
The EU is being ripped apart by austerity and money printing will rip Germany and the North asunder. Evans-Pritchard, despite analyzing the problem beautifully, is a monetarist and thus has something of a standard Keynesian response. He demands ECB money printing.
The ECB must be given treaty powers to act as a genuine lender of last resort, able to intervene with sufficient force to take all risk of sovereign default off the table in Spain and Italy.
Evans-Pritchard, with his usual exactness, gives us the delineation of the problem. But it is the solution he lacks. The Germans, likely, will no more sit quietly while the ECB turns on the monetary taps than the PIGS citizens have sat by quietly while "austerity" takes its toll.
The idea was to be that the inevitable failure of the monetary union would lead inexorably to a greater political union. Notice Evans-Pritchard is calling for greater EU powers.
Conclusion: Is this in reality a struggle between a European peoples awakened by the 'Net information and a gilded trap that the elites have prepared to close? We cannot predict the outcome except to say that elite plans to smoothly squeeze the EU into a more powerful political union may not be as easily realizable in the 21st century as in the 20th.