German Chancellor Angela Merkel (pictured left) says Greece's budget crisis puts the euro in jeopardy. Greece's budget deficit has surged to 12.7 percent of gross domestic product, or GDP. Merkel expressed concern about fiscal issues for euro zone members in a recent speech. "The Greek example can put us under great, great pressures," she said. "Who will tell the Greek parliament to please go ahead and pass a pension reform? I don't know that they'll be enthusiastic about Germany giving them instructions." Germany certainly wouldn't be happy to receive advice from Greece if the tables were turned, Merkel said. "So the euro is in a very difficult phase over the coming years." The European Union's rules stipulate that member countries' budget deficits can't exceed 3 percent of GDP. Greek Prime Minister George Papandreou has a plan to cut the gap to 8.7 percent of GDP this year through spending cuts and revenue increases. "We will do whatever it takes," he said in a speech. … [But] Greece and Portugal may have to raise interest rates and taxes, Moody's says. "Over time, this chain of events would lead to a 'slow death' of an economy within the euro area." – MoneyNews
Dominant Social Theme: Germany punches the alarm button.
Free-Market Analysis: Well, this is interesting. We've written articles expressing the idea that the EU itself is something of a German reconquest of Europe without the messy effects of a war. But even within this context we wondered how much German citizens would be willing to pay for their empire. In fact, German Chancellor Angela Merkel signals, not much. And really why should German citizens pay for such? Does the average German get up in the morning with a grin on his or her face over the idea that Germany may someday, in a back-door sense, gain additional economic sway over Europe? We doubt it.
Absent the world-spanning ambitions of a seemingly sociopathic leader, German people would tend to be like any others, contrary to what Daniel Jonah Goldhagen thinks. They want to be left alone to raise their families and put bread on the table as best they can. Today, therefore, the manifest destiny of Germany is not readily apparent to most Germans. And certainly it may not provide a good enough reason enough for Germany to risk bankruptcy to prop up first Greece, then Spain, then Portugal, then Ireland and finally the whole of the Eastern European bloc. Of course, maybe economies will snap back and the crisis will be averted altogether, but we have a sneaking suspicion that won't be the case. Absent recovery, the pressure will be on German, as the motor of Europe, to make Europe whole. And Merkel has responded – indicating doubts.
You know, it seems to us that the financial crisis was no doubt anticipated by the power elite – the central banking economic system virtually demands this kind of unraveling – but the breadth and depth of the crisis were perhaps a surprise. Merkel's statement is in fact a warming to Europe's socialist brain trust. They may believe that unyielding rigor in the face of unwinding economies and blood-on-the-street is the appropriate response, but Merkel is letting them know that they must consider their posturing within the context of the German wallet. Be brave with your own purse, she is telling them.
Merkel is fairly good as European politicians go. A German friend of ours told us that she is perceived domestically as hard to push around, especially when it comes to positioning herself and her party on the right side of electoral frustration. Perhaps she knows that going on TV to tell Germans that they will have to pay higher taxes and suffer from higher inflation in order to bail out Greece is a non-starter. Germany actually has plenty of problems. The country is used to exporting its way out of a crisis, but its largest market, America, is not keen on consumerism at the moment. And Germany, as an exporting nation, has plenty of competition these days from China, among other players. Jobs and more jobs are Merkel's concern – not bailing out the euro, or perhaps even the EU if it comes to that.
We think Merkel's concerns are not unusual, and are even – evidently and obviously — shared across the pond. Listen to the Obama administration these days, and the rhetoric sounds surprisingly desperate. The Administration is going to make "jobs, jobs, jobs" its number one priority. The sotto voce admission is that health care reform has merely proved an anger-provoking detour. In our humble opinion, what the power elite fears most is harsh, implacable, public anger. Inevitably this sort of anger turns first against the economic levers of the state – and then eventually against the power-mechanisms, the endless expansions and abuses of the military and internal security authorities. It is difficult to govern behind the scenes absent the money levers of a central bank and the comforting presence of various styles of Praetorian Guards.
So what is next? We don't think Greece will succeed in slashing its federal budget or not for long. The people in power are the ones that created the mess in the first place. Heck, as we understand it, the Greek police are banned from entering Greek campuses of higher learning. If Greek police cannot even enter the austere and smoky halls of academe for fear of riots we don't quite understand how the Greek government is going to enforce its austerity measures on an entire country. Either there will be a great eruption of rioting and consequent blood-letting, or the government will quickly back off. Of course, the Greeks could simply accept what the government proposes. Is that likely?
And how about the Portuguese and the Spanish? And the Irish. These are all stiff-necked people. Eventually, we suppose, the EU itself will have to take up the slack. It will have to stop insisting so determinedly on fiscal discipline. The trouble is, as we have pointed out, that the euro itself operates in a market. So if the EU does decide to change its currency demands, the result would be a weakened euro – not to mention the advent, quite possibly, of dreaded price-inflation.
Shall we then don sackclothes and ashes? No. This currency trap couldn't have happened to a more deserving bunch of people. For decades, the socialist leadership feeding at the trough of the EU has lied and manipulated 300 millions in its quest to reconstitute Charlemagne's empire. The British leadership was supposed to keep quiet about it, while the French were supposed to provide the clever sophistries and the Germans were expected to provide the economic muscle. But a funny thing happened on the way to leadership's ever-expanding Swiss bank accounts. The French people became disenchanted with the whole operation and the Germans are not, after all, ready to accommodate the fiscal demands of the EU's undemocratic captains.
NOTED: Scott Brown: Nothin' But Net! At deadline, Scott Brown (Republican) was said to have won the Senatorial race in Massachusetts. There is enormous psychic satisfaction in seeing, as a potential ramification of this apparent victory, the crumbling of the devious and leveling political agendas of the Obama administration. Barack Obama promised change, but he has treated his first year in office as if it were the reign of an uncrowned emperor, in our opinion. His profligacy has been stunning, his "change" proved to be every expansion of state power that he could get away with, and his policies, as a result, have further extended the American depression and doomed more of the hitherto middle class to ruin and misery. We do believe that Obama is fully manipulated by those who helped behind the scenes to assure his victory – and these individuals seek nothing more than the endless, miserable expansion of state power for their own purposes. Meanwhile Obama's teleprompter goes everywhere he does, and when he is without it, he makes gaffe after gaffe. In fact, he appears in many ways to be spectacularly uneducated and insular. He believes in the power of the state, the necessity of waging multiple international wars and despite his reputation as a constitutional scholar, seems to know little about America and less about its legal history. Alternatively, he knows and understands exactly what he is about – but does not care. With this defeat, hopefully, Democrats around him will likely have second thoughts about the radical nature of his leveling agenda and his arrogant determination to shove it down the collective throat of a nation that broadly wants nothing much to do with it.
So what comes next? At some point we suppose we would anticipate a loosening of the "courageous" financial rigor that the EU leadership is now exhibiting. But there is much more at stake than the currency itself. The power elite's dream is to establish regional currency commonalities around the world in seeming preparation for global government. If the EU begins to splinter, the dream dies, or at least is far deferred. Of course our perspective is that the elite should consider moving away from its rush toward global gelt. A private gold and silver standard would fit the bill far better than these artificial currencies and would be far easier to sustain. We're not holding our breath.