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Berlin has the same old new plan. But this time it’s “special”

There was some pos­i­tive sound­ing sig­nals com­ing from Merkel’s gov­ern­ment recent­ly: Berlin was open to more “pro-growth” poli­cies for the euro­zone, yield­ing to the grow­ing calls for a duel pol­i­cy of “struc­tur­al reform” (i.e. aus­ter­i­ty mad­ness) and some form of stim­u­lus. Unfor­tu­nate­ly, that seems to come with the con­straint of no addi­tion­al spend­ing. Hmm­m­m­m­m­mm:

Ger­man oppo­si­tion leader says Merkel embraces idea of EU growth pact along­side fis­cal treaty

By Asso­ci­at­ed Press, Pub­lished: May 24

BERLIN — Germany’s oppo­si­tion leader said Thurs­day that Chan­cel­lor Angela Merkel has accept­ed the need to add a sep­a­rate set of mea­sures pro­mot­ing growth to the Euro­pean Union’s treaty enshrin­ing fis­cal dis­ci­pline.

Sig­mar Gabriel told reporters after a two-hour closed-door meet­ing between Merkel and top law­mak­ers that the gov­ern­ment has “sig­nif­i­cant­ly moved toward accept­ing a pact for growth and invest­ment.”


Hollande’s elec­tion this month shift­ed the polit­i­cal tide in Europe away from talk about aus­ter­i­ty mea­sures toward ways of fos­ter­ing growth as Europe is on the brink of a reces­sion, with south­ern Euro­pean nations such as Greece, Por­tu­gal or Spain par­tic­u­lar­ly hard hit.

Merkel recent­ly also start­ed talk­ing about spurring growth, although she strict­ly oppos­es the idea of fos­ter­ing growth through more spend­ing, say­ing it would only make Europe’s debt woes worse. Instead, she main­tains that growth can be fos­tered through a more effec­tive use of exist­ing EU funds and imple­men­ta­tion of struc­tur­al reforms.

Pre­vi­ous­ly, the con­ser­v­a­tive chan­cel­lor also refused to link the rat­i­fi­ca­tion of the fis­cal pact to growth-pro­mot­ing mea­sures.

“The gov­ern­ment has real­ized today that it can only win France’s approval and a two-thirds major­i­ty in Par­lia­ment through chang­ing its posi­tion,” said par­lia­men­tary cau­cus leader Juer­gen Trit­tin of the oppo­si­tion Greens.

How­ev­er, it remained unclear Thurs­day what exact­ly a growth pact would entail, and whether Merkel has accept­ed that more spend­ing might be nec­es­sary.


So did Merkel “accept that more spend­ing might be nec­es­sary”? Ummmmmmmmmmmm...no. At least, not if Berlin is co-sign­ing and it lacks a ‘relin­quish­ment of nation­al sovere­ing­ty’ clause:

NY Times
As Euro Bond Wins Sup­port­ers, Details Remain Vague
Pub­lished: May 27, 2012

FRANKFURT — To euro zone coun­tries in need, euro bonds would be a noble expres­sion of Euro­pean sol­i­dar­i­ty and a cru­cial instru­ment for pre­serv­ing the com­mon cur­ren­cy.

To Ger­mans and quite a few oth­ers, though, euro bonds would be a lot like co-sign­ing a loan for a dead­beat broth­er-in-law.

Those car­i­ca­tures have dom­i­nat­ed a debate that has left Euro­peans deeply divid­ed on a cen­tral ques­tion: Should euro zone coun­tries cre­ate com­mon bonds to reduce bor­row­ing costs for mem­bers that can­not get afford­able cred­it on their own?

But despite the inten­si­ty of the debate, even as polit­i­cal upheaval in Greece and bad bank loans in Spain mush­room into exis­ten­tial threats to the cur­ren­cy union, the euro bond remains only the vaguest of con­cepts.

About the only thing clear is that Ger­many and some oth­er cred­it­wor­thy north­ern coun­tries oppose adopt­ing such bonds any­time soon. Mean­while, François Hol­lande, the new French pres­i­dent, seems keen on speed­ing things up — even if he has not quite artic­u­lat­ed how his idea would work.

“You don’t know what François Hol­lande is talk­ing about when he talks about euro bonds,” said Jacques Delpla, a mem­ber of the French Coun­cil of Eco­nom­ic Analy­sis, a pan­el that advis­es the gov­ern­ment. “An open bar with Ger­man mon­ey for Greece and Spain? That doesn’t work.”

At their meet­ing in Brus­sels last week, Euro­pean Union lead­ers agreed only that euro bonds deserved fur­ther study.

Mr. Delpla is the co-author, along with a Ger­man econ­o­mist, Jakob von Weizsäck­er, of one of the few detailed pro­pos­als so far. They out­lined how euro bonds might be used to ease finan­cial pres­sure on coun­tries like Greece, Spain or Italy while address­ing Ger­man con­cerns by encour­ag­ing more pru­dent gov­ern­ment spend­ing.

The basic idea of euro bonds does enjoy wide sup­port among econ­o­mists. Pro­po­nents also include Chris­tine Lagarde, man­ag­ing direc­tor of the Inter­na­tion­al Mon­e­tary Fund. And last week the Orga­ni­za­tion for Eco­nom­ic Coop­er­a­tion and Devel­op­ment in Paris called for some vari­a­tion of euro bonds.

The var­i­ous mod­els share a basic idea: In addi­tion to each country’s rais­ing mon­ey by issu­ing its own bonds, as is now the prac­tice, they would put at least some of the debt into a com­mon pool. These pooled bonds would be issued by some kind of joint Euro­pean debt agency, with all mem­bers assum­ing shared respon­si­bil­i­ty for repay­ment.


The prob­lem is that talk of euro bonds inevitably rais­es fun­da­men­tal ques­tions about the nature of the Euro­pean Union. Such bonds would require Euro­pean coun­tries to watch one another’s spend­ing much more close­ly, and each coun­try would have to cede some con­trol over its own bud­get.

For euro bonds to work the way U.S. Trea­sury secu­ri­ties do, investors would need assur­ances that they are backed by a cen­tral trea­sury, or at least an agency with direct access to tax rev­enue from each mem­ber state.

“This needs a very strong insti­tu­tion­al set­up,” said Gun­tram B. Wolff, deputy direc­tor at Bruegel, a research orga­ni­za­tion in Brus­sels. “If you are going to sell them to a Sin­ga­pore­an investor, the Sin­ga­pore­an investor needs to know who is going to pay that bond.”

Once Euro­pean gov­ern­ments began financ­ing one anoth­er on a large scale, they would cer­tain­ly also want more say over one another’s bud­gets and big-tick­et items like mil­i­tary spend­ing or pen­sion sys­tems. For those who advo­cate a more pow­er­ful “Unit­ed States of Europe,” these changes would be good. But they would rep­re­sent a huge trans­for­ma­tion of the decen­tral­ized Europe that exists today.

“Imme­di­ate­ly behind the euro bond pro­pos­al lurks polit­i­cal union,” said Uri Dadush, a direc­tor at the Inter­na­tion­al Eco­nom­ics Pro­gram at the Carnegie Endow­ment for Inter­na­tion­al Peace in Wash­ing­ton.

“The moment you start say­ing, ‘Give me half your tax receipts,’ we are talk­ing seri­ous stuff,” Mr. Dadush said. “We are talk­ing about giv­ing up major sov­er­eign­ty.”

The Euro­pean Cen­tral Bank prob­a­bly has the cred­i­bil­i­ty to play the role of a euro bond debt-issu­ing agency. But the bank would almost cer­tain­ly refuse to do so, see­ing it as a threat to its polit­i­cal inde­pen­dence — and a vio­la­tion of the pro­hi­bi­tion on using the bank to finance gov­ern­ments.

But even if the E.C.B. did not issue the debt itself, euro bonds would need at least the cen­tral bank’s tac­it sup­port, Mr. Dadush said.

A big rea­son U.S. Trea­sury secu­ri­ties have retained cred­i­bil­i­ty with investors, for exam­ple, is that despite offi­cial denials of com­plic­i­ty, there is an assump­tion that the Fed­er­al Reserve would not let the U.S. gov­ern­ment go bank­rupt. The E.C.B. would prob­a­bly be much less like­ly to accede to such an implic­it guar­an­tee.

The Ger­man chan­cel­lor, Angela Merkel, made an argu­ment sim­i­lar to Mr. Dadush’s at last week’s meet­ing in Brus­sels, say­ing Europe must become more eco­nom­i­cal­ly and polit­i­cal­ly inte­grat­ed before it could issue com­mon debt. But the fed­er­al Europe she seems to have in mind could take years to build, by which time the euro could lay in ruins.

Ger­many also fears that low­er inter­est rates would sim­ply rein­force irre­spon­si­ble spend­ing habits by coun­tries like Italy. To Ger­man eyes, Italy, Greece and oth­ers did not take advan­tage of the low inter­est rates avail­able in past years to make their economies func­tion bet­ter.

In a short state­ment to the news media after the Brus­sels meet­ing, Ms. Merkel said “sev­er­al par­tic­i­pants not­ed that the com­mon inter­est rates with the intro­duc­tion of the euro real­ly didn’t lead to improve­ments in the eco­nom­ic com­pet­i­tive­ness of all the euro coun­tries.”


One Euro­pean diplo­mat, speak­ing on con­di­tion of anonymi­ty, said even a step toward euro bonds could reas­sure investors who have been watch­ing Greece teeter and fear a bank run in Spain — and won­der­ing what hap­pens next. “The fun­da­men­tal issue,” he said, “is who or what stands behind the euro.”

Ok, so Merkel seems to acknowl­edge that the grow­ing call for eurobonds is fueled by a desire to quell the self-rein­forc­ing cri­sis dynam­ic where con­cerns over a coun­try’s cred­it leads to a spike in bor­row­ing costs and an even greater cri­sis. That self-rein­forc­ing death spi­ral is hap­pen­ing right now and Merkel appears to agree that eurobonds would be an effec­tive solu­tion for pre­vent­ing this. And that’s why she oppos­es it. The debt crises are appar­ent­ly an unpleas­ant neces­si­ty need­ed to “avoid rein­forc­ing irre­spon­si­ble behav­ior”. And this eurobond oppo­si­tion in Berlin exists even when the “pro-growth” sides are appar­ent­ly open to the idea of a “Unit­ed States of Europe” mod­el where bud­get-mak­ing author­i­ty is hand­ed over in exchange for pooled eurobonds. That’s pret­ty much a sovere­ing­ty fire-sale and it’s still not accept­able.

Now why on earth would Berlin be unwill­ing to accept hav­ing their neigh­bors basi­cal­ly hand them­selves over for cash? That’s pret­ty much the dream, right? Wrong. Get ready for mini euro-Chi­nas:

Six-Point Growth Plan Merkel Pre­pares to Strike Back Against Hol­lande

Trans­lat­ed from the Ger­man by Christo­pher Sul­tan

The more Euro­pean lead­ers talked at a din­ner last Wednes­day, the grim­mer Angela Merkel looked. One after anoth­er, they spoke out in favor of the joint assump­tion of debt and against the strict aus­ter­i­ty course Berlin is call­ing for. The chan­cel­lor stared silent­ly at the man who was respon­si­ble for this change of mood — France’s new pres­i­dent, François Hol­lande, who not­ed with sat­is­fac­tion that there was “an out­look for euro bonds in Europe.”

Merkel dis­agreed, say­ing that euro bonds are not the right tool, but to no avail. Only a minor­i­ty stood behind the Ger­man leader. Even Euro­pean Coun­cil Pres­i­dent Her­man Van Rompuy said, at the end of the din­ner, that there should be “no taboos,” and that he would exam­ine the idea of euro bonds. “Her­man,” Merkel blurt­ed out, “you should at least say that some at this table are of a dif­fer­ent opin­ion.”

Merkel’s world had been turned upside down. For the first time in years, the chan­cel­lor did not set the tone at an EU sum­mit, nor did she and the French pres­i­dent agree on joint posi­tions in a back­room before the meet­ing.


A Judo Attack

But Merkel is an expe­ri­enced oppo­nent. She knows that she is now on the defen­sive in Europe, and she is plan­ning her counter-attack. She believes that euro bonds would enable the cri­sis-rid­den coun­tries to low­er their bor­row­ing costs, and that the nec­es­sary struc­tur­al reforms would be post­poned. This is why she now wants to counter Hol­lan­de’s pro­pos­als with a prin­ci­ple famil­iar to judo fight­ers: using your oppo­nen­t’s momen­tum for your own attack.


When it comes to ener­gy projects, the Euro­pean Com­mis­sion places spe­cial empha­sis on projects such as con­nect­ing the wind farms in the North Sea and the cross-bor­der pow­er and gas lines among the Baltic coun­tries, between North­ern and South­ern Europe and to North Africa. It also wants to pro­mote inter­na­tion­al nat­ur­al gas pipelines like Nabuc­co and expand­ing effi­cient inter­net con­nec­tions. While Ger­many and France agree on the impor­tance of these projects, their dif­fer­ences lie else­where. To stim­u­late growth through­out Europe, Merkel’s advi­sors don’t just want to imple­ment mea­sures that cost mon­ey. The Ger­mans are con­vinced that growth can also be gen­er­at­ed less expen­sive­ly, using struc­tur­al reforms that require noth­ing more than liv­ing with hard­ships.

Six-Point Plan

Accord­ing to an inter­nal doc­u­ment mak­ing the rounds at the Chan­cellery, Ger­man gov­ern­ment experts have devel­oped a six-point plan that is rem­i­nis­cent of for­mer Chan­cel­lor Ger­hard Schröder’s Agen­da 2010 eco­nom­ic reforms, and seeks to har­mo­nize aus­ter­i­ty and growth in Europe once again. The doc­u­ment defines the posi­tion with which Merkel intends to enter into nego­ti­a­tions with Hol­lande and the oth­er EU part­ners.

In the plan, the Ger­mans focus pri­mar­i­ly on mea­sures that have been suc­cess­ful in Ger­many in the past, and that placed the coun­try in the role of Europe’s engine for growth. Accord­ing­ly, Merkel wants to launch Europe-wide pro­grams to pro­mote start-ups and small and mid-sized busi­ness, like the pro­grams offered by the KfW devel­op­ment bank in Ger­many. Under the Ger­man pro­grams, gov­ern­ment agen­cies have to approve invest­ments with­in a fixed time peri­od, and the appli­ca­tions are con­sid­ered auto­mat­i­cal­ly approved if they are not denied with­in that time peri­od.

Merkel also wants EU coun­tries with high unem­ploy­ment to use Ger­many as a mod­el in reform­ing their labor mar­kets. This would mean relax­ing pro­tec­tions against wrong­ful dis­missal and intro­duc­ing more lim­it­ed employ­ment cir­cum­stances, called “mini-jobs” in Ger­many, with low­er tax and con­tri­bu­tion bur­dens. And like Ger­many, these coun­tries would also be expect­ed to devel­op a dual edu­ca­tion sys­tem, which com­bines a stan­dard­ized prac­ti­cal edu­ca­tion at a voca­tion­al school with an appren­tice­ship in the same field at a com­pa­ny in order to com­bat high youth unem­ploy­ment.

Merkel’s advi­sors have also noticed that south­ern EU coun­tries still own many com­pa­nies that enjoy spe­cial pro­tec­tions. Under their plan, pri­va­ti­za­tion agen­cies or spe­cial funds would be estab­lished in these coun­tries to pri­va­tize the state-owned busi­ness­es. For­eign investors could be attract­ed with tax ben­e­fits and less strin­gent reg­u­la­tions.

The advi­sors also rec­om­mend the estab­lish­ment of so-called spe­cial eco­nom­ic zones, like the ones that once ush­ered in Chi­na’s eco­nom­ic ascent. Final­ly, the Ger­mans want Europe’s south­ern coun­tries to invest more in renew­able ener­gy, reduce tax bar­ri­ers and pro­mote work­er mobil­i­ty. All of this, they rea­son, strength­ens Europe’s com­pet­i­tive­ness.


So the new six-point plan that’s sup­posed to counter the grow­ing calls for more pro-growth eco­nom­ic poli­cies is going to include cre­at­ing mini-Chi­nas. Well, at least that might explain the appar­ent desire of Berlin’s pol­i­cy-mak­ers to per­ma­nent­ly impov­er­ish its neighbors...you can’t mim­ic Chi­na with­out a seem­ing­ly inex­haustible sup­ply of poor migrant work­ers. And the best part of the whole plan? It’s cheap! Not only is there going to be a bunch of state-asset fire-sales but the main cost for these types of “struc­tur­al reforms” is appar­ent­ly just “liv­ing with hard­ships”. And since you can’t mon­e­tize hard­ship that means it’s free! Sweet! Isn’t it awe­some how mon­ey = kar­ma. It real­ly sim­pli­fies things.

So how did Berlin’s pol­i­cy-mak­ers arrive at these wise and mer­ci­ful pol­i­cy (and cost effec­tive!) solu­tions for their ail­ing neigh­bors? By learn­ing a few lessons from their own expe­ri­ence with reuni­fi­ca­tion. It was long, painful, and expen­sive:

NY Times
Ger­many Looks to Its Own Cost­ly Reuni­fi­ca­tion in Resist­ing Stim­u­lus for Greece

Pub­lished: May 25, 2012

MUNICH — When Ger­many wants to under­stand Greece and the cri­sis afflict­ing Europe it not only looks south to the Continent’s periph­ery but also turns inward, to the for­mer East Ger­many, still strug­gling more than two decades after Ger­man reuni­fi­ca­tion.

To an extent not often appre­ci­at­ed by out­siders, the lessons pro­vid­ed by that expe­ri­ence — with the nation pour­ing $2 tril­lion or more into the east, by some esti­mates, to lit­tle imme­di­ate ben­e­fit — col­or the out­look and deci­sions of pol­i­cy mak­ers and the atti­tudes of vot­ers, a major­i­ty of whom would like to see Greece leave the euro zone, polls show.

Most econ­o­mists agree that Ger­many could do more to help revive growth through­out the euro zone, and there are reports that Chan­cel­lor Angela Merkel is prepar­ing to pro­pose a major Euro­pean Union plan to accom­plish that. But the Ger­man reluc­tance to under­write the economies of Greece and oth­er strug­gling coun­tries is not just a mat­ter of the par­si­mo­nious Ger­mans hoard­ing their funds, as it is so often por­trayed, but a sense that sub­si­dies do not breed suc­cess­ful economies.

“Mon­ey alone doesn’t help,” said Simon Huber, 44, out for a stroll recent­ly near Sendlinger Gate here. “You’re only saved when you save your­self.”

Though reg­u­lar­ly lec­tured by their col­leagues across the Atlantic about the need for stim­u­lus mea­sures to reverse the sag­ging for­tunes of coun­tries like Greece and Por­tu­gal, Ger­man experts believe they have a lot more expe­ri­ence try­ing to revive uncom­pet­i­tive economies locked in cur­ren­cy regimes after near­ly 23 years of deal­ing with the for­mer East Ger­many.

“We per­formed a real-life exper­i­ment,” said Hans-Wern­er Sinn, pres­i­dent of the Ifo Insti­tute for Eco­nom­ic Research here.

While unem­ploy­ment in the for­mer West Ger­many is 6 per­cent, it remains stub­born­ly high­er, at 11.2 per­cent, in the east. In 2010 gross domes­tic prod­uct per capi­ta was more than $40,000 in the for­mer West and just under $30,000 in the for­mer East, com­pared with 1991 fig­ures of $27,500 in the West and about $12,000 in the East. But much of the nar­row­ing in the gaps between east and west, experts say, is attrib­uted to the migra­tion of job seek­ers west­ward as much as to any sig­nif­i­cant improve­ment in the east.

There have been suc­cess sto­ries in the revival of cities like Dres­den and Leipzig, and some regions, espe­cial­ly on the south­ern edge of the for­mer East Ger­many, are doing bet­ter. But the east­ern part of the coun­try today is known for per­fect­ly rebuilt town squares that sit emp­ty for much of the day and new stretch­es of auto­bahn with few dri­vers on them.

“Ger­many made huge invest­ments in infra­struc­ture in East Ger­many,” said Klaus Adam, a pro­fes­sor of eco­nom­ics at the Uni­ver­si­ty of Mannheim. “The hope that the rest would fol­low has not been ful­filled. You need to get the pro­duc­tiv­i­ty fig­ures up.”


The mag­a­zine Der Spiegel report­ed that a six-point plan is in the works that includes incen­tives for mid­size com­pa­nies, a loos­en­ing of pro­tec­tions against fir­ing for work­ers, spe­cial eco­nom­ic zones and even a ver­sion of Germany’s sys­tem of dual train­ing divid­ed between voca­tion­al school and hands-on work at com­pa­nies. State-owned enter­pris­es would be sold in a process sim­i­lar to that of the Treu­hand, the agency that helped pri­va­tize East Ger­many.

“The Mediter­ranean area should become like the Fed­er­al Repub­lic, only with bet­ter weath­er,” the mag­a­zine said.

Yet the one-dimen­sion­al por­tray­al of Ger­mans as heart­less aus­ter­i­ty taskmas­ters is only part of the sto­ry. A basic sense of thrifti­ness is also cou­pled with a strong belief in social safe­ty nets; this is not unchecked cap­i­tal­ism, but a mod­el known here as the social mar­ket econ­o­my.


“The lim­it of Ger­man broth­er­hood extend­ed to East Ger­many, and they saw what hap­pened with two tril­lion euros over the past 20 years,” said Michael C. Bur­da, an eco­nom­ics pro­fes­sor at Hum­boldt Uni­ver­si­ty in Berlin. “And these are peo­ple they love. They don’t con­sid­er the Greeks their broth­ers.”

Great, so the lessons from Ger­many’s decades of deal­ing with the chal­lenges of reuni­fi­ca­tion appear to be:

1. Pri­va­ti­za­tion, declin­ing wages, dereg­u­la­tion, and mini-Chi­nas = good.
2. Invest­ments in infra­struc­ture and social well-being = bad.

So I guess the arti­cle below is what we get to look for­ward to, but with­out all that awful waste­ful social wel­fare spend­ing. Inter­na­tion­al ‘tough love’, inter­est­ing­ly, some­times resem­bles an intra­na­tion­al tran­sre­gion­al shake­down:

NY Times
East Ger­many Counts the Cost Of Pri­va­ti­za­tion
By Bran­don Mitch­en­er
Pub­lished: July 12, 1993

DRESDEN — One of the last­ing lessons of East Ger­many’s cost­ly con­ver­sion from a com­mand to a social mar­ket econ­o­my is that pri­va­ti­za­tion sel­dom means auto­mat­ic sal­va­tion.

First, an ill-con­ceived cur­ren­cy union with West Ger­many, com­bined with noto­ri­ous­ly low pro­duc­tiv­i­ty, ren­dered most of the region’s man­u­fac­tured goods vast­ly over­priced. Then its tra­di­tion­al cus­tomers in East­ern Europe van­ished as old trade ties were sev­ered.

Now, with West­ern Ger­many and much of Europe lan­guish­ing in reces­sion, even pri­va­tized East Ger­man com­pa­nies that have slashed costs and pro­duce com­pet­i­tive prod­ucts sud­den­ly find their sur­vival at stake again.

“We’re get­ting more and more com­pa­nies that weren’t ready for the free econ­o­my when they were pri­va­tized by the Treu­hand,” said Michael Sagur­na, chief spokesman for the south­east­ern state of Sax­ony. He was speak­ing of the gov­ern­ment agency charged with sell­ing off East Ger­many’s state-owned assets.

More and more com­pa­nies want to have a new crack at the process, said Alexan­der von Klaudy, head of acqui­si­tions for Deutsche Indus­trie-Hold­ing GmbH, part of Deutsche Bank. “We think we’ll get a lot of busi­ness from com­pa­nies that aren’t entire­ly hap­py with their pri­va­ti­za­tion,” he said.

The reces­sion, and a series of seri­ous mis­takes, are also ren­der­ing sale of the Treuhand’s remain­ing 700 pri­va­ti­za­tion can­di­dates more dif­fi­cult and expen­sive and increas­ing the like­li­hood that the agency will be around for years rather than close at the end of 1993 as orig­i­nal­ly planned.

One of the agen­cy’s most com­pli­cat­ed and con­tro­ver­sial tasks in com­ing years will be polic­ing the ful­fill­ment of investors’ con­trac­tu­al promis­es. As a rule, the Treu­hand refus­es to take back com­pa­nies that it has already pri­va­tized, although in a few cas­es it has made excep­tions. Eighty per­cent of investors meet their oblig­a­tions, in fact, but with evi­dence of abus­es accu­mu­lat­ing, the Treu­hand recent­ly announced an expan­sion of its audit staff to 550 from 350 by the end of the year.

In recent weeks, at least three cas­es have come to light involv­ing unscrupu­lous investors who plun­dered their East­ern pur­chas­es for per­son­al prof­it.


Many entre­pre­neurs in the East, includ­ing those no longer direct­ly involved with the Treu­hand, describe an almost con­spir­a­to­r­i­al alliance of region­al bureau­cra­cies, banks and com­peti­tors mak­ing it impos­si­ble for them to stay afloat. The IWH eco­nom­ics research insti­tute in Halle, in a June report, said there was rea­son to fear a “dein­dus­tri­al­iza­tion of the East Ger­man land­scape.”

The con­struc­tion mafia in West Berlin bare­ly lets us breathe,” said Dieter Hasler, direc­tor of Eletro-Anla­gen-Bau Klein­mach­now GmbH, an elec­tri­cal equip­ment mak­er based in Bran­den­burg.


Peter Dit­trich, a con­sul­tant to Atlas, a mini-Treu­hand set up by the state of Sax­ony to sal­vage 140 unsold Treu­hand com­pa­nies, defend­ed gov­ern­ment inter­ven­tion as a grow­ing polit­i­cal neces­si­ty. “There are some areas that would have 70 per­cent unem­ploy­ment if these com­pa­nies died,” he said.

Mr. Sagur­na cit­ed MuZ as an exam­ple of state sup­port with a pur­pose. “If you com­pared a Tra­bi with a Golf,” he said, refer­ring to East Ger­many’s failed attempt to copy the Volk­swa­gen peo­ple’s car, “it was safe to say the Tra­bi would­n’t sur­vive com­pe­ti­tion. But if you com­pare an MuZ with a west­ern motor­cy­cle, you would prob­a­bly con­clude that it’s a good motor­cy­cle that’s worth build­ing.”

But Mr. Späth, of Jenop­tik, ridiculed the gov­ern­men­t’s plans to sal­vage “indus­tri­al cores” in the East. He said it was a sop to East Ger­mans “to call every­thing that’s left an indus­tri­al core.”

Rather than nur­ture unpri­va­tized East Ger­man indus­tries back to com­pet­i­tive health, which is no guar­an­tee of mar­ket suc­cess, the Treu­hand should stick to its orig­i­nal mis­sion of sell­ing off com­pa­nies at any cost, crit­ics say.

Yes, inter­na­tion­al ‘tough love’ does some­times resem­bles an intra­na­tion­al tran­sre­gion­al shake­down, but it does­n’t have to be so expen­sive. Les­son learned.

Ok, so the six-point plan for ail­ing econ­o­my’s appears to be:
1. De-indus­tri­al­iza­tion at any cost
2. Re-indus­tri­al­iza­tion at any cost (Chi­na-style!)
3. Rinse and repeat at any cost
4. Rinse and repeat at any cost
5. Rinse and repeat at any cost
6. Eutopia (Chi­na-style!)

Oh wait! But what is this new news I see? Is the Frank­furt Group hav­ing a change of heart? Per­haps it’s been rec­og­nized that the eurobonds-for-sovere­ing­ty swap was one of the most amaz­ing­ly cheap forms vic­to­ri­ous eco­nom­ic con­quest ever achieved? Naaahh...think ‘eurobonds turned into an aus­ter­i­ty straight-jack­et’...or some­thing like that:

Ger­many Seeks Finan­cial ‘Redemp­tion’ for Europe
By Peter Coy on May 28, 2012

Ger­mans hate the idea of cov­er­ing the debts of the big spenders of South­ern Europe, but the hottest new idea for shar­ing Europe’s debt bur­den comes from ... Ger­many.

Sur­pris­ing but true: Germany’s oppo­si­tion par­ties have got­ten Chan­cel­lor Angela Merkel to recon­sid­er an idea float­ed last win­ter that involves joint Euro­pean lia­bil­i­ty for nations’ sov­er­eign debt.

The idea comes from the Ger­man Coun­cil of Eco­nom­ic Experts, also known as the “wise men.” It’s called the Euro­pean Redemp­tion Pact (PDF), which sounds a bit reli­gious to the Amer­i­can ear but isn’t intend­ed to be.

Since fresh think­ing on the Euro­pean debt cri­sis is bad­ly need­ed, it’s worth tak­ing a look at what the wise men advise. Here’s the plan in a nut­shell:

The debt of the 17 coun­tries belong­ing to the sin­gle-cur­ren­cy euro zone is split into two parts. The por­tion up to 60 per­cent of each nation’s gross domes­tic prod­uct stays on the books, unchanged.

The por­tion of nations’ debt exceed­ing 60 per­cent of GDP is trans­ferred into some­thing called the Euro­pean Redemp­tion Fund.

The 17 coun­tries are still liable for the por­tion of their debt that’s trans­ferred in the fund. They have 20 or 25 years to pay it off.

Legal­ly, how­ev­er, all 17 nations are joint­ly liable for the debt placed in the fund. This is a way for low-debt nations such as Ger­many to back­stop high-debt nations like Greece, giv­ing peace of mind to their cred­i­tors and low­er­ing inter­est rates.

To make sure coun­tries pay off their debt in the Euro­pean Redemp­tion Fund, some of their nation­al tax rev­enue would be ear­marked for repay­ments. They would also have to com­mit to fix­ing nation­al finances to free up mon­ey for debt ser­vice.

Hav­ing got­ten the rest of their debt down to 60 per­cent of GDP, coun­tries wouldn’t be allowed to run it back up. There would be auto­mat­ic “debt brakes,” as Ger­many and Switzer­land already have.

The respon­si­bil­i­ty of Ger­many and oth­er cred­i­tor nations is strict­ly lim­it­ed to the amount of mon­ey that’s put into the redemp­tion fund. That makes this plan dif­fer­ent from “euro bonds,” which some coun­tries are push­ing. Euro bonds would be new bonds for which all the euro zone coun­tries would be joint­ly liable. There would be no cap on the size of bor­row­ing via euro bonds.


Befit­ting a plan orig­i­nat­ing in Ger­many, the pro­pos­al is not exact­ly gen­er­ous. It’s hard to imag­ine how a coun­try like Greece could imme­di­ate­ly begin repay­ing the Euro­pean Redemp­tion Fund while keep­ing the debt remain­ing on its books at a mere 60 per­cent of GDP.

But at least it’s some­thing. Estab­lish­ing the prin­ci­ple of joint lia­bil­i­ty for debt could open the door to a more for­giv­ing (read: real­is­tic) plan in the future.


Is any­one else feel­ing like they’ve seen this movie before?


8 comments for “Berlin has the same old new plan. But this time it’s “special””

  1. its the old Ger­many seek­ing alter­na­tive meth­ods of bind­ing nations togeth­er under her con­trol in clos­er sub­servience under long term debt, ful­ly aware that some will nev­er repay and suf­fer the con­se­quen­cies to relin­quish full sov­er­eign­ty to Ger­man dic­ta­tor­ship

    Posted by Harry Beckhough | May 29, 2012, 12:43 am
  2. It seems so much eas­i­er now, this once ardu­ous task of bring­ing all of Europe to heel. And what else can we name the sub-units of this “mini-Chi­na syn­drome” but Can­tons?

    Posted by Rob Coogan | May 29, 2012, 3:41 am
  3. @Harry Beck­hough–

    Wel­come to the web­site, once again. I con­tin­ue to be some­what sur­prised that more peo­ple haven’t fig­ured out the German/Underground Reich plan by now.

    At your con­ve­nience, note the excerpt pub­lished by Dorothy Thomp­son in 1940, high­light­ed in the “Memo­r­i­al Day Post” on the front page of this web­site.

    The machi­na­tions now being real­ized are long in the making,and a fool­ish, myopic world is ignor­ing the man­dates of his­to­ry and squan­der­ing the sac­ri­fice of World War II heroes, such as your­self.


    Dave Emory

    Posted by Dave Emory | May 29, 2012, 4:37 pm
  4. Europe’s strange mix of imme­di­ate finan­cial union cou­pled with only a seem­ing­ly par­tial attri­tion of sov­er­eign­ty for the mem­bers is lead­ing to these bizarre con­di­tions. Does the enti­ty known as the ‘Greek gov­ern­ment’ any longer have any mean­ing except as a legal device to indebt the peo­ple on that penin­su­la to a transna­tion­al cabal?
    Watch for para­dox­i­cal devel­op­ments as des­per­ate (moti­vat­ed) labor seeks to move across bor­ders to regain an income. Ger­man pop­u­lar chau­vanism is already caus­ing a reac­tion against the process of eras­ing bor­ders, at least when it comes to retain­ing Ger­man iden­ti­ty. The EU process is guar­an­teed chaos.

    Posted by Dwight | May 30, 2012, 5:00 am
  5. One more advan­tage of turn­ing your neigh­bors’ economies into a frothy mess: skim­ming off the cream:

    Greeks Flock to Ger­many Even as They Crit­i­cize It
    Pub­lished: Wednes­day, 30 May 2012 | 5:51 AM ET
    By: Andy Eckardt and Car­lo Anger­er, NBC News

    Thou­sands of well-edu­cat­ed work­ers are flee­ing Greece as the euro zone cri­sis bat­ters their home­land.

    Ger­many, Europe’s eco­nom­ic pow­er­house and a coun­try that has been crit­i­cized by many Greeks over its harsh demands for aus­ter­i­ty cuts in return for bailout cash, has expe­ri­enced an influx of young skilled immi­grants.

    Der Spiegel mag­a­zine not­ed that while Greek news­pa­pers “print­ed car­toons depict­ing the Ger­mans as Nazis, con­cen­tra­tion camp guards, and euro zone impe­ri­al­ists who allow their debtors to bleed to death,” the Greeks have kept arriv­ing — bring­ing an “any­thing is bet­ter than Athens” atti­tude with them.

    With more than 50 per­cent of young Greeks out of work, it’s not sur­pris­ing that offi­cial sta­tis­tics show the num­ber of Greeks who moved to Ger­many increased 90 per­cent dur­ing 2011.

    Unem­ploy­ment rates have con­sis­tent­ly been shrink­ing in Ger­many in recent years and the econ­o­my is thriv­ing, despite Europe’s ongo­ing finan­cial cri­sis. Relaxed cross-bor­der employ­ment reg­u­la­tions for mem­ber states of the Euro­pean Union also make Ger­many an attrac­tive choice for job seek­ers. While Ger­many is in need of spe­cial­ized work­ers, how­ev­er, the Greek labor mar­ket has lit­tle to offer.

    Warn­ing of ‘Cold War’ Over Cuts

    “It is vir­tu­al­ly impos­si­ble to find a job in Greece at the moment,” says Chris­tos Chris­toglou, an inspec­tion engi­neer who took a job at Ger­man chem­i­cal and phar­ma­ceu­ti­cal giant Bay­er at the start of the finan­cial cri­sis in June 2010. “It is not that there are only very few jobs for young grad­u­ates to seek, no, there are none, zero, there is noth­ing.”


    There was also a sig­nif­i­cant spike in the num­ber of immi­grants relo­cat­ing to Ger­many from oth­er eco­nom­i­cal­ly depressed south­ern Euro­pean coun­tries last year, with offi­cial sta­tis­tics show­ing an increase of 52 per­cent from Spain, 28 per­cent from Por­tu­gal and 23 per­cent from Italy.


    Posted by Pterrafractyl | May 31, 2012, 8:27 pm
  6. Oh boy, this will real­ly calm things down:

    Ger­man Court Won’t Rule on Bailout Fund for 8 Weeks
    By Patrick Don­ahue — Jul 16, 2012 6:37 AM CT

    Germany’s top court will take more than eight weeks to decide whether to sus­pend the euro-area’s per­ma­nent bailout fund, leav­ing Europe’s anti-cri­sis cof­fer less than half full to respond to the debt cri­sis.

    The Fed­er­al Con­sti­tu­tion­al Court in Karl­sruhe will issue a rul­ing on bids to halt Germany’s par­tic­i­pa­tion in the Euro­pean Sta­bil­i­ty Mech­a­nism and the fis­cal pact on Sept. 12, it said today in an e‑mailed state­ment. That’s more than two months after it held a hear­ing on the mea­sures.

    “The court has held a com­pre­hen­sive hear­ing on the issue and will now take the time it needs to reach a deci­sion,” Ger­man gov­ern­ment spokesman Stef­fen Seib­ert told reporters in Berlin today. Finance Min­is­ter Wolf­gang Schaeu­ble warned the hear­ing last week that a delay in acti­vat­ing the ESM “could lead to a sig­nif­i­cant wors­en­ing” of the cri­sis.

    The delay could com­pli­cate efforts to resolve the 2 1/2- year-old cri­sis as Euro­pean lead­ers squab­ble over the details of bailout con­di­tions, bank res­cues and bur­den shar­ing. In an inter­view yes­ter­day, Chan­cel­lor Angela Merkel gave no ground on Ger­man demands for more cen­tral­ized con­trol over euro mem­ber states in return for joint lia­bil­i­ties.

    Chid­ing states which sought to slow moves toward more cen­tral con­trol, Merkel told broad­cast­er ZDF that a so-called bank­ing union involv­ing a bloc-wide finan­cial over­seer will have to include joint over­sight on a “new lev­el.” She said efforts to advance on “sol­i­dar­i­ty” with­out super­vi­sion will fail.


    The com­plaints tar­get­ing the ESM and fis­cal pact were brought by a group of law­mak­ers, aca­d­e­mics and polit­i­cal groups fil­ing sep­a­rate suits seek­ing an injunc­tion. They argued that the leg­is­la­tion designed to over­come the three-year-old debt cri­sis trans­fers con­sti­tu­tion­al­ly man­dat­ed author­i­ty from Ger­man law­mak­ers to Brus­sels and under­mines demo­c­ra­t­ic rule.

    Vosskuh­le at one point in the hear­ing last week asked Rolf Strauch, a board mem­ber for the EFSF, what the effects would be if the court took longer to decide.


    Ger­man Bun­des­bank Pres­i­dent Jens Wei­d­mann said euro lead­ers had caused dam­age by fail­ing to define more clear­ly their con­clu­sions at the sum­mit. He told Dutch news­pa­per Het Finan­cieele Dag­blad on July 14 that euro nations “should dis­cuss giv­ing up sov­er­eign­ty with the same open­ness as the ques­tion of how to resolve the debt prob­lem col­lec­tive­ly.”

    As gov­ern­ments in Spain and Italy strug­gle under the bur­den of high­er bor­row­ing costs, Wei­d­mann, Germany’s chief cen­tral banker and a Euro­pean Cen­tral Bank Gov­ern­ing Coun­cil mem­ber, told Boersen-Zeitung that Italy’s high­er yields don’t jus­ti­fy a request for bailout assis­tance. Euro bailout fund­ing should be deployed only as a last resort, he said.

    “If Italy stays the course on reforms, it’s on a good path,” Wei­d­mann told the news­pa­per in an inter­view. Asked whether the euro area’s third-largest econ­o­my needs to tap the fund, he said, “No, I don’t see Italy in that sit­u­a­tion.”

    That’s right Italy, just stay the “austerity”-course. Things are going great.

    Posted by Pterrafractyl | July 16, 2012, 8:23 pm
  7. The ECB has a new super awe­some plan for quelling the ongo­ing pan­ic in the dis­tressed euro­zone bond mar­kets. The plan con­tains the kind of super awe­some­ness that’s pret­ty much what we should expect by now:

    The Euro­pean Cen­tral Bank’s Ongo­ing Pow­er Grab

    By Matthew Ygle­sias

    Post­ed Wednes­day, Sept. 5, 2012, at 10:14 AM ET

    Mario Draghi is out with a new Euro­pean Cen­tral Bank plan that, on its face, does­n’t make sense.

    For the loose mon­ey crowd, he’s offer­ing poten­tial­ly “unlim­it­ed” ECB pur­chas­es of periph­er­al gov­ern­ment bonds. But on the oth­er hand, he’s promis­ing that these pur­chas­es will be “ster­il­ized” (which I don’t believe can actu­al­ly be done in unlim­it­ed quan­ti­ties) He’s also say­ing that the bond pur­chas­es will be lim­it­ed to gov­ern­ment bonds, which turns it into a kind of sub­sidy for periph­er­al gov­ern­ments rather than a gen­er­al mon­e­tary eas­ing. Last but by no means least, there’s no firm tar­get for what the bond pur­chas­es are sup­posed to accom­plish and the pur­chas­es are stip­u­lat­ed to be “con­di­tion­al.”

    The last point is the most impor­tant one. As mon­e­tary pol­i­cy, this does­n’t make sense. But as pow­er pol­i­tics it makes a ton of sense.

    What the ECB is doing, in essence, is set­ting itself up as the shad­ow gov­ern­ment of Italy, Spain, Por­tu­gal, and per­haps Ire­land. If the gov­ern­ments of those coun­tries do what Draghi wants, Draghi will pro­vide them with gen­er­ous sub­sidy. If the gov­ern­ments of those coun­tries don’t do what Draghi wants, he’ll use a mon­e­tary laser to destroy their bud­gets. Fear will keep the periph­er­al states in line.


    Unlim­it­ed “ster­il­ized” bond pur­chas­es, eh? That sounds like the kind of mea­sure intend­ed to pla­cate the Ger­man gov­ern­ment and Bun­des­bank over the infla­tion­ary fears of “unlim­it­ed” ECB bond pur­chas­es. Not that it will help:

    Merkel Ally Fuchs Says Ger­many Backs Draghi With Con­di­tions
    By Patrick Don­ahue and Francine Lac­qua — Sep 5, 2012 8:24 AM CT

    Ger­many will back Euro­pean Cen­tral Bank bond pur­chas­es to help over­come the euro-area debt cri­sis only if such an oper­a­tion is lim­it­ed and recip­i­ent coun­tries agree to strict con­di­tions, said a senior ally of Chan­cel­lor Angela Merkel.

    Michael Fuchs, a deputy par­lia­men­tary cau­cus leader in Merkel’s Chris­t­ian Demo­c­ra­t­ic Union, said that Ger­many would oppose any ECB plan that fore­saw “too much” bond buy­ing with­out ensur­ing coun­tries in need of help com­mit to over­haul their economies.

    “Ger­many is a coun­try which is very much afraid about infla­tion,” Fuchs told Bloomberg Tele­vi­sion today, speak­ing in Eng­lish. “We don’t want to have the ECB just buy on the mar­ket, either in the pri­ma­ry or sec­ondary mar­ket,” he said. “The ECB can do it only if there are cer­tain con­di­tion­al­i­ties, if the coun­tries are real­ly doing their home­work.”

    The remarks are fur­ther evi­dence that Ger­many will sup­port ECB Pres­i­dent Mario Draghi’s plan to buy sov­er­eign debt as a way to ease bond yields in coun­tries such as Italy and Spain so long as gov­ern­ments sign up to strict con­di­tions in return and the euro-area’s res­cue funds enter bond mar­kets first. Merkel, speak­ing in Ottawa last month, said the ECB was “count­ing on polit­i­cal action in the form of con­di­tion­al­i­ty as the pre­con­di­tion for a pos­i­tive devel­op­ment of the euro.”

    Unlim­it­ed Pur­chas­es

    Draghi’s pro­pos­al involves unlim­it­ed pur­chas­es that will be ster­il­ized to assuage con­cerns about print­ing mon­ey, accord­ing to two cen­tral bank offi­cials briefed on the oper­a­tion. The ECB chief is due to give a press con­fer­ence in Frank­furt tomor­row.


    Ah yes, the irra­tional infla­tion con­cerns in the midst of a near depres­sion and “strict con­di­tions” (it’s not “aus­ter­i­ty”, it’s just “strict con­di­tions”). Well, ok, the infla­tion con­cerns might not be entire­ly irrational...even Spain is expe­ri­enc­ing high­er infla­tion. At least all of that aus­ter­i­ty strict con­di­tion­al­i­ty on all of its aide has prob­a­bly put a damper of Spain’s infla­tion rate. You know, use­ful stuff like VAT tax increas­es, which not only helps curb Spain’s deficit but also should help reduce infla­tion. That’s how it works, right?

    UPDATE 1‑Inflation adds to Span­ish woes with jump to 2.7 pct

    Thu Aug 30, 2012 1:31pm IST

    * Spain con­sumer prices rise 2.7 pct in Aug, up from 2.2 pct July

    * Fuel prices behind rise, says Sta­tis­tics Insti­tute

    * Nasty mix for Spain of ris­ing prices and declin­ing eco­nom­ic out­put

    * Prices like­ly to rise in after Sept. 1 VAT hike

    MADRID, Aug 30 (Reuters) — Span­ish con­sumer prices surged in August dri­ven by high­er fuel costs and a val­ue-added tax hike in Sep­tem­ber could dri­ve anoth­er jump, com­pli­cat­ing Spain’s efforts to get out of reces­sion and gen­er­ate the growth need­ed to reduce its debts.

    EU-har­monised con­sumer prices rose by 2.7 per­cent year-on-year in August, flash data from the Nation­al Sta­tis­tics Insti­tute (INE) showed on Thurs­day, up from 2.2 per­cent in July and much high­er than a mar­ket con­sen­sus for an unchanged read­ing.

    Prices could well rise fur­ther from Sep­tem­ber 1 when val­ue-added tax ris­es to 21 per­cent from 18 per­cent, rais­ing prices for con­sumers already strug­gling under the weight of falling wages and unem­ploy­ment of almost 25 per­cent.

    Spain also depends on imports for some 70 per­cent of its ener­gy needs, mean­ing high­er fuel prices raise costs for busi­ness­es.

    “We can see an ener­gy cost effect here, but it might also be that some busi­ness­es have raised prices on prod­ucts before the Sep­tem­ber VAT hike, so they can then say they haven’t raised prices when it hap­pens,” said Nico­las Lopez, econ­o­mist at M&G Val­ores.

    He said infla­tion could rise as high as 3.7 per­cent in Sep­tem­ber.

    Spain’s infla­tion fig­ures come before those for the wider euro zone on Fri­day, which should show infla­tion at 2.5 per­cent in August, faster than the 2.4 per­cent rate seen in July.

    That would be some way above the Euro­pean Cen­tral Bank’s infla­tion tar­get of close to 2 per­cent.

    INE data also showed Spain’s nation­al con­sumer price index rose by 2.7 per­cent in August on an annu­al basis, up from 2.2 per­cent in July.

    Huh, so Spain’s tax hike was actu­al­ly fuel­ing infla­tion? Well, that’s unfor­tu­nate con­sid­er­ing the euro­zone’s new infla­tion obses­sion. Oh well, at least that VAT tax hike should at least help with the Span­ish deficit:

    Spain: ris­ing job­less rate off­sets VAT tax increase
    Gov­’t to dip into reserves to cov­er pen­sions

    05 Sep­tem­ber, 19:06

    (ANSAmed) — MADRID — The rise in unem­ploy­ment costs in Spain has off­set income from the new­ly increased VAT tax, from 18% to 21% as of Sep­tem­ber 1, accord­ing to data pub­lished by El Mun­do news­pa­per on Wednes­day.

    The cost of unem­ploy­ment ben­e­fits is ris­ing by 2.6 bil­lion euros a month, against the 2.3 bil­lion euros pro­ject­ed in the state bud­get. Unem­ploy­ment ben­e­fit pay­ments through July cost 1 bil­lion euros more than in the pre­vi­ous year. They equaled 18.456 bil­lion euros in sev­en months, almost two thirds of the 28.503 slat­ed in the bud­get for the entire year. The gov­ern­ment went 2 bil­lion euros over bud­get, equal to the income from the new VAT tax increase, El Mun­do wrote. New unem­ploy­ment ben­e­fit requests totaled 200,000 as of July, and the gov­ern­ment paid out 174,000, accord­ing to nation­al sta­tis­ti­cal insti­tute data pub­lished on Tues­day. There were 137,000 jobs lost in August, and an addi­tion­al 38,179 unem­ployed joined the line, bring­ing the total to 4,625,634 peo­ple out of work. There were 604,541 jobs lost in the past 12 months, against the 215,947 lost in the pre­vi­ous year, and the num­ber of peo­ple pay­ing into the social secu­ri­ty fund dropped to 16,895,977. In July, the cash-strapped gov­ern­ment dipped into a busi­ness work­place com­pen­sa­tion fund to pay 15 bil­lion euros in pen­sions.

    Mar­i­ano Rajoy’s admin­is­tra­tion has aired the pos­si­bil­i­ty of using the 68 bil­lion euro nation­al pen­sion reserve fund to cov­er future pen­sions, year-end wage bonus­es, and infla­tion-indexed com­pen­sa­tions. (ANSAmed).

    Hmm­mm, well...at least there will no doubt be many valu­able lessons learned dur­ing this excit­ing peri­od.

    Posted by Pterrafractyl | September 5, 2012, 9:37 am
  8. Ah, it looks like Merkel is now call­ing for a “com­pet­i­tive­ness pact” that will exist to enforce the new “fis­cal treaty”:

    Merkel Says Europe Must Per­sist With Reforms

    Pub­lished: Thurs­day, 24 Jan 2013 | 9:40 AM ET
    By: Anto­nia van de Velde

    Deputy News Edi­tor

    Ger­man Chan­cel­lor Angela Merkel urged Euro­pean nations to con­tin­ue the eco­nom­ic reforms they have begun and argued that the debt cri­sis offered an oppor­tu­ni­ty for the bloc to become more com­pet­i­tive.


    Through­out the euro zone debt cri­sis, Merkel has placed sig­nif­i­cant empha­sis on aus­ter­i­ty mea­sures in response to soar­ing debt and widen­ing bud­get deficits.

    Oth­ers, includ­ing French Pres­i­dent Fran­cois Hol­lande believe those mea­sures need to be bal­anced with ini­tia­tives to spur growth. They fear aus­ter­i­ty alone will not get the econ­o­my mov­ing again.

    “Con­sol­i­da­tion and growth basi­cal­ly are two sides of the same coin,” Merkel said.

    Merkel called for the cre­ation of a “com­pet­i­tive­ness pact” which would exist along­side the exist­ing fis­cal pact, which is aimed at ensur­ing EU mem­ber states stick to their bud­get com­mit­ments.

    “In 2013 we must see to it that over the next few years we also have a con­ver­gence in com­pet­i­tive­ness with­in the com­mon euro area.”

    Here we go again.

    Posted by Pterrafractyl | January 28, 2013, 9:42 am

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