Be Bold, Bitte

The Economist writes: If the euro collapses, then Germany will suffer hugely.

The downgrading of some of its banks this week was a portent of that. Moreover, the undoubted mistakes in Greece, Ireland, Portugal, Italy, Spain and the other debtor countries have been compounded over the past three years by errors in Europe’s creditor countries. The overwhelming focus on austerity; the succession of half-baked rescue plans; the refusal to lay out a clear path for the fiscal and banking integration that is needed for the single currency to survive: these too are reasons why the euro is so close to catastrophe. And since Germany has largely determined this response, most of the blame belongs in Berlin.

Throughout this crisis, Mrs Merkel has refused to come up with a plan bold enough to stun the markets into submission, in the same way that America’s TARP programme did. In short, even if her strategy has paid some dividends, its cost has been ruinous and it has run its course.

Heretics Verboten!

Europe Doesn’t Need the Euro? Another religious tract to study on Sundays.

All of this is kind of like religion, don’t you think? First you’ve got some prophets who come out of the wilderness (the political class preaching the virtues of the euro, come hell or high water), then what they say gets labeled as heresy by the faithful (by the “man on the street” who wants to keep his deutschmark), then the euro faith overcomes this persecution, establishes itself as the true universal teaching and becomes orthodoxy. Then the next voice out of the wilderness comes along and the game starts all over again, etcetera and so forth already.

Don’t get me wrong, I don’t beleive that Thilo Sarrazin is a full-fledged prophet or anything (I just think he wants to make a buck, I mean euro). But he’s not a full-fledged heretic, either. And that’s something the euro high priests could never admit to.

The euro, in Sarrazin’s view, is just the old German deutschmark extended to a lot of countries with less robust currencies.

Germany, in other words, is being used as a guarantor of other countries’ debts.

“The German political class bet that the political union would follow shortly thereafter almost as a matter of natural law, because without that the common currency wouldn’t be stable. That bet has failed.”

Germans are hostage to their sense of not wanting to be responsible for Europe’s failure.

Germans are hostage to their sense of historical guilt.

“Pro-euro Germans 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.”

“Angela Merkel to like the friendly woman on the navigation system in my car.”

It’s Good To Be The German

In case you didn’t know it, Germans are sitting on a big honking tremendous pile of money.

The Bundesbank thinks that German private households are in posession of ein paar tausend Milliarden or “a few thousand billion” euros (stick with that, believe me: Billion is Milliarde in German, trillion is Billion). They’ve got more set aside now then ever before, in other words; some 4.7 trillion euros.

And the punch line is that they seem to have invested most of it at those awful horrible dreadful banks they like to despise so much (they make big banks even bigger, you might say). Investments in real estate haven’t even been calculated here, by the way. Rereading this is starting to make my stomach hurt.

Privatleute vertrauen Vermögen den Banken an.

Next Bestseller Guaranteed

It’s a popular Sunday night ritual here in Germany: After Tatort is over, most folks stay tuned in to watch Günther Jauch’s talk show.

And another popular ritual here is to make sure to be empört (outraged, highly indignant) whenever you hear the name Tilo Sarrazin. The reason? This guy has the gall to 1) revel in being politically incorrect by saying out loud what roughtly 80 to 90 percent of the rest of the German population really (if not secretly) thinks and to 2) openly and shamelessly captialize on this by writing lucrative bestsellers about these horrid and despicable views.

His first Tabubruch (taboo breaking): “Germany Is Doing Away With Itself,” a book advocating a more restrictive immigration policy and the reduction of state welfare benefits.

His next big bestseller (to be plugged tonight): “Europe Does Not Need The Euro,” a book, well, the title says it all, doesn’t it?

Needless to say, the politically correct political caste is up in arms about tonight’s show already and is calling for a boycott and whatever else they call for in a situation like this and, well, let’s face it. Once you mix popular rituals like these together, live and in color, as the Germans like to say, I am convinced we’ll be getting Fernsehen vom Feinsten (TV at its best) tonight. All for all the wrong reasons, of course, but still.

“Mit Sarrazin sollte sich niemand mehr in eine Talkshow setzen.”

The Great European Divide

There’s Germany, it seems. And then there’s (practically) everybody else in Europe.

The Economist notes: The hope is that Germany, which produces over a quarter of euro-zone output, can pull along the rest. But the worry is that the latest bout of euro sickness may sap confidence even in Germany, aborting a broader recovery.

With unemployment at 6% compared with a 15-year high of 11% across the euro zone and over 20% in Spain and Greece, Germans feel less pressure to save in case they lose their jobs. And a more confident Germany helps everyone by spending more on imports. German inflation at 2.2% is now below average.

German resilience reflects several strengths. Although growth in the first quarter was helped by exports, the usual mainstay, it has increasingly been backed by domestic demand, which accounted for three-quarters of GDP growth in 2011. This reorientation has happened because Germany avoided the debt excesses (? hmmm, relatively speaking perhaps, but I’ve seen some other numbers here), both private and public, that inhibit growth elsewhere. With relatively low debt, German households and firms can borrow more. What is more, they can do it at rock-bottom rates. Paradoxically, Germany is benefiting from the euro crisis, as investors seek a haven. Yields on ten-year German government bonds have fallen below 1.5%.

Paradoxically, Germany is benefiting from the euro crisis, as investors seek a haven. Yields on ten-year German government bonds have fallen below 1.5%.

And yet, after having read all these impressive figures up there, there’s another German paradox I keep running into here all the time: Germans on the street aren’t nearly as confident as this article wants to imply, at least not when it comes to the euro and the euro-zone. How else do you explain the fact that nearly every second German now thinks that the introduction of the euro was a big honking mistake in the first place?

Die Euro-Einführung war ein Fehler, glauben knapp die Hälfte der Deutschen.

German Tourists Avoiding Greece This Year For Some Reason

German tourists may gladly zip off to some of the most dangerous places on earth you can imagine, but not even they are crazy enough to be heading down to Greece any time soon.

“The Germans aren’t coming here this year but there’s no reason for them to be afraid,” one Greek guy said. “Honest,” he should have added.

“We don’t have a problem with the German people, only their government,” another guy added, who forgot to say “Really.”

“That’s just the way Germans are: if there’s trouble in some country, then Germans just don’t go there on their holidays.”

German Austerity Still Quite A Rarity

Despite all the talk to the contrarity.

The German government didn’t reach even half of its planned savings in the federal budget in 2011. Only 42 percent of the spending cuts named by Merkel’s coalition government, comprised of the conservative Christian Democrats and the business-friendly Free Democratic Party, were actually not implemented…

The government is also falling behind on its targets for this year. Of the originally planned €19.1 billion in savings, less than half has been implemented…

This lapse (in reaching savings targets) is particularly embarrassing for the German government because the news comes just after 25 European Union member states agreed in early March to an international fiscal pact obliging them to adhere to greater fiscal discipline…

The aim of the pact is to make EU countries maintain binding austerity measures that leaders hope will contain the debt crisis and prevent countries like Greece from being able to pile up massive debts again.

And countries like Germany will show them how to do it, see? Next year, maybe. Or the year after that. Hard to say for sure.

 “It (the pact) is a milestone in the history of the European Union.”