Merkel Gains Greece but Loses Germany?
By Staff News & Analysis - May 06, 2010

Angela Merkel's party faces defeat in regional elections after Greek bailout … Angela Merkel faces defeat in a critical election this weekend as a growing backlash against a £19 billion German bail-out of Greece has threatened to mortally wound her coalition government. Germany's parliament will on Friday vote through payments worth €22.4 billion to Greece just two days ahead of a vote on Sunday in North Rhine-Westphalia, the country's most populous state. The German chancellor's political future hangs in the balance after she reluctantly gave the green light to the German contribution to a three-year €110 billion European Union and International Monetary Fund bailout for Greece … Her unsuccessful attempt to delay a decision on Greece until after the North Rhine-Westphalia vote further damaged her reputation after she was blamed for aggravating the Greek crisis and fuelling turbulence on global financial markets. Frank-Walter Steinmeier, leader of the opposition Social Democrats (SPD) in the Bundestag, on Wednesday accused Mrs Merkel of undermining Germany's leading role in the EU. "No German government has managed to throw away so much respect and confidence as you have in such a short time," he said. "Where was the leadership? Where was the crisis management Mrs. Merkel? We saw nothing." – UK Telegraph

Dominant Social Theme: What must be done is difficult but necessary.

Free-Market Analysis: Recently we commented on an insightful article in the UK Telegraph that pointed out that Germany was now most obviously the cynosure of the EU, and that the financial crisis had made that clear. But while acknowledging this was true, we wondered if being the center of attention would make any difference to the average German. We asked then, what we ask now: If Germany is going to be dragged into the middle of multiple, sovereign bankruptcies, will remaining in the EU seem such a good thing?

Click here to read article: The EU Has Faltered Over Greece.

The EU has provided Germany with advantages thus far. It has stabilized the currencies of Southern Europe and made them more dependable purchasers of German goods. But now the bill is coming due. These client states are coming undone and the money that Germany made from them seems about to vanish out the back door. The goods and services that these countries purchased from Germany are now turned to dross. The customer has gone broke. If Germany wants to retain its consumer base, then Germany will actually have to provide funding – at least if Germany stays in the EU. Does this make sense?

None of this is difficult to understand if you are a small or medium-sized German businessperson in the manufacturing business – and thanks to World War II and rebuilding, Germany has plenty of them rather than merely a slew of corporate giants. These are tough-minded German entrepreneurs (and there is nothing much more tough-minded than a German small-company owner).

We have long maintained that the fractious tribes of Europe would tolerate the EU for just as long as there was something in it for them. In fact, we are surprised that the Irish have thus far put up with the economic constraints that have been placed on that long-suffering "Celtic Tiger." (We anticipated a more Greek-like response. But these are early days yet.) Anyway, yesterday, a feedbacker pointed out to the Bell that the knife cuts both ways. Sure, there will be social insurrection amongst the PIGS, but there may well be a good deal of social discontent – and even violence in the North if EU leaders try to insist on massive bailouts. Both the South and North could riot over bailouts, but for different reasons. We would not be surprised if there is violence in Germany if the bailout issue is consistently forced.

We feel sorry Ms. Merkel in a way. She is a good German from East Germany and apparently a very smart woman with a Ph.D. in physics. Like many EU leaders, she is a soft-socialist (despite her mainstream media political label of conservative), someone who believes in a middle way between the market and state planning. But as the great Austrian economist Ludwig von Mises pointed out long ago, there is no middle ground between socialism and marketplace. If you are not doing your best to observe the power of the market, you are doubtless headed toward socialism or worse. And sooner or later you will be bankrupt – as the EU is going to be, apparently.

Merkel has done what she could. She has tried to finesse a bad situation She wanted to wait until after the elections to help bail out Greece because she knew that if she went ahead and gave the OK for a Greek bailout beforehand, that the elections would be seen as a referendum on her acquiescence. As it turns out, she couldn't hold off. She has given German money to Greece and now the German voters will have their say. And by all accounts they are furious.

What does this mean for Germany and the EU? It means that in a couple of days German voters may let the EU (and Merkel) know in no uncertain terms that the Greek bailout is not to be repeated. Of course, the EU bigwigs can do what they have done so many times before – ignore an individual country and simply move down the socialist path, but Germany is not Ireland, nor even France. Germany is the heart of the EU, and the small-to-middle-sized manufacturing companies that make up much of Germany's economy are not inclined to put up with more bailouts.

There is a certain ineluctable logic to all of this. The lies that have flown easily out of the mouths of the power elite regarding this increasingly failed EU promotion are rapidly returning home to roost. The hope was obviously that an economic crisis would generate a political solution that would tighten the bonds between Brussels and its vassal states. But the anger is palpable in Greece and in Germany as well – and that same anger will spread along with the sovereign crisis.

Already we are reading many articles that predict the money to be injected into Greece won't be enough. And that in any case the Greeks won't stand for the kind of parsimony that Brussels intends to inflict upon them. And why should they? There are other options, though shedding the EU would probably be necessary to embark upon them. And ironically, were the Greeks to put up with the draconian deal that their government has just agreed to, we think there are not guarantees that the Germans themselves will stick around.

After Thoughts

One by one the elite's dominant social themes are unraveling. Global warming, central banking and now the EU. America's serial wars are not going well. China, the leadership of which is in obvious cahoots with the Anglo-American power elite, has its own problems. It seems that in the 21st century, the elite is not nearly so all-powerful as it appeared to be in the 20th. We argue this regularly, of course. We believe that the Internet has made a big difference in terms of the understanding that people have about elite manipulations. The fear-based promotions are foundering. The UN calls down catastrophe regarding global warming or bird flu, but no one heeds and the world goes on. And the globe will continue to spin even if the Greeks repudiate the debt they owe to international bankers. And it will continue to turn even if Germany itself decides to leave the EU.

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