Merkel Strikes Back Against Hollande

Tyler Durden's picture

Some thought that German chancellor Angela Merkel would quietly take the abuse heaped on her, and her program of "austerity" (or deleveraging as we call it, but that just does not have quite the negative connotations of a word that has become symbolic for all that is wrong with a massively overlevered world) by the new French president and Germany's increasingly more insolvent "partners", without much of a fuss.

That changed over the weekend, following a Spiegel article titled "Merkel prepares to strike back against Hollande." Now, as Bloomberg reports, the German retaliation is picking up speed, following a thinly veiled threat from the former German finance minister, who basically said that French bonds are unlikely to continue seeing the flight to safety bid they have been enjoying recently, once the rating agencies cut France even more from its one vaunted AAA rating, where Moody's and Fitch still have the country (following the S&P downgrade to AA+ in January), but likely not for long now that Germany has spoken.

From Bloomberg:

Former German Finance Minister Peer Steinbrueck said French President Francois Hollande’s proposals may have an impact on the country’s credit rating, Bild newspaper reported, citing an interview to be published tomorrow.


Investors and rating companies will naturally take a close look at the course France sets,” Bild quoted Steinbrueck as saying in response to a question about French proposals to lower the retirement age and tax top earners at a higher rate. “That can have consequences for France’s credit rating.”

No need for blustery rhetoric or pompous oratory: two sentences and the French ego balloon just got popped.

What is more important than whether or not France gets an official downgrade warning, is that Germany refuses to pursue some form of Nash equilibrium, so critical for Europe attaining a conciliatory middle ground, and instead continues to defect at every opportunity.

And now, with Hollande presumably silenced, it is Mario Monti's turn.

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Shibumi2's picture

Was your best friend Made-off?

Handyman's picture

Hmmm...I don't like these loafers. I think I'll bring my jack boots to the next neck stomping.

Fortunate Fool's picture

bla bla bla... Hollande's election was supposed to be a disaster for France, which was supposed to be downgraded immidiately. etc.


The truth is, and to the big shock of most here, Jospin, the last socialist prime minister, was the only one, with Villepin to a certain extent, to decrease the french public debt as a % of GDP. Those that are waiting for armaggeddon in France will have to wait a bit longer. Don't hold you breath.


By the way, one fact that is ignored. The largest trading partner of Germany is France, and the largest trading partner of France is also Germany. These two countries will be forced to find an agreement. Everything else is political theatre.

walküre's picture

You're forgetting one crucial aspect.

France is NO LONGER in control over her own currency and CANNOT print, print, print and devalue as much as they used to.

By 1999 the New Franc which had to be introduced in the Sixties when the Old Franc was so rotten and worthless, had devalued over 80% !!! already.

10+ years into the Euro model and the French can't pull their currency like chewing gum anylonger.

No Eurobonds! No Euro! Everyone go back to cooking their own books and do whatever the hell they've done before to making it "work" for them.

Element's picture

He also forgets that counterparties will do what they must.

And I don't remember anyone saying Hollande would be instant Armageddon for France.

What I remember, is people pointing out that the political atmosphere would become even more dysfunctional, as the European people's voting responses to the unacceptable status-quo, swung to extremes, greatly complicating the situation, and frustrating all attempts at any unified front, policy or viable stable agreements.

And this article indeed reflects that process.

The reality is France was and is already fucked (as Reggie Middleton makes very clear) it's just got to play out.  What ratings agencies do is what they always do, come late to the table with a load of pompous bullshit that everyone paying attention already knew.

This is why today the French upper-class Neo-Aristocrats are preoccupying themselves with more overt discussion of an allied (globalist) intervention in Libya, and of the desperate need for direct intervention  and another NATO-We-Fly-And-Bomb-You-Zone, over Syria so that France and the rest of the EU pro-zionism thugs can in kill 40k to 50k of the Syrian people instead, and create yet another radicalised insurgent-controlled failed-state, for the region to cope with.

Got to keep those chattering-class from discussing the parlous state of France's finances and the smelly decomposing zombie banks that are about to become involuntary state 'assets', for the taxpayers to pay, and to pay again, to finally bury them.


slewie the pi-rat's picture

the photo looks like it was taken at a fashion show to benefit the special0lympics

franzpick's picture

The reality of the euro collapse won't come until germany formulates and announces its own version of the Herman Cain plan:  "Nein-Nein-Nein".

jez's picture

Merkel is still showcasing that swingin' East German fashion industry, I see. This is what the well-dressed Stasi informant is wearing in Karl-Marx-Stadt this summer. Mismatched colors in shapeless manmade fiber is in.

She actually looks deformed in this photo. It must be the ever-increasing psychic weight of all the lies she tells every day, bearing down on her shoulders. That's why her posture is so awful.

supermaxedout's picture

Sarko is gone, Yeah, Yeah, Yeah

Hollande is there, Yeah,Yeah, Yeah,Yeah

Fortunate Fool's picture

The Euro didn't happen overnight. It was introduced officially on January 1, 1999, but it took years in the making (see european monetary system). Josping was prime minister from 1997 to 2002, so the euro didn't prevent him to reduce the debt...


Your point is moot.


France is in no worse shape than most western countries, and certainly in better shape than the US or UK. Whether you like it or not is not the problem. Just look at the facts.

Sandmann's picture

certainly in better shape than the US or UK

It simply has not done anything to reduce State Deficits at DCN, SNCF, Health Care, Pensions and runs State Corporations like EDF et al. France simply fails to address reducing the State so underwrites massive overspending like the Us and Uk

Fortunate Fool's picture

US and UK share a similar weakness that France doesn't: an over-bloated financial sector, hence my comment.

Element's picture

I read your comment again.  The first time I read it, it just came across as though you were overly discounting the situation with France.

I personally think we may need a third-'recession' (great plunge) before the system actually topples due to massive unresolvable (and statistically 'hidden') unemployment and inflation in daily-needs, because clearly the financiers and politicians intend to break every rule (and then some) to try and delay the collapse, they know will come.

It's now a game of economic and social survival and manageable stability, for as long as possible.

What we'll get during recession (plunge) #2 will seem really bad, and it will be, but TPTB will paper-over it and apply lots of duct-tape and copious propaganda lies, etc.  For one thing the USD is going to look like a comparitive beauty-queen in the leper colony, as the Euro is gutted and China stumbles along the bottom.  And in many places where this still can work, it may work for another cycle.

Where it can't work though, due to the preceding intensity of real economy collapse and demand dissolution, it won't work and plunge #2 will finish them off.  But we'll do our best to disdain their frailty, and kick them into the gutter ... until we all join them there.  It's possible France will avoid the gutter in this cycle.  I'm sure they'll all try to stop it crashing too early.

But if the system freezes ... all bets are off.

Blammo's picture

Hey Arnold !!!You were always my favorite chauvanist.

RoadKill's picture

You really are a "Fool". Everyone knows the rating agencies are 3 years behind every downgrade.

And as for France and Germany being big trading partners lets look at US vs China, Canada or Japan. If one of them were on the verge how much $ would Congress authorize for them and under what terms?

Knobbius's picture

That was also true in the summer of 1914....


Silver Bug's picture

The German people need to get out of that mess called the EURO asap!

Treason Season's picture

German Author Says Berlin Is Hostage to Holocaust in Euro Crisis

Sarrazin writes that supporters of euro bonds in Germany "are driven by that very German reflex, that we can only finally atone for the Holocaust and World War II when we have put all our interests and money into European hands,

falak pema's picture

Sarrazin is hardly a good reference to quote for an experienced journalist; why don'y you quote Marine Le Pen's take on what's the real threat to Europe/France : Islamisation! Not financial turmoil and economic decline.

In this day and age, quoting Sarrazin is like waving a red flag by making his opinion appear as something respectable. Which it certainly is not, its far right and xenophobic like Marine; not that he doesn't have a right to express it. But responsible journalists should not echo it like it was "run of the mill", unless you happen to share it as your own personal take. 

And I do not myself feel that's Europe's problems with its currrent demographic trend require it to nitpick who enters its haloed frontiers based on pigment of skin or cultural origin and religious background. I would humbly propose that cultural adaptation potential and education, something easier with younger people,  would be better criteria for welcoming potential new citizens. Not race and creed as this indicates a prejudiced, biased mindset for host country, a sign of ancient continental disease based on its past history. We don't need to go back there, but to move forward, on values of enlightenment. 

The young of this continent are more broad minded; something years of economic downturn and hardship could wipe out if those in power do not take the necessary measures to not encourage this regression socio-political trend, like we saw in the Balkans in the 90s, when Yugo collapsed so tragically.

WhiteNight123129's picture

Let us come back to the French franc vite-fait, default, print a bit and come back to the Golden coins with the Coq gaulois, let us rewind back into time an erase this abomination of first world war, which has led to all sorts of abuses....


Bill D. Cat's picture

Merkel > "See that stain on the floor ...... your balls are gonna look like that when I'm done with them . "

Royal Fleming's picture

thanx ZH for not letting spam on your site...edited out the rant..

falak pema's picture

this is not a rumble in the jungle nor a thrilla in Manila; this is shadow boxing from the Charlie Chaplin tramp movie on boxing; probably the most hilarious boxing match ever filmed. Wait for this to play out; in the end ECB and Super Mario will probably cast his vote. And we know which way that will go; as he reports to the Squid. 

Frau Merkel will put up a good faked fight and Monsieur Hollande will spring around like a ballerina and jump up like Charlie every time he catches it on the chin. He will throw his wild punches and steam roll the referee in the process; but the match will end like it should, poor Charly Hollande carried out on a stretcher  and winner Merkel cheated out of her purse; by the matchmaker Super Mario and the man behind the curtain, the good ole Squid!  More can kicking in 2013 once the 2012 drama of Euro zone is over. Until in all folds, slowly and then all at once. 

Charlie Chaplin Boxing (HQ) - YouTube

insanelysane's picture

Germany's plan B has to be to leave the euro first and leave all of the crazy countries in the euro.

gdgenius's picture

Be first, be smarter or cheat...

CClarity's picture

Agree Germany should just leave (part of why bid sooooooo high in bund cuz think of what you'd rather hold debt in after a German exit from the EZ - definitely deutchbonds, not euro denominated).  Would actually have a better outcome for periphery AND Germany - still painful for both, but probably less terrible than Greece and eventually Italy, Spain and Portugal, perhaps Ireland, etc etc etc slowly being hung out to dry by being forced to leave or choosing to leave so can have devalued currency a-go-go.  Germany leaving would put things in motion to hit skids then start improving much more quickly.

Not a good plan to be long anything denominated in Euro meanwhile.

An aside, given his name, will Hollande try to align with Holland?  Nederland/France nuxys?

noses's picture

It really reminds me of my fifth birthday party. Everybody wanted to play musical chairs (which I already regarded as seriously boring) so I got out first and had a lots of cake without anyone disturbing me while the rest battled for a piece of chocolate or something similar.


It's easy. Define goals. Define strategy. Execute.

walküre's picture

If you seriously remember what happened on YOUR fifth birthday party, you are DEFINITELY too YOUNG to have an opinion in the matter.

Either that or you have discovered a way to keep memories in your databank alive forever.

barliman's picture


Or ... he just makes them up


CreativeDestructor's picture

Can we just admit that Germany ain't just fuckin'stupid. Can we just admit that best and most rational play will be to let the whole fuckin'periphery crumble along with few other countries and only after that to step in with a rescue mission?

That's a mistake IMF and ECB have made, those institutions (especially IMF) step in once the debt has fallen apart, and they pick up the body parts from the floor. But this time they were duped by the Goldman"".

Germans can see through that crap and are gonna hold out till the very end when they can buy shitt very cheap (I fuckin' hope so), and that is the only way it can work. I fuck Goldman Morgan(s).

Bobbyrib's picture

It would be like China forcing the US to default. It would crush their economy.

Mark123's picture

So just increase vendor financing that will NEVER be paid back?  Is that your solution?


The world has to accept that what seemed like wonderful prosperity was just a big party on the credit card.  Germany will of course suffer when the consumers credit line is shut down, but doing that now is a hell of a lot easier than extending more credit and then pulling the plug.


Save the core.

RoadKill's picture

Didnt that work for Cisco and Intel in the 90s?

bank guy in Brussels's picture

GIIPS countries blow up ... means German banks and insurance companies collapse, loaded up with GIIPS debt ... German workers pension funds blow up, also loaded up with GIIPS debt ... leading to German revolution as German workers are told half their pension money has 'vaporised'.

As various ZH pieces of pointed out, a good chunk of Germany's wealth is from selling to other euro-zone countries, buying German company stuff with money lent to them by Germany. - Greece buying German submarines one of the gross examples. - Vendor financing, like China with the US.

No painless way out of this mess -

But the hard part psychologically for Germans, is the fact that the typical 'best' solution to this debacle is to inflate currency, which they might even have to do for a new Deutschmark (because of German bank etc. collapses) ...

And the Germans were promised all along the euro would be as stable as the Deutschmark ... now they are slowly being forced to understand their lifelong habit of keeping savings in German currency, is one more thing that may have gone 'poof'.

Germany leaving the euro may be the best solution, if they can be bold enough ... at least that way they could eventually work back toward their traditional currency stability.

Marco's picture

In theory if the production now used to feed the trade surplus is instead redirected to internal consumption then with government intervention in the market the present standard of living could actually be improved ... which would of course entail bailing out the banks and pension fund and raising taxes to pay for it.

In practice, chaos ...

Bobbyrib's picture

Thank you for stating my point, which I should have stated in my first post.


To quote Full Metal Jacket: "'s a huge shit sandwich and we're all going to have to take a bite."

Alpacanio's picture

Great Post Bank Guy, agree 100%. Germany should leave the EURO. This is the best solution for crap sandwich that everyone must eat.

The Euro has failed. Every country should go back to their own currancy.

Day_Of_The_Tentacle's picture

Don't mean to stalk, but just in case you didn't see it, I left a question for you in earlier thread. 


trebuchet's picture

@Bankguy in brussels: good points.

Re article in general:

1. Hollande, since being elected, has NOT mentioned fiscal pact renegotation, just " all growth options are to be discussed". 

2. ALL at EU meeting and G8 agreed that "growth" is needed, fiscal stimulus now becomes a matter of negotiation and timing.

3. Monetary stimulus is still on the cards. BOJ just upped its 100bn tickler to 350bn.  

However, a REAL discussion about exit does appear to be taking place, and EU finds it doesnt have the institutions to deal with it. ECB and central banks have to come up with a way to Refi/unwind Target 2. The imbalance are so horrendous that both sides will lose. 

Biggest Problem in Germany leaving the Euro is that their exports to Euroland and financial assets denominated in Euros get halved in value. Recession in Germany, Target 2 losses.   Germany is the biggest loser. 

in the meantime, Grexit, Iberian bailout II and/or Italian rehash all point to Eurolan meltdown, vs the alternative which is Ctrl +P.





sessinpo's picture

With that line of thinking, things would revolve forever. But we know it doesn't. Eventually, things come to ahead and these little squabbles turn into something much more.

Bobbyrib's picture

Creative Destructor was saying how much better off Germany would be if they seceded from the EU before every other nation. I was just stating the reality that when the EU eventually falls apart, every country in the EU is fucked. Germany sank all that money into the PIIGS and their export economy (which is how Germany's economy was doing so well) would get crushed. It's going to be ugly anyway you look at it. It's a no win situation that they created in Europe.

trebuchet's picture

most people dont take their thinking that far. 

"split from euro"  "get rid of weak countries" "let strong countries exit"  -> Germany ends up on the hook with foreign assets DEVALUED and its EXPORTS OVERPRICED.  

Only hope for euroland is across the board devlauation.

China, smart enough to realise this, is devaluing NOW. 

The US with currency appreciating, will face an econoic slowdown as a consequence. 



noses's picture

You wish. But it won't. China has been living on a relatively low level not that long ago. They could do it for another decade or two, even if that means shooting some ten thousand protesters and invading a few neighbors. On the other hand I can already smell the smoking guns of another civil war if the US economy breaks down for good. The Kingdom of California, ruled by some aging actor as a puppet for the super rich, some Republic of Texas, a few brain-dead theocracies in the mid west... You get that picture.

RoadKill's picture

That is idiotic. The US has the BEST demographics / culture to survive this. Everyone is an immigrant here and we have all been mixed tograther for hundreds of years. We all solidly identify ourselves as Americans first and States second. The possible exceptions being a minority of people in Texas and a small group of racist asshats (many of which seem to be on ZH).

Meanwhile China has how many separatist movements going on right now? If you know anything about China's history you know its made up of several distinct cultural groups that have taken turns subjecting each other to horrible things. Manchurians, Mandarins, Huns, Turks, Ugurs, Tibetians, Nepalease, Hong Kong (Very European compared to the rest of China) etc... The peasentry is already VERY upset with the cirrupt communist bosses for taking their land without payment and siphoning billions offshore. One day they will wake up and find out $1 trillion of those reserves are missing and GDP growth is <0% for the 1st time in 30 years and their will be hell to pay.

Real Estate Geek's picture

We all solidly identify ourselves as Americans first and States second.

¿En serio?  ¿Dónde vive usted, hombre?

Lednbrass's picture

Everybody is an immigrant here? WTF are you smoking you idiot? Most of the population was born here dumbass. Read a dictionary and find out what the damn word means.

Im guessing you are a northeastern or left coast urban idiot with mininal comprehension of the culture outside your bubble. A sizable portion of the South would be more than happy to tell your sort to go fuck yourselves, and if there is an economic breakdown it becomes a strong likelihood. Most of the Midwest and non-coastal West dont like you either. You seriously underestimate how much you are despised in other parts of the country and the fact the most of the South that arent carpetbagging scum have their own distinct identity. The only thing this nation has in common is language, an ever more questionable currency and the pursuit of "stuff", once the last grinds to a halt and things get ugly there is really no reason left to tolerate you idiots.

Lessons were learned from 1865 and the weaknesses addressed, its a considerably different situation this time around when the wheels fall off. Expect secession to come back big when that happens, and there wont be a damn thing you can do about it- the best thing about ending the draft is that the flyover types ARE the fighting arm of the military at this point.