Ganging Up On Germany

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Wolf Richter   www.testosteronepit.com

They’d wanted to “blockupy” Frankfurt, Germany’s money capital, for four days to protest against capitalism, the power of banks, and the wave of austerity policies, and they’d wanted to shut down the financial center with concerts, marches, and speeches. But the city government issued a blanket prohibition—highly controversial in an otherwise democratic country. Blockupy appealed, but the court rejected the appeal on a technicality.

Wednesday, Thursday, and Friday, about 5,000 police officers turned the financial center into a fortress, shut down two subway and commuter rail stations, and installed checkpoints. The ECB building was sealed off. As soon as a few people got together and someone started playing a guitar, police descended upon them and scattered them like roaches. And so it accomplished, ironically, what Blockupy had failed to accomplish: blocking the financial center and shutting down life within it.

Saturday, the one day when demonstrations were allowed, 20,000 people, according to the police, marched through the center—peacefully for the most part. It was an eclectic group of all ages from all over, including topless women with their torsos painted in the glorious blue and yellow of the EU. There were Spaniards, Italians, and lots of French. Two thirds were estimated to be over 30. But there was a common denominator: they accused the political elite of trying to satisfy the financial markets at the expense of the people.

That was the background. In the foreground was the G-8 at Camp David where the leaders of the US, Japan, Germany, France, Britain, Italy, Canada, and Russia—but ironically not China, the second largest economy—hobnobbed overnight, though any harmony was soon trampled by President Obama’s reelection campaign, the Eurozone debt crisis, and the dire situation in Greece.

French President François Hollande and President Obama, now best buddies, had their first meeting even before Camp David, and their target was German Chancellor Angela Merkel. Obama had been pushing long and hard for a gigantic debt-funded spending package in Europe. He wanted all the money spigots opened all the way everywhere to give the US economy a short-term boost so that he might survive what shapes up to be a tough reelection campaign, made even tougher by a tottering US economy. A big burst of government spending in Europe, regardless of costs in the future, would briefly filter into the US economy—and thus into the ballot box. “If a company is forced to cut back in Paris or Madrid, that might mean less business for workers in Pittsburgh or Milwaukee,” Obama said after the meeting, fearing that those workers might then not vote for him.

Hollande brought his own agenda. He demanded the introduction of Eurobonds and came out swinging against the nomination of German Finance Minister Wolfgang Schäuble to the post of Euro Group President. Back home, his Prime Minister Jean-Marc Ayrault demanded that the ECB fund debt sinner countries, such as Greece, directly to monetize their deficits without the awkward detour via the capital markets. It was a three-pronged approach on their war path against Germany; and Hollande tried to rope in Obama as an ally, after having already roped in Italian Prime Minister Mario Monti and others.

Merkel downplayed the attacks ... and her isolation. She is trying to get Eurozone countries to live within their means—an experience that is apparently too painful to contemplate for the others at Camp David. She rejected debt-financed growth programs. Growth would have to come through structural reforms and “investments in the future” such as research and infrastructure. She’d already softened her opposition to Eurobonds, which would shift additional risks and potential losses from other countries to the beleaguered German taxpayer. But she wouldn’t even consider them until after all Eurozone countries had gotten their budget deficits under control, and until after the fiscal union treaty had been ratified—both of which Hollande vigorously opposes. In the end, despite relentless pressure from Obama, Hollande, and others, she won a mini victory by being allowed to say that all had agreed that there had to be a combination of budget discipline and growth policies.

In one point, the G-8 leaders toed the line in unison by stating, if perfunctorily, that they wanted Greece to stay in the Eurozone—even as the ECB, the European Union, and financial institutions are already preparing for Greece’s return to the drachma. And that includes printing new drachma notes. Read.... Rumors, Denials, and Visions of Chaos in the Eurozone.

Greece suffered in 2011. The economy tanked. Unemployment jumped. The government, up to the gills in debt and cut off from the capital markets, went begging, and in return had to implement painful economic reforms. People demonstrated, strikes paralyzed Athens, and street battles were fought with batons, teargas, and Molotov cocktails. A Greek photojournalist captured these violent absurdities in an awesome and at once shocking video.... Horrific Moments of Greece’s Year 2011, in Video.