Germany-US Rift Gets Deeper, As Merkel Openly Mocks Obama's Keynesian Guidelines

The transatlantic smackdown is getting vicious, as Angela Merkel makes a point to demonstrate her refusal to follow Obama's policies before a business audience in Berlin. As Bloomberg reports, "Chancellor Angela Merkel championed German export strength as “the right thing” for her country, spurning President Barack Obama’s call to boost private spending as both leaders  prepare for Group of 20 talks. Merkel, addressing a business audience in Berlin today, said she told Obama in a phone call that  cutting government debt is “absolutely important for us,” exposing a second point of contention ahead of the June 26-27 G-20 summit in Canada." It appears Germany's chancellor is actually prudently thinking ahead after realizing that the recent bailout of Europe has massively angered potential voters, cost her parliamentary majority, and absent damage control, her career would come to a premature end. If that means openly mocking the pinnacle of Keynesian insanity these days, Washington D.C., so be it. It is strange that our own president has yet not realized his own political career will be very short unless he follows in Merkel's footsteps. Instead, he and the Fed will melt the market up to unprecedented highs in the months leading to the mid-term elections in hopes that this will presumably indicte just how strong the US economy is, even as fresh new millions in the GoM find themselves unemployed courtesy of some salt water content in the oily gulf. Perhaps Orszag is much smarter than people give him credit for: surely his pitchfork avoidance skills will come in very handy when the tide finally turns.

More from Bloomberg:

Reducing the budget deficit by 10 billion euros ($12 billion) per year “won’t put a brake on the world’s economic growth,” Merkel said, relating what she told Obama yesterday. Germans are more likely to spend money if they feel the government “is taking precautions” to ensure solid finances, she said.

Four days before world leaders meet in Toronto, Germany is heading for conflict with the rest of the G-20 over tighter financial regulation, a banking levy and U.S. calls to boost growth rather than cut debt.

The G-20 must “safeguard and strengthen” the economic recovery and promote “global demand growth that avoids the imbalances of the past,” Obama said in a June 16 letter to fellow G-20 leaders. He expressed concern about “heavy reliance on exports by some countries,” which he didn’t name. Treasury Secretary Timothy F. Geithner called on June 5 for “stronger domestic demand growth” in European countries like Germany that have trade surpluses.

The upcoming G-20 meeting will likely be very contentious:

Merkel said on June 11 that she expects to have a “hard time” from fellow leaders at the G-20 meeting, where Germany and France are leading Europe’s push for a global commitment to impose bank levies and a tax on financial transactions.

The G-20 faces a test of unity on the banking levy, a German government official said earlier today, warning that leaders can either pull together or split into two camps over the tax. The official spoke to reporters on condition of anonymity.

And the punchline:

Obama’s appeal “isn’t anything that goes against what we are doing,” Merkel told reporters yesterday. “If we don’t get onto a path of sustainable economic growth but have rather a growth bubble, then if the next crisis comes we won’t be able to pay for it.”

How long before our own "elected" leaders realize they should follow the will of the people, not the recommendations of economic advisers who have a 2 year shelf life?


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