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The G20 PLayed Its Hand… Will Germany Go “All In”?
As I’ve stated time and again, Germany is the only EU member that has the money to get Greece through this next round of debt payments (14.4 billion Euros coming due March 20). But Merkel isn’t going to give the money without Greece submitting to German fiscal demands.
However, there is no way Greece will submit to German fiscal authority. Heck the Greeks are even going so far as to bring up German war reparations from WWII!
Greek MP's raise the issue of German war reparations
The Athens News reported that the MP's have stressed that Germany owes Greece a debt of 54 billion euros before interest (70 billion with interest). They are calling for the issue to be raised as a national issue as Greece was the only country to which Germany failed to pay war reparations.
The issue of war reparations is one which is widely discussed amongst the Greek population who are increasingly resentful of criticism from Germany, which came to the fore when Germany proposed that Greece hand over budgetary sovereignty to the EU. In an article in German paper Der Spiegel in June 2011, eminent historian Albrecht Ritschl, a professor at the London School of Economics, criticized Germany for their hostility towards Greece in the current economic. He pointed out that Germany's debt default in the 1930s makes the Greek debt look insignificant in comparison.
http://digitaljournal.com/article/319064#ixzz1lqi1y9WF
Let’s be blunt here, Merkel is well aware that Greece will likely never submit to German fiscal demands. She is also well aware that:
1) Come April and May, all her efforts to unite the Euro under a banner of fiscal prudence (read: German rule) will end as it’s highly likely France will have become completely socialistic
2) Greece will have already defaulted and German banks will be in trouble.
Regarding #1, Nicolas Sarkozy, who has technically yet to announce his campaign, will soon be facing off against an extremely popular socialist François Hollande, in France’s two round elections for President in April and May.
A few facts about Hollande:
- He wants to cut all tax breaks to the wealthy and use the money to create more government jobs
- He wants to lower the retirement age to 60
- He completely goes against the recent new EU fiscal requirements Merkel just convinced 17 EU members to agree to and has promised to try and renegotiate them to be more loose and profligate
Now, Hollande is extremely popular with French voters (according to current polls, if he and Sarkozy make it to the second round of elections in May, Hollande would win 60% of the votes while Sarkozy only got 40%).
So Merkel knows Sarkozy will likely soon be gone… which would mean she’d be alone in her quest for greater fiscal conservatism in Europe.
Merkel also knows that it is highly likely that Greece will default (no one else has the funds to bail the country out and Greece will never submit to German fiscal demands especially given the two country’s WWII history).
So Merkel is staging a brilliant political move right now.
By emphasizing that she doesn’t want to kick Greece out of the Euro but will give Greece more money only if Greece submits to German fiscal control, Merkel is in fact doing two things politically:
- She’s winning MAJOR political points in Germany where up until recently her ratings were dropping like a stone due to her being perceived as “pro-bailouts.”
Merkel Approval in Germany Climbs to Highest Level Since 2009 Re-Election
Support for German Chancellor Angela Merkel’s party bloc rose to the highest since before her re- election in 2009, pointing to voter backing for her handling of the European financial crisis.
Merkel’s ratings have jumped since December as she led the drive to lock in euro-area budget discipline while resisting calls to provide more public money to fight the debt crisis. It’s a reversal after Germans’ anger at bailouts for Greece (GDBR10), Ireland and Portugal sent support for her bloc to 29 percent in the fall of 2010 and helped defeat the Christian Democrats in state elections last year.
“Germans like that she continues to be seen as tough on Greece while managing to get all the other euro countries on board,” Christian Schulz, an economist at Berenberg Bank in London, said by phone. “Italy, Greece, Spain, Portugal -- all these countries are moving into a German direction.”
The second thing Merkel is doing by emphasizing that she doesn’t want to kick Greece out of the Euro but will give Greece more money only if Greece submits to German fiscal control, is:
- She’s covering herself in case Germany has to pull out of the Euro and others accuse her of not doing enough to stop the debt implosion (her defense will be “we offered the money time and again when no one else did, but they didn’t want to get their financial house in order”)
This last option is not some delusion. Germany has just gone to the IMF and G20 requesting additional funds for the Greek bailout and was told, “firewall Europe first, then we’ll talk.” The majority of Germans don’t want a second bailout. And Germany’s Finance Minister has made it clear that Germany won’t be putting up more money for the various EFSF or ESM bailout funds for Europe.
In other words, the big players at the table are finally showing their hands. Given the public outrage concerning the 2008 bailouts as well as the fact it’s an election year, the US-backed IMF won’t cough up money for a European bailout. Which means Germany is on its own here. And it’s very likely going to lose its biggest ally in the fight for austerity (Sarkozy).
Will Germany go “all in” on the Euro experiment? I doubt it. In fact I’ve found the “smoking gun” the little known act that Germany has recently implemented that proves the country has a Plan B that involves leaving the Euro with minimal damage.
Make no mistake, the situation in Europe is far far worse than 99% of investors realize. Even if the second Greek Bailout is finalized (the details are still emerging) we’ve still got Italy and Spain to deal with: two problems that are far too big for any of the current troika (ECB, IMF, and EU) to handle.
On that note, if you have not already taken steps to prepare for the next round of the Crisis now is the time to do so while the system is still holding together.
If you’ve yet to take steps to prepare for this, I can show you how: my Surviving a Crisis Four Times Worse Than 2008 report is chock full of information on how to not only survive but thrive during the months to come.
Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).
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Good Investing!
Graham Summers
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The green party and the social democrats are 100% all in on this Euro farce, so even though there are cracks within Merkel's own party, the opposition will push the yes button everytime and easily overwhelm any opposition. They are going to run this bitch into the ground. Merkel will never be the Chancellor who destroyed the € andi the disintergration of the EU. Thing is, Merkel is going to be the Chancellor who destoys the € and the pipedream known as the EU.
War reparations for the greeks, give me a break. All that has been dealt with way back in the sixtees, contracts were made, considerable sums paid by Germany. Greek politians seem to be rather very desparate if they need to bring that nazi-thing up again and again and again to give the poor greek sheeple a channel for their (rightful) anger, whilst knowing that the whole unpleasant matter has been settled long since, with international backing and acknowledgement, may i add. No way to change things here without questioning the whole past-WWII international settlement system.
Well, if it helps, in the end, it's always the mean ugly hun doing all the bad stuff. We have gotten used to that, really. Hint: Hun politician is a corrupt powerdriven nice-speaking creature who does usually not at all what hun population really wants. Sounds familiar, huh?
Really, europeans survided those two dreadful wars, they will survive the banksters, too. Hopefully without stepping into the nationalism trap on the way again, that is.
ps. Merkel is brilliant. I despise her, but would not count on her demise so fast ...
jhm,
Those same banksters financed the wars and motivated whatever it was that inticed populism in the first place.
Without funding of some sort there can be no war. Certainly not on the scale we've seen over the last 3 centuries primarily in Europe.
Yes, right, and i know quite well, as do a *lot* of people in Germany. Alass, as germans, we are forbidden to speak/write our mind, of obvious historical reasons and such of political correctness. Would that be different we would have to ask some extremely unpleasant questions regarding the demonization of a whole nation since at least 1871 and then 1914 without ever telling the whole story besides the obvious horrors of 1933-1945.
"Es steht ein Turm zu Frankfurt am Main,
dort hängt ein rotes Schild,
erleuchtet die Nacht mit fahlem Schein,
ein seltsam verschwomm'nes Bild."
This article is pure speculation.
Wonder if Germany will pay the war reparations for brutalizing the Greeks in WWII? Wonder if the Hague would take that one up?
I wonder what will happen to German tax collectors as they find themselves in a war by their nation against Greece?
Maybe were going to find out what Greece is going to use those recently purchased military tanks for?
Wonder if the Greeks will eat with the German tax collectors? Jesus did so. Are Greeks the new Jews? No, can't be. Greeks were cheated by Jewish bankers and the same bankers are leaving the collection to Germans. Is this for real or what?
I can't wait for the next Bonzai7 take on this one!
it's all one big happy family over here in Euro Zombie Land Mr Summers, you've got it all wrong
"So Merkel knows Sarkozy will likely soon be gone… which would mean she’d be alone in her quest for greater fiscal conservatism in Europe."
Ok, ok i take your point that being fiscally prudent is seen as extreme right radical bordering on insane here in suicide socialist Europe but, but, but.... it's our cultural heritage you understand for politicians to wreck and lay waste to our countries
This is the birthplace of democratic Govt afterall, the most destructive institution in history
Hollande is on the same page as Merkel as far as fiscal discipline is concerned. His job creation scheme is electoral BS, he will not do it. State jobs will go down, but more in certain areas like Defense and Finance ministeries with increases in Justice and schooling. Over all, there will be shrinkage as in Health, big employment sector. The 60 year retirement age only works if you started to work at 18! So retirement age will now gradually increase and contribution wil either increase for same benefits or at constant benefits, pension entitlements will decrease. Pensions will also be taxed more heavily. All this means that France will stay on track in terms of Fiscal discipline. Unless the economy tanks big time in Eurozone...
What Hollande wants from Merkel is greater Eurobond solidarity and more investments to make economy surge by bringing back industry to core countries. This is where the fight will be, on investment stimulus packages, not on fiscal discipline. Even the GErmans know that ONE day Euro zone will have to go joint and several on Eurobonds and have all statutory changes that this requires in place <ith local parliaments; even if it means obliging the peripherals to leave, to devalue and then to re-enter once they are debt free.
Painful ten years ahead. But as elsewhere. No more free money, no more cheap energy. And more international competition for capital investment. New world order.
When the petrodollar link severs, the world will really change. But we are not there.
Right one many points. Don't know where Graham Summers is from but surely not from continental europe. He does not understand anything to the way Europe works and is completly confused about french politics.
Though, the euro bonds can only come once imbalances across the eurozone are really fixed. The reason is simple, with a common currency the spread between nations on their govenment bonds is the only adjustement variable allowing a redux on current account imbalances.
Sharing a common currency and the same interest risk free adjusted rate, there is no way you can solve the imbalance.
excellent summary - though I still think that the eurobond will not come and that it was a City of London idea and request in the first place
"When the petrodollar link severs, the world will really change. But we are not there" worth repeating