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The Failure of Politics: Merkel's Euro Debacle?
Submitted by Daniel Stelter via TheGlobalist.com,
It may be the great magic trick of the management consulting world: No matter how complex the situation and how iffy the outcomes may appear to be, just draw a two-by-two box for your client. Define what options to write on the x and y axes – and then the client can decide.
Of course, a good consultant will carefully pre-shape the answer options, so that the answer the client will arrive at is more or less given. Best of all, the magic trick works, whether it concerns a pure business situation or a matter of public policy.
The top option always ends up in the top right of that box, the worst in the lower left. In between, in the top left and bottom right corners, you have the choice between two middle options.
The problem with it all is that, neat as these boxes are, in the real world you will know which box you landed in only after landing in it. Even if you go well prepared with the help of trip advisor or other services you might end up in a place in the box where you didn’t want to end up.
The same holds true for German chancellor Angela Merkel. She clearly hoped not to end up in the lower left box when she embarked on the mission to save the euro. “The euro is our common fate, and Europe is our common future” might well be her biggest mistake in her 10-year reign of Germany – and some would say of Europe.
The box Merkel was aiming for
In 2010, at the first and definitely not the last height of the euro crisis, Merkel and her team of advisors most probably had the following decision box in mind: How do we minimize the immediate political damage for us in Germany and how do we postpone the long-term political damage — even minimize it when it comes to pass?
The short-term political damage would have been clear. Preventing an immediate, uncontrollable collapse of the eurozone was necessary as this would have caused huge financial losses and demolished Merkel`s domestic reputation.
But it was also necessary to keep the German public’s illusion that the Euro would only bring benefits — and not lead to bailouts and transfers to other countries. In addition, it would also have been highly unpopular to admit that, in reality, it was German banks (not Greece and the rest of the periphery countries) that had to be rescued.
The former had given way too much credit to the latter and funded an unsustainable consumption boom in today’s crisis countries.
Merkel aimed for the upper right box: Happy voters and postponing any damage. Politically, that was understandable enough. But her choice entailed no effective solution of the crisis.
Living in denial
With more political courage on her part, she could have opted for a real solution in 2010. Such a solution required fixing the eurozone through a broad debt restructuring and mechanisms for more economic integration, which implies permanent transfers.
Of course, both of these components are highly unpopular among the German public – they were so then and are so today. Thus, she chose the “extend and pretend” option, still aiming for the upper right box hoping for a happy end and avoiding bad news today– by providing “credit” to already over indebted countries.
At first it seemed to work. The German public accepted the conditional support and believed its leadership that no taxpayers’ money would be spent for other countries.
The eurozone survived but it was not because of the politics implemented by European leaders but due to the ECB that did whatever it took to keep the Euro afloat.
Moment of truth
Unfortunately for Merkel, it didn’t last. It is only possible to deny the hard economical facts for a certain period of time. The latest effort to “rescue” Greece and the Euro made this transparent for everybody.
The proposal to Greece for a voluntary exit of the Euro made by the German finance ministry can be seen as the last attempt to stick to the 2010 strategy.
It would have incurred massive losses for German taxpayers but would have been sold domestically as the only way to prevent the worst outcome: Paying for all countries on a permanent basis. It would not have been in the upper right box anymore, but still been politically acceptable.
Now it is time for Merkel to face the unpleasant truth. Her aiming for a pain-free solution has failed. Now, she sits in the lower left box with unlimited costs for Germany, a tarnished reputation in Europe and a soon-to-come domestic backlash.
Whenever you make your choice, make sure that your choice is realistic. It is nice to dream about excellent food and good service. But if you cannot afford it, make the compromise upfront to avoid ending up where you don’t want to be.
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EU: "we have more money than you, so now we're going to own you. thank you and have a nice day"
Currency is the window upon which we look at the world, switch currencies and that perspective changes entirely......... Merkels marxism will be her undoing.
Ummm, right after lunch and an article about Merkel and landing in the "box" you want.
Never knew I was bulemic until now.
pods
I never understood how an "Ossie" like Merkel, who grew up under the repressive DDR regime, became Chancellor.
What in the world does she know about a republic?
It's a rhetorical question. The answer is nothing.
Would you rather have Merkel's problems today,
or Tsipras's problems???
the globalist.com, really? nwo, really? sigh
I want Merkel's problems to be someone else's problems. Tsipras has made a deal with the devil. Screw him.
Here we are the year 2015 A.D. and man still hasn't realized control over it's own constructs, let alone natures. And we have how many people living lavish life styles like they fixed all the worlds problems. If there are so many billionaires in this world, where are the cures for cancer, and end of starvation. Currency is a gun. Nothing more than a tool that can bring life as well as take it. But make no mistake that tool always has a cost and people need to realize the burden should be shared equally by all who use it. Who decides what is equall is the only question. All I can say is we are damned if we do and damned if we dont. Hopefuly we can build a better system this time around.
metaphorically ------seven years of fat followed by seven years of lean
No longer so. According to Goldman the cycles are shortening and they beget shorter business cycles.
Not to be unpleasant but that's awfully vague. Are you talking complete revolution? If so, what are the broad general precepts for us to follow?
Would it not be fun the have Merkel, Yellen and Hitlary in a fight to the finish cage match?
Who would win?
Hillary. She would be the one to bring an ice pick. Though Yellen might bore the other two to death.
Who give a shit about the EU?
Who give a shit about the UK?
Return this blog to the exceptional Americans at once!
Exceptionally broke-ass 'Merica... truly like no other.
Nicht gut?
Adolf Hitler, Josef Stalin, Mao Zedung, Pol Pot, Angela Merkel…
Two Germans in the top 5 most infamous names in recent history. Congratulations Germany!
I have my own list.
None of the above there.
Rather:
Queen Victoria, Chruchil, Rothschild, Rockefeler and all US presidents so far.
You missed off Il Duce which is probably the closest fascist trickster that current day EU leaders resemble.
The EU is a failed system.....it was great going up...but has no coning down....so it is falling apart....its just Greece now..but wait until the other countries want other bailouts..then it blows sky high....and watch out it will be every man for himself...the French will steal it all.....
its all about the TOILETS..........
''The idea that the euro has "failed" is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.
That progenitor is former University of Chicago economist Robert Mundell. The architect of "supply-side economics" is now a professor at Columbia University, but I knew him through his connection to my Chicago professor, Milton Friedman, back before Mundell's research on currencies and exchange rates had produced the blueprint for European monetary union and a common European currency.
Mundell, then, was more concerned with his bathroom arrangements. Professor Mundell, who has both a Nobel Prize and an ancient villa in Tuscany, told me, incensed:
A facile, crock of shit piece. Competes with J Ricktards for the glibness award 2015.
I continue to stick with my original prediction- the first country to exit the Euro will be Germany.
you must have impeccable sources
A German exit first is not beyond the bounds of possibility. The longer the crisis goes on the likelihood of a German exit first increases.
A German exit first is not beyond the bounds of possibility. The longer the crisis goes on the likelihood of a German exit first increases.
I don't know if i should laugh or cry after reading this bullshit
Merkel is a stooge of insolvent Deutsche Bank which she bailed out 5 years ago using taxpayer money. A crime in Germany. The same bank is now accused by DOJ of circumventing US sanctions against Russia through transaction mirroring for clients on sanction list a pressure tool to bring her and Schauble back to sanity and to write down half of the Greek debt Germany holds.
More on Greece and German response to the crisis:
https://contrarianopinion.wordpress.com/greek-odyssey-through-debt/
All of you Marxist utopians keep clamoring for a 50% write off of Greek debt and keep making the comparison to the 50% write off West Germany got post WW2. And as usual with all utopians, YOU HAVEN'T DONE YOUR HOMEWORK.
Utopians making these bleeding heart posts really need to go back and read the results of the 1953 London debt conference. In order for W Germany to avail itself to the debt writeoff, W GERMANY HAD TOO MEET SEVERAL CONDITIONS.
The most important condition W Germany had to implement was FREE MARKET REFORMS.
Just what Greece is resisting, FREE MARKET REFORMS !!!
Germans did not pay their debt/reparations after WWI yet.
Marshall plan poured billions to restore in Germany American industrial interests like Ford and the rest of debt was forgiven. Privileged trade status and suppression of lawsuits of victims of WWII also helped so were massive US installations and bases built bringing jobs to people.
You must be talking about IMF Marxists since it was IMF that demanded at least 50% of write off for Greece to become eligible for IMF programs, since they are prohibited from financing insolvent countries.
Before writing anything learn your lessons first.
Free trade, capitalistic economy in Germany? Are you crazy?. 70% of German economy was controlled by German government in 1950-1980 in public private partnerships, with government officials of the boards of directors with trade union representatives and the trade barriers were there until EU treaty 1992.
No, no that's not true, if anything the Fed bailed out Deutsche, but Merkel bailed out Commerzbank, taking even a 25 pct plus one share blocking minority in addition to huge amount of pref shares
Merkel has bank aids.
We are constantly told that the struggle to preserve the euro - it is a struggle for universal brighter European future. In fact, the struggle for the euro - it is a struggle for the preservation of the financial power of the owners, on new debt slaves in the face of nations and peoples of Europe.
As Vicky Nuland says, Fuck the EU!
The author has Merkel all wrong. Merkel is in league with the current Putin and the current Obama to guide the world into a global fascio/communist state run by whoever she, he and it represent.
They want conflict. They want the people to be powerless.
The plan MIGHT have worked had Tsipras not come to power. He was a complete disaster for Greece, his dithering and brinkmanship turned a slight economic expansion into a deep recession.
a soon-to-come domestic backlash
Really?
Merkel just hit new records in popularity. CDU/CSU might get 50% in the Bundestag.