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“Now, Europe Will Speak German!” Germany to UK: Adopt the Euro, or Else!

Martin "Merkel" (right) with Himmler

COMMENT: As Germany cements its control over the European economy and the European Central Bank, the German power elite are openly and derisively calling for Britain to join the EMU.

(Note that the ECB could solve much of the eurozone debt crisis by lending money, but has been blocked by Germany from doing so. The only solution, according to the Germans, is political union–Deutschland Uber Alles.)

Note also, that belt-tightening is just what shouldn’t be done during times of recession, because it worsens the situation. Germany is insisting on just such a solution!

Of course, we should never forget that the European Monetary Union is the blueprint for German European and world domination, as formulated by Friedrich List and realized by the Third Reich and the Bormann capital network.

EXCERPT: Germany last night declared that Britain would be forced to scrap the pound and join the euro – as David Cameron returned home empty-handed from crisis talks in Berlin.
In a highly-provocative intervention, German finance minister Wolfgang Schauble suggested the UK’s struggling economy meant the pound was doomed, and urged the Prime Minister to back Europe’s ailing single currency.
Mr Schauble said the euro would emerge stronger from the current crisis – leaving Britain on the sidelines unless it signed up. He said Britain would be forced to join ‘faster than some people on the British island think’ – despite a pledge by Mr Cameron never to do so.
But Jean-Claude Juncker, head of the powerful Euro Group of eurozone finance ministers, said Britain was in no position to comment on the crisis as its deficit was twice the European average.
He said he was ‘not in favour of being dictated to by countries that are doing worse than us’.
Mr Schauble’s comments came as Mr Cameron arrived to a hostile reception in Berlin for talks on the eurozone crisis with German Chancellor Angela Merkel.
Senior members of Mrs Merkel’s ruling coalition voiced their irritation at London’s ‘lecturing’ over the crisis.
Leading German magazine Der Spiegel ran a prominent feature describing Britain as the ‘dis- eased empire’.
And Rainer Brüderle, head of Mrs Merkel’s coalition partners, said: ‘Britain can’t be freeloaders in the eurozone.’
The deputy leader of Mrs Merkel’s party, Michael Meister, criticised Britain for lecturing the eurozone on what steps it should take while not actively contributing towards a solution.
He also warned Mr Cameron against catering to nationalist sentiment on the euro, saying turmoil in the single currency area could have a devastating impact on countries outside the eurozone and on London’s financial industry.
Mrs Merkel flatly rejected Mr Cameron’s key demand to allow the European Central Bank to pump in hundreds of billions of euros to prop up the euro and prevent a new recession. . . .

EXCERPT: Berlin is demanding a predominating voting majority in the principal EU institutions. According to reports in the Spanish business press, the German government will insist at the next EU summit in early December on a redistribution of vote weighting in the European Central Bank (ECB): In the future, the votes should be weighted in accordance with the country’s Gross National Product (GNB). Thus, Germany would attain a predominating position in the most important European monetary institution – not only temporarily, but most likely on a long-term basis. The current principle of equality among sovereign countries would be cancelled. The demand, which has not yet been officially formulated by the German government, is a continuation of the reorganization of the Eurozone along the lines of German interests. Berlin’s leading politicians have commented on this reorganization, which has been taking place for quite some time saying Europe is facing “a new era.” Volker Kauder, chair of the CDU/CSU parliamentary group and a confidant of the German Chancellor, succinctly summarized this development saying, “now Europe will speak German.”‘

Rights of Intervention

Accompanied by openly chauvinist insults, the CDU party leadership persuaded the party congress delegates to adopt the government’s aggressive policy toward Europe. At the upcoming EU summit in early December, German conservatives are determined to reorganize comprehensively the European Union to satisfy German interests. In her European policy speech at her party’s congress early this week, Chancellor Angela Merkel declared, “So far we have not interfered in the situation of other family members.” But, it cannot continue like this: “We need the means for taking legal action against states,” currently being drawn into the maelstrom of the debt crisis. Once again, the Chancellor demanded that the EU bureaucracy be granted “rights of intervention” in indebted EU member countries. For Germany, there are no alternatives to a consolidation of the European Union, Merkel said, “We have to create a political union step by step.”[1]
EU Austerity Commissioner

The CDU concretized its objectives in a keynote motion culminating in the demand to create the post of an “EU Austerity Commissioner.” Bypassing parliaments, this commissioner should have the power to intervene directly in the budgetary policy of Euro countries, as soon as they exceed a certain debt limit. “We must establish a fiscal union,” said German Finance Minister Wolfgang Schäuble. According to the CDU’s keynote motion, this fiscal union should include automatic sanctions on indebted countries. Under current regulatory provisions, this can only be imposed after being passed by EU bodies. In addition, the CDU would like to convert the EU’s so-called rescue umbrella, the European Financial Stability Facility (EFSF), into a sort of “European Monetary Fund,” which would be entrusted with the enforcement and monitoring of austerity programs in the periphery of the Eurozone. Finally, only those EU countries can join the monetary union in the future, which have inscribed “debt brakes” in their constitutions, along the lines of the German model. Rebuffing calls for European bonds, the chancellor again rejected Germany’s participation in bearing the costs of the crisis, which, after all, escalated because of the German exports industry’s excessive account surpluses vis-à-vis the southern Eurozone:[2] “A communitarization of the debts cannot be permitted.”[3] . . . .


13 comments for ““Now, Europe Will Speak German!” Germany to UK: Adopt the Euro, or Else!”

  1. It looks like Schauble could take a page from Putin’s book of vassal state marketing techniques. Less stick, more carrot:

    UPDATE 2-Russia woos Belarus with gas price cut, $10 bln loan
    Fri Nov 25, 2011 6:13pm GMT

    * Belarus gets 40 pct price cut on Russian gas

    * Russia lends Belarus $10 billion for nuclear power plant

    * Belarus gets ‘integration discount’ — Putin

    * Russia eyes closer ties in so-called Eurasian Union

    * Gazprom acquires 100 pct in Belarus pipeline operator

    By Vladimir Soldatkin and Denis Pinchuk

    GORKI, Russia, Nov 25 (Reuters) – Russia will slash gas prices for Belarus and lend Minsk $10 billion to build a nuclear plant, Prime Minister Vladimir Putin said on Friday, as he offered an “integration discount” to push his agenda of building his vision of a Eurasian Union.

    Markets have closely followed talks on gas prices between the two former Soviet states as previous stand-offs between Moscow and its western neighbours have led to punishing disruptions, in winter, of Russian gas exports to Europe.

    Putin said Belarus would pay $164 per 1,000 cubic metres of Russian gas in the first three months of 2012, a discount of more than 40 percent on the price it paid Russian gas export monopoly Gazprom in the third quarter of 2011.

    Russia, Belarus and Kazakhstan last week signed a declaration envisaging a Eurasian Union that would deepen their existing free-trade zone and could be joined by other ex-Soviet states.

    Belarus will get a so-called integration discount, and within the next few years it will move to pricing parity (with Russian domestic gas prices),” Putin said.


    Belarus is seen in Moscow as a buffer between Russia and its Cold War-era adversary NATO and the Kremlin is keen to keep strong ties with Minsk, which suffered a financial crisis this year after Moscow jacked up its energy bill.

    A balance-of-payments crisis led to a 65 percent devaluation of the Belarussian currency this year and stoked inflation, leaving the government struggling to meet its external debt obligations.

    The $10 billion nuclear power project loan may help ease the funding strains facing Belarus.

    Earlier this year, Russia and Belarus agreed to press ahead with a stalled plan to build a nuclear reactor near the eastern frontier of the European Union, where there are many calls to abandon nuclear energy after Japan’s Fukushima nuclear disaster.

    The plant, to be built in Belarus using Russian nuclear technology, will be located 50 km (31 miles) from the capital of EU member Lithuania.

    Ok, maybe some stick too:

    Gas pipeline from Russia to Germany reveals weakness in Putin’s ‘energy weapon’

    Many people believe that the opening this week of the Nord Stream gas pipeline linking Russia and Germany will put Europe in an even greater energy bind with Russia. But Gazprom, the giant state-run company behind Putin’s export-energy policy, has many weaknesses.

    By Lucian Kim / November 7, 2011


    On Nov. 8, energy giant Gazprom plans to start deliveries through Nord Stream, the first natural-gas pipeline linking Russia directly to Germany. The 760-mile pipeline under the Baltic Sea is a personal victory for Prime Minister Vladimir Putin, who pushed through the project despite technical challenges and opposition from neighbors.

    The $12.1 billion pipeline has stoked fears in Europe over growing dependence on state-run Gazprom, which already provides around a quarter of the European Union’s gas. Critics maintain that Nord Stream will seal a dangerous alliance between Berlin and Moscow, reminiscent of the 1939 Molotov-Ribbentrop Pact between the Soviet Union and Nazi Germany.

    Gazprom is the perfect bogeyman: oversized, greedy, and always lurking around the corner. Rather than fight its image as Putin’s “energy weapon,” the company relishes it. But the monster is illusory.

    To repair this weakness, Mr. Putin, during his first two terms as Russia’s president, pushed Nord Stream as part of a double-pronged gas delivery system devised to bypass Ukraine. A second underwater pipeline called South Stream is planned to connect Russia to southern Europe via the Black Sea.

    Posted by Pterrafractyl | November 27, 2011, 5:08 pm
  2. Is it just me, or is our radical hippie eurocommune starting to feel a little like Jonestown. Does this Kool-Aid taste funny?

    Germany, France examine radical push for eurozone integration

    By Luke Baker and Julien Toyer

    BRUSSELS | Sun Nov 27, 2011 5:58pm EST

    (Reuters) – Germany and France are exploring radical methods of securing deeper and more rapid fiscal integration among euro zone countries, aware that getting broad backing for the necessary treaty changes may not be possible, officials say.

    Germany’s original plan was to try to secure agreement among all 27 EU countries for a limited treaty change by the end of 2012, making it possible to impose much tighter budget controls over the 17 euro zone countries — a way of shoring up the region’s defenses against the debt crisis.

    But in meetings with EU leaders in recent weeks, it has become clear to both German Chancellor Angela Merkel and French President Nicolas Sarkozy that it may not be possible to get all 27 countries on board, EU sources say.

    Even if that were possible, it could take a year or more to secure the changes while market attacks on Italy, Spain and now France suggest bold measures are needed within weeks.

    With Germany rigidly opposed to the idea of the ECB providing liquidity to the EFSF or acting as a lender of last resort, the euro zone needs a way of quickly calming markets, where yields on Spanish, Italian and French government benchmark bonds have all been pushed to euro lifetime highs.

    Policymakers hope progress toward tougher fiscal rules will also assuage investors. Schaeuble said a Stability Union could be a decisive step to winning more confidence from the markets.

    “That means that every euro zone member has to do its homework on its budget discipline. We want to ensure that through treaty changes,” he said.


    Reuters exclusively reported on November 9 that French and German officials were discussing plans for a radical overhaul of the European Union to establish a more fiscally integrated and possibly smaller euro zone.

    “The Germans have made up their minds. They want treaty change and they are doing everything they can to push for it as rapidly as possible,” one senior EU official involved in the negotiations told Reuters. “Senior German officials are on the phone at all hours of the day to every European capital.

    While Germany and France are convinced that moving toward fiscal union – which could pave the way for jointly issued euro zone bonds and may provide more leeway for the European Central Bank to act forcefully – is the only way to get on top of the debt crisis, some other euro zone countries are unable or unwilling to move so rapidly toward that goal.

    Not only Greece, Ireland and Portugal, which are receiving EU/IMF aid, but also Italy and Spain and some east European countries such as Slovakia, would either find it difficult under current economic conditions to meet the budget constraints Germany wants, or simply do not agree with the aim.

    The ECB has bought the bonds of euro zone strugglers in intermittent fashion when they have reached crisis point. Economists say it has to act much more radically to turn the market tide but the central bank, and Germany, has opposed any such move. Commitments to binding fiscal rules by euro zone governments may be the cover it needs to change tack.

    So it looks like “the market” is going to be the official driving force behind the creation of the world’s latest vassal state union. “We didn’t want to turn Europe into a giant fiefdom. The bond vigilantes made us do it.”

    Posted by Pterrafractyl | November 27, 2011, 7:07 pm
  3. Well, the Brits may or may not end up learning how to speak German, but with their current austerity fetish, they’re going to have to learn something. Manderin perhaps?

    27 November 2011 Last updated at 20:37 ET

    China eyes UK infrastructure investment to boost growth

    China Investment Corporation (CIC), is keen to invest in infrastructure development in the UK and other developed countries.

    Lou Jiwei, the head of CIC, wrote in the Financial Times that the fund is looking to participate in public-private-partnerships in the UK.

    His comments come as the British government has been seeking to upgrade infrastructure in bid to boost growth.

    CIC is China’s main sovereign wealth fund.

    “CIC believes that such an investment, guided by commercial principles, offers the chance of a “win-win” solution for all,” Mr Lou said.

    He added that authorities needed to attract investment in the sector by reducing taxes and offering bank loans at discounted rates.

    Or how about Arabic?

    November 23, 2011 10:36 pm
    Mission to woo Mideast investors

    By Simeon Kerr in Dubai and Michael Peel in Riyadh

    Britain has launched an ambitious effort to raise capital for infrastructure investment from oil-rich Middle Eastern states seeking to recycle their ever-growing wealth abroad.

    The Sassoon delegation’s sweep through the Gulf – taking in Saudi Arabia, Kuwait and the United Arab Emirates – is part of a wider British push for infrastructure funding from capital-rich countries outside the crisis-hit west.

    Lord Sassoon, who said he had also seen interest from China, told the Financial Times: “As an asset class, UK infrastructure is generating about as much interest as there was with the privatisation programme of the 1980s and 1990s.”

    He said talks with long-term investors in the Gulf, such as sovereign wealth funds, had spanned projects in water, energy and transport.

    Regional investors were “looking forward” to next week’s announcement in London of a timeline for national infrastructure investment, Lord Sassoon added. The programme could give investors more generous long-term returns than gilts – but less risk than equities, he said.


    Congrats Britain, you’re so dedicated to pleasing “the market” that you’ve managed to simultaneously outsource both your stimulus and infrastructure. That’s almost impressive in a weird way.

    Posted by Pterrafractyl | November 27, 2011, 8:16 pm
  4. http://www.bloomberg.com/news/2011-11-30/germans-righteous-stand-fans-flames-in-euro-crisis-clive-crook.html

    Germans’ Moral Stand Fans Flames in Euro Crisis: Clive Crook
    By Clive Crook Nov 29, 2011 4:00 PM PT

    Radoslaw Sikorski made a striking comment in Berlin on Monday night. “I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.”

    I see his point, though “inactivity” doesn’t quite do justice to Germany’s impressive dedication to deepening the euro area’s crisis. This isn’t mere inactivity. This is zeal in pursuit of catastrophe…

    Posted by R. Wilson | November 30, 2011, 10:46 pm
  5. http://maxkeiser.com/2011/11/30/the-germans-are-playing-this-crisis-perfectly/

    Keiser comments on the above article:

    “Germans are playing this crisis perfectly: Europeans are begging Germany to be more autocratic”

    Keiser has previously been following “Germany 4.0” as his self-described “conspiracy theory” is that “a Fourth Reich is underway”:


    (It’s beginning to get noticeable to more commentators).

    Posted by R. Wilson | November 30, 2011, 10:53 pm
  6. 78-to-1, the gambling man’s leverage ratio:

    Deutsche Bank Could Transfer Contagion: Simon Johnson
    By Simon Johnson Dec 1, 2011 9:00 PM CT

    You’ve probably never heard of Taunus Corp., but according to the Federal Reserve, it’s the U.S.’s eighth-largest bank holding company. Taunus, it turns out, is the North American subsidiary of Germany’s Deutsche Bank AG, with assets of just over $380 billion.

    Deutsche Bank holds a large amount of European government and bank debt; it also has considerable exposure to lingering real estate problems in the U.S. The bank, therefore, could become a conduit for risk between the two economies. But which way is Deutsche Bank more likely to transmit danger — to or from the U.S.?

    By any measure, Deutsche Bank is a giant. Its assets at the end of September totaled 2.28 trillion euros (according to the bank’s own website), or $3.08 trillion. In the latest ranking from The Banker, which uses 2010 data, Deutsche was the second- largest bank in the world by assets, behind only BNP Paribas SA.

    The German bank, however, is thinly capitalized. Its total equity at the end of the third quarter was only 51.9 billion euros, implying a leverage ratio (total assets divided by equity) of almost 44. This is up from the second quarter, when leverage was about 36 (assets were 1.849 trillion euros and capital was 51.678 euros.)

    Even by modern standards, this is very high leverage. JPMorgan Chase & Co. has a balance sheet about 20 percent smaller than Deutsche Bank’s, but more than twice as much Tier 1 capital, an important indicator of a bank’s financial strength. Bank of America Corp., whose weakness is a serious worry in the U.S. today, has twice Deutsche’s capital. (These comparisons use The Banker’s ranking of the top 25 banks and aren’t adjusted for differences between U.S. and European accounting rules.)


    Perhaps Deutsche Bank holds mostly German government debt, which still has safe-haven value. But it’s likely that Deutsche also holds a significant amount of Italian and French government bonds.

    Still, the bigger risks are probably in the U.S. Deutsche Bank is a significant trustee for mortgages, having been heavily involved in the issuance and distribution of mortgage-backed securities during the housing bubble. Yves Smith, writing on the nakedcapitalism.com blog, says Deutsche Bank is one of the U.S.’s four biggest securitization trustees. Many questions on whether paperwork was done properly and whether the rights of investors have been protected hang over these trusts.

    Let’s take a look just at Taunus Corp., named after a range of mountains outside the parent bank’s Frankfurt headquarters. The latest figures (from the Fed data, using the consolidated financial statement at the end of the third quarter) show Taunus with total equity capital of just $4.876 billion. This implies an eye-popping leverage ratio of around 78.

    Asking for Trouble

    Deutsche Bank and, if necessary, the German government should be required to inject substantially more capital into Taunus. Allowing business as usual is asking for trouble, particularly as Deutsche wants to remain focused on relatively risky investment banking. Recently it named as chairman Paul Achleitner, the finance director at Allianz SE, the German insurance company, and an ex-Goldman Sachs executive, worrying even some of its shareholders.

    This would be a good time for Congress to dig more deeply into the risks that Deutsche Bank poses to financial stability in the U.S. and around the world.

    Posted by Pterrafractyl | December 2, 2011, 7:57 am
  7. With the UK looking like the only EU nation that isn’t pledging to join the new-fangled austerity-zone, some of the UK left appears to be engaged in a knee-jerk if-Cameron-opposed-it-we-support-it antics. That may not be the best response.

    Posted by Pterrafractyl | December 9, 2011, 7:21 pm
  8. Background: Niall Ferguson is a UK-based right-wing historian who is currently working closely with Henry Kissinger on his authorized biography. Ferguson has a “whimsical” vision of Europe & the world in 10 years in which the U.S. is inconsequential, Southern European nations are broken serfs who are content with their serfdom, and Germany is the crown of a reborn dynasty:


    2021: The New Europe
    Niall Ferguson peers into Europe’s future and sees Greek gardeners, German sunbathers—and a new fiscal union. Welcome to the other United States.

    Posted by R. Wilson | December 10, 2011, 8:06 pm
  9. http://www.zcommunications.org/tough-on-euros-weak-on-nazis-by-victor-grossman

    Tough on Euros, Weak on Nazis
    By Victor Grossman

    Source: Berlin Bulletin No. 35Friday, December 16, 2011

    Excerpt: “… Who are the powers-that-be? A major contender for one title would be Josef Ackermann, CEO of the Deutsche Bank, with his 9.6 million euro income (2009). He just hit the headlines because of a letter bomb was addressed to him – allegedly from an obscure Italian anarchist group. This temporarily pushed the Nazi killer story from the headlines; yes, we were back to left extremists again. The bomb, discovered before it could hurt anyone, came at such an appropriate moment that it even caused cautious skepticism among some cynics.

    But Ackermann’s Deutsche Bank does deserve attention. It was one of the prime lenders to Greece, not far behind Goldman Sachs. It was also a major player in the mortgage-foreclosure racket in the USA, a cause and a winner in the whole recession misery. Few in the media liked to recall that the Deutsche Bank was a main player in World War One finances, then a key supporter of Hitler’s rise to power, a profiteer from the occupation of most of Europe, and a direct investor in the Auschwitz death camp. It now employs 100,000 people in all the world and is not only powerful in Germany. Its close ties to Angela Merkel became embarrassingly visible three years ago when it was learned that she had treated Ackermann to a luxurious private birthday party in her headquarters in Berlin, comparable to the White House, and with about twenty-five select friends chosen by him.

    Though Swiss, he is surely the most powerful man in Germany and beyond; she is still the most powerful woman, now in most of Europe. The close cooperation and collusion between these two, with a European crisis still threatening and a right wing reserve in the background, make one wish devoutly that all on the left … can move forward…”

    Posted by R. Wilson | December 20, 2011, 6:28 pm
  10. Here’s a column that does a great of summarizing many of the arguments against the ‘expansionary austerity’ and anti-Keynesian economic policies that Germany is pushing all of the EU to adopt en mass (don’t forget, 25 out of 27 EU members recently signed a pledge to implement de facto balanced budget amendments in the middle of the Greater Depression!). Be sure to check out the “punchline” from the economic study on the supposed effectiveness of Ireland’s austerity programs:

    What if the Germans are wrong?
    06 February 2012 8:30 AM

    This is my column from today’s Irish Daily Mail —

    Here’s a question for you: what if the Germans are wrong? What if our Government has agreed to sign over control of our budgetary lives to Berlin and its relentless austerity, and the Germans turn out to be enforcing the wrong policies?

    Of course it is not just the government of this country that has thrown the budgetary car keys to Berlin and said, ‘Okay, you drive. We’ll just strap ourselves into the kiddie car-seat in the back.’

    Greece has done it, Portugal has done it, Italy has done it; the Baltic States of Latvia, Estonia and Lithuania have done it. Altogether the governments of 25 countries of the EU have done it; they have signed an intergovernmental treaty in which they promise to bind themselves permanently to German-designed programmes of austerity.

    But what if the Germans are wrong? What if they are driving us over the cliff edge?

    All the evidence points to just that. Most spectacularly, the evidence shows that Berlin-designed austerity is causing a debt spiral – say that fast enough and it comes out ‘death spiral,’ and that’s about right – in Greece and Portugal.

    Yet when anyone points to that evidence, the Germans and their deutsch-cult true-believers – the self-flagellating albino monks of the European economies — say, ‘The suffering of Greeks and the Portuguese, and of Spain and Italy, is getting worse because they haven’t embraced enough austerity. If only they would show the discipline’ – yes, if they would tighten that cilice on their thighs — ‘of Ireland and the Baltic States, they would see that fiscal austerity and wage cuts would do the trick.’

    Some trick. Our domestic economy, like the domestic economies of the Baltic States, is bleeding to death.

    This fact was examined last week in a paper by Simon Tilford, chief economist at the pro-EU think-tank Centre for European Reform (full disclosure, the CER receives an annual grant from the parent company of the Irish Daily Mail, as well as from a shed-load of other big corporates such as Shell, Boeing and Diageo).

    Mr Tilford notes that eurozone policy-makers advocate in particular that Italy and Spain should emulate the Baltic States and Ireland. They argue that ‘these four countries demonstrate that fiscal austerity, structural reforms and wage cuts can restore economies to growth and debt sustainability.

    The eurozone policy-makers insist that Ireland and the Baltic States prove that, with enough austerity, economies can regain external trade competitiveness and close their trade deficits without the help of currency devaluation. (It is important to the propaganda of the eurozone policy-makers not to allow anyone to admit that if Ireland or any other struggling eurozone country had its own currency again, it would have the powerful tool of currency devaluation to help pull it out of its recession.)

    Anyway, you know all that. That is the official eurozone line that our Government has been repeating: that we are the good boys of austerity, and those undisciplined Italians, Spaniards, Greeks and Portuguese could learn from us.


    As Mr Tilford points out, Ireland and the Baltic States have all experienced economic depressions: ‘From peak to trough, the loss of output ranged from 13 percent in Ireland to 20 percent in Estonia, 24 percent in Latvia and 17 percent in Lithuania.’

    ‘Since the trough of the recession, the Estonian and Latvian economies have recovered about half of the lost output and the Lithuanian about one-third. For its part, the Irish economy has barely recovered at all and now faces the prospect of renewed recession.’

    ‘Domestic demand in each of these four economies has fallen even further than GDP. In 2011 domestic demand in Lithuania was 20 percent lower that in 2007. In Estonia the shortfall was 23 percent, and in Latvia a scarcely believable 28 percent. Over the same period, Irish domestic demand slumped by a quarter (and is still falling). In each case, the decline in GDP has been much shallower than the fall in domestic demand because of a large shift in the balance of trade.’

    And here comes the punch in the jaw to our Government’s fantasy of an export-led recovery: according to Mr Tilford, ‘The improvement in external balances does not reflect export miracles, but a steep fall in imports in the face of the collapse in domestic demand.’

    ‘Countries that have experienced such enormous declines in domestic demand, and whose economic growth figures have been flattered by a collapse of imports (and hence improvement in trade balances) hardly provide a blueprint for others, let alone big countries.’

    ‘Spain and Italy could close their trade deficits if they engineered economic slumps of the order experienced by the Baltic countries and Ireland. But a collapse in demand in the EU’s two big Southern European economies comparable to that experienced in the Baltic countries and Ireland would impose a huge demand shock on the European economy. Taken together, Italy and Spain account for around 30 percent of the eurozone economy, so a 25 percent fall in domestic demand in these two economies would translate into an eight percent fall in demand across the eurozone.’

    ‘The resulting slump across Europe would have a far-reaching impact on public finances, the region’s banking sector and hence on investor confidence in both government finances and the banks. The impact on sovereign solvency in Spain and Italy and on the two countries’ banking sectors would be devastating.’

    Posted by Pterrafractyl | February 11, 2012, 8:28 pm
  11. Whoops! Forgot the link for the above article!

    Posted by Pterrafractyl | February 11, 2012, 8:29 pm
  12. There was a very revealing op-ed piece in Thursday’s “New York Times” by Norbert Walter, the chief economist of Deutsche Bank.

    I think it answers the question of “What if . . .

    ” . . . This view also ignores the fact that a strong German export sector acts as a sponge for surplus labor in other countries–unemployed workers in Madrid or Athens can easily move to Munich or Cologne for work. . . .”

    “Surplus Workers?!” He means “unemployed.”

    So, if you’re out of work, just move to Germany!

    That’ll solve the world’s problems.

    BTW–the piece is titled “Germany’s Hidden Weakness” and is on page A19 of the NYT of 2/9/2012.

    Posted by Dave Emory | February 12, 2012, 2:27 am
  13. Posted by R. Wilson | May 2, 2012, 9:15 pm

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