Angela Merkel Urged To Put European Solidarity Over German Interests and Back Coronabonds

Yves here. Is Merkel capable of a Nixon goes to China moment? She’s such a cautious politician that it seems unlikely.

Originally published at openDemocracy

A meeting of eurozone finance ministers ended this morning without agreement on how to pay the huge costs of dealing with the COVID-19 pandemic, the Financial Times reports. Italian and Dutch ministers had disagreed sharply over the idea of ‘coronabonds’ – a form of shared debt. Northern European governments were also unwilling to remove conditions on loans from the European Stability Mechanism, a fund that has been set up to help eurozone economies in difficulty.

Before the meeting started yesterday, more than 300 political scientists, historians, sociologists, economists and international experts from thirty European countries published an open letter to the German Chancellor, Angela Merkel. The signatories, including two Nobel laureates, more than twenty MEPs, the former head of the International Atomic Agency and the general secretary of the European Trade Union conference, call upon Merkel to support the creation of European bonds to finance economic recovery from the coronavirus pandemic.

Here is the full text of the letter:

Sehr geehrte Frau Kanzlerin,

Throughout the coronavirus outbreak – as so many times before – you have shown leadership for your country. Both as a chancellor and as a physicist you grasped the depth of the sanitary emergency and the challenges it represents to Europe as a whole.

We now turn to you as German and European citizens to ask you, in the best tradition of German European policy, to lead a united European response to the economic and financial crisis prompted by this pandemic.

With great concern we witness growing anger, acrimony and resentment between countries in the South and the North of Europe. An epidemic knows no barriers between North and South, nor should it be permitted to create them. Rather, as an existential threat to the European Union as a whole, it calls for new forms of European solidarity.

Unless such new forms of European solidarity will be found, some countries will be facing far deeper consequences than others. This alarms us. We know Germany remembers the dramatic recession it suffered after the First World War. If the other European countries had prevented that recession, how would history have played out? Wasn’t the European Union created precisely to write a different history?

Since the end of WWII, Germany, more than any other country, has had the capacity to learn from its bitter past. The immediate reform of its armed forces and, above all, the painful but rigorous facing of individual and collective atrocities, are and remain the foundation of a new Germany as well as important aspects of a European heritage.

In difficult circumstances your country’s vision for Europe has prevailed over even legitimate national claims. No supporter of a United Europe can forget the lifelong commitment of Willy Brandt to a European Germany as opposed to a German Europe. A commitment shared by Helmut Kohl, who gained his place in history as an essential partner of a virtuous exchange between the creation of the euro and the immediate unification of Germany, which came about through dialogue and in solidarity with Europe as a whole.

The present pandemic is an unforeseen emergency that calls for similar dialogue and solidarity, in the ultimate interest of everybody concerned.

European bonds, tied to this context but of much greater historical significance, are the necessary guarantee and fulfillment of the efforts made by the European Central Bank and individual nations. As suggested by leading German and European economists such a proposal would allow to tackle an emergency that could otherwise turn into a eurozone crisis and, ultimately, into a social and economic tragedy. A century ago, European nations did not listen to the advice of John Maynard Keynes and other leading economists and thinkers, with catastrophic consequences. We must not make the same mistake now.

It is of paramount importance to act now and show the people of Europe that we are actually doing so in an extraordinary way. We ask you to lead this action in the European Council, signalling to the world that Europeans stand together in the face of this crisis and are ready to do whatever it takes to preserve our union and in fact strengthen it in the face of hardship.

We are confident, sehr geehrte Frau Merkel, that this will happen under your tenureship and add to your legacy as Bundeskanzlerin and as a great European.

Sincerely yours,

See original post for full list of signatories

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  1. curious euro

    Fairly useless letter.
    It’s not just Merkel who is against, or rather, if she were suddenly embracing Euro-bonds, she’d have a palace revolution instantly. She already is a lame duck, relinquished her party chair(wo)manship and announced this term is her last as chancellor.

    One would have to convince the whole german establishment for Euro-bonds to happen. That’s about as likely as the US two-party system to stop their imperial wars.

  2. Matthew G. Saroff

    Na Ga Na Happen.

    First, there is a significant probability that the German courts will invalidate such an agreement, and second, German politics, particularly for the CDU, is predicated on demonizing those lazy spendthrift southerners.

  3. Ignacio

    I would have signed the letter. I think that German leadership, particularly financial leadership, is in deep denial mode refusing to acknowledge the damage this will cause, not only for Southern countries but for Germany herself. It is astounding IMO.

  4. AlexHache

    Making efforts to integrate the GDR? Sure. Making efforts to integrate Italy or Greece? Nope: Italian and Greek citizens are not Germans, and Germans are Germans, not Europeans.

  5. Clive

    I would have signed it too. I’ll go and order a BMW if it helps. Yes, the U.K. probably isn’t exactly flavour of the month in EU circles. But we are, to coin a phrase, all in this together. The U.K. doesn’t need a dysfunctional EU and the EU doesn’t need a dysfunctional U.K. right now. Neither of us, suffice to say, need a dysfunctional US, either.

    A pity, then, we’re in notional democracies but our words and thoughts and wishes count for nothing, but there we are.

    1. Ignacio

      “Flavour of the month”, that made me laugh. I need some laugh these days, thank you! The other wise words are also appreciated.

    2. John Jones

      In my 60+ years of experience of this world , I’ve found it to be very imperfect and, for much of the the time dysfunctional. It’s not to say it couldn’t function better but with the existing global leadership it’s very hard to see a unilateral position converging anytime soon.

      For integrationists, this must be an awful time – their world ,the global world is disintegrating at an alarming rate .

      The EU had a short window of opportunity to unite , and converge on a true , full blown political union – that it chose or has chosen not to do so , demonstates, in my view, the greater strength/resilience and linkage of the sovereign nation state over and above anything the EU could ever offer – the defender of people in the last resort is the nation state , of that there is now no doubt.

  6. Mikel

    No reform until the globe can shake the debunked Social Darwinism dogmas.
    Until then, all crisis situations are going to be met with same solutions: propping up financial institutions and the usual wealthy suspects and lying about how “strong” they are.

  7. Susan the other

    Sehr geehrte Frau Merkel did recently take a stand against that little end-run against her party by the AfD. She could stand up to the ultra nationalists again. Maybe even more so because she is planning to step down and if it backfires it really won’t hurt her; chances if it backfires it will hurt the ultras with economic blowback. Merkel is cautious but she is tough. One thing she knows, as she is openly planning to support German industry, is that everything has changed. And since economics it’s usually a standoff between currencies all she has to do is look across the Atlantic to see that the euro actually needs to expand quickly and massively. Right? The strength of all economies now depends on some very serious spending. I’d like to guess she will do eurobonds gladly.

    1. larry

      She is flexible but the Dutch will not budge an inch in response to Italian requests for safety restrictions for them. She may be the most flexible of the leaders of the frugal four, the Dutch being the least. The group are meeting with the commission on Thursday but some experts suggest that no resolution will be the result. It would be nice were this to lead to the end of the Euro without a similar effect on the EU, but such a consequence may lead to a kind of domino effect, with countries dropping out one by one.

      1. vlade

        Death of EUR while EU survives in some form would be the best result. Unfortunately, I don’t see how it’s really possible. Again, I’d be only very glad to be proved wrong.

        1. John Jones

          vlade – I’m minded of the old bankruptcy adage ” how did you bankrupt ” – “er, slowly at first, then , overnight”.

          It’s extremely feasible that the full non optimal currency union as exists today ,will last a short while longer , however ,given that euroland , in its wisdom.decided on only tactical, Meccano like reform post the 2008 crisis , it’s very hard to see the money markets being so benign in the current position – it goes back to the pesky nation state thingy – nations kind of do look after their own, the EU has no “own”.

  8. vlade

    Merkel is famous for not doing anything. Her whole political career is in not doing anything (even the migration crisis was “let’s not do anything and let them come in”).

    The letter would have to be presented in a way where she could do nothing and the solution reached. Asking her to take a commited step is not going to happen IMO. I’ll be glad to be proven wrong though.

    If it doesn’t happen though, the EUR is dead, and the EU is likely dead. If Germany, with its massive export orientation, believes it will be to its advantage, they are in for a nasty surprise.

    1. Ignacio

      Very much like Rajoy in his days. May be this is the definition of conservatism: do nothing cos everything is fine.

    2. curious euro

      Not really. Merkel is someone who does nothing for a very long time, then very suddenly jumps in one direction after she has seen where everyone else went. Afterwards she claims the decision for her own.

      For example abandoning nuclear power after Fukushima is a prime example. She waited until a deep black CDU state elected a green as prime minister for the first time ever in Germany, and then jumped. Invalidating on what she campaigned for 5 years and 2 federal elections.

      But again, Merkel is irrelevant. After the migration crisis, she has no political capital left, dead politician walking. The other german elites who are needed for a project as big as Euro-bonds wouldn’t follow. And neither would the other northern euro countries as Larry wrote.

  9. Peter B

    Could the Euro Bonds be used as a lever to reorganise the Union? Exit and suspension procedures, more democracy, for instance? Peter

    1. Clive

      You’d hope so. But this is really the nub of it. What the PR label “coronabonds” means is actually fiscal union in fancy dress. Fiscal union is incredibly difficult to instigate in the absence of political union.

      Great Britain tried fiscal union with the old US states back in the day. There was no political union, just colonial rule. Look what happened there. The same problem will instantly hit coronabonds if attempted as a solution in isolation absent political mechanisms to ensure that liabilities covered by one Member State (let’s say, Germany, for example) that come with political influence over the Member State (let’s say Italy for example) which is generating the liability can be worked through.

      Italy won’t accept Germany’s colonial rule. But will Germany accept Italy’s inherent political input into its fiscal policy?

      1. chuck roast

        Well Clive, I don’t mean to quibble. I’m getting the colony part, but I’m not getting the “…fiscal union with the old US states…” part. In my view here from what was a pre-revolutionary, rich, slave trading US port it was not a fiscal union. It was the standard, extractive, Metropole/Colony Model. The Metropole needed specie to pay for the costs of the French and Indian War, and the colonists were gonna’ pay. The colonists had fish, sheep, timber, land, slaves and ships, but they had no cash. The American’s were poor as church mice, and the revolution was the result of a huge liquidity crisis.

        In the most recent liquidity crisis Schauble did to the Greeks what the Wehrmacht couldn’t do. It remains to be seen whether Italy and Spain can avoid the same fate.

        1. Clive

          Yes, and apologies for cutting fast and loose with US history! It was a shorthand analogy for an unequal balance between a sovereign (Great Britain) and an administered province (the US) and some specifics are very different in terms of, say, Germany and, say, Greece or Italy in the framing of the EU.

          I hope the gist is still clear, though. People aren’t happy when they don’t have control of their money or their politics. You can control someone’s money but only if you give, in return, some control of your politics (and vice-versa).

          1. John Jones

            Let’s cut to the chase , it’s called ” no taxation without representation ” – heard this before ?

  10. Johnonomous

    The northern nations must do something. Otherwise, at some point in their economic apocalypse the southern nations will say, “all we get out of this is the common currency–which is weaker than what a D-mark would be, but stronger than what a lira or peseta would be? Hhmm….my own currency would really help put people back to work. The downside of changing back to my own currency isn’t really as far down as it used to be.” In other words: there could be a point where people say, what have I got to lose? Still a looooong way from this point, but…

  11. Synoia

    Q: What do you call a not-stubborn Dutchman?

    A: A German.

    When one has decided to take on the sea to survive, as have the Dutch, stubbornness is a very large asset.

  12. drexciya

    I’m getting rather annoyed with the bad press the Dutch are getting here. We’re not against helping Italy (or Spain), but we’re not getting Euro bonds. Everyone with a beating heart knows, that there will not be Corona bonds, they will be Euro bonds. Does anyone really think this will be a temporary thing?

    The Dutch haven’t signed up for a transfer union, although that is one of the issues with the Euro in the first place. It’s political suicide (and rightly so), to allow Euro bonds. There’s already a lot of media coverage pointing at the following:
    – Italy was already profiting from relatively low interest rates.
    – Italy didn’t put any effort into reducing the deficit.
    – The Italian banking system is still very unhealthy.
    – Tax evasion is a serious problem in Italy.

    Now compare this to the Netherlands; we’ve mostly fixed our banks, we have a relatively low deficit, we have a very decently capitalized pension system, and there’s decent fiscal discipline. I’m not fond of the austerity politics in the Netherlands, even going as far as increasing VAT on essentials (the lower VAT tariff), but that’s the way they acted in recent years. Do tell, why the Dutch should accept to just hand out money to Italy, with no strings attached?

    1. curious euro

      And this is why there won’t be any Euro-bonds.
      Not cause Merkel, Rutte or whoever says no, but almost no northern european voter trusts fiscally or economically anyone in the southern european countries. With unfortunately a long long history to prove it.

      Which will lead to what Johnonomous above wrote: if/when the southern countries really don’t have anything to lose, then they will break away. This is however a fairly long time coming: Greece didn’t do it. Not cause the elites who still profit from the Euro crammed it down the throats of the populace , but the normal people on the street basically trusted their own local politicians less than the Euro troika under Schäuble. Normal people on the street actually didn’t want their drachma back and voted for the Euro-zone and to keep the Euro with all the austerity: first for the right wing Syriza part, the left part split over this and went into irrelevance, and now for the right wing Nea Democratia.

    2. vlade

      Becasue in good years the Italians and Spanish were taking a lot of Dutch capital that Dutch would otherwise have to deploy at home, as EUR made Dutch (and German, Austrian etc.) exports (of goods and capital) way cheaper than they would be otherwise, and imports to Spain/Italy/Greece cheaper too.

      So basically, a lot of German (and I don’t know enough about Dutch economy, but likely would hold the same) prosperity came from a currency that was undervalued for Germany and overvalued for Spain etc.

      If there was still DM, it would have been strong for quite a while, and German unemployment quite higher. I suspect the same can be said of gulden and Dutch.

      Germans and Dutch (and others) agreed to the EUR, and profited from it. Well, every coin has two sides, so if you really want to be fair, then Germans and co should help now, when the disadvantage of the project (which were ALWAYS known, because EUR is not an optimal currency area by any means) come home to roost. If they don’t, the EUR should disband voluntarily, because if it won’t it will disband unvoluntarily.

      1. Ignacio

        The Netherlands is in many ways a fiscal haven and I dislike that. For instance why Uber has its headquarters in The Netherlands? Because they are fiscally responsible? Hah!

        1. Biologist

          Indeed. Not just Uber. Many multinationals have a PO Box in NL for fiscal reasons, and the politicians–mostly centre-right but centre-left PvdA has been just as guilty of this in the past–defend this claiming it brings employment or tax revenue. These companies have tailor-made deals with the Dutch tax man, but what they pay is spare change compared to the tax liabilities in other countries that these deals allow them to avoid.

          It’s pathetic how this practice is defended in The Netherlands. Fiscally responsible, indeed /s

    3. Maurice

      I’m also Dutch, and I do see the need for a transfer union. Just like in the Netherlands there is a transfer from rich provinces to the poorer ones, you have to do the same with countries. But that will never work as long as it is perceived as a transfer between countries, that is why you need a political union where the money is really seen as going to and coming from the EU itself. And Europe is not ready for that.

      And yes, that is rather depressing. And if there is ever a good time to leave the Euro, it would be now, as the countries are already taking the economic hit.

      I agree though with the annoyance about the bad press. Basically the Dutch are just taking the heat for the Germans and both are fully aware that they are on the same page, together with some other Northern countries. And the government is fully backed by the population and the press, there is very little opposition against the Dutch position over here.

      1. Ignacio

        The problem I see, and this is not something specific against the Netherlands or Germany but against the euro is that the single currency in the current context, without some fiscal union just doesn’t work and the only way for adjustment is this stupid race to the bottom for salaries that keeps the UE in multiple sclerosis including lots of Germans and possibly Dutch in a situation of weakness. Being keen on the single currency and at the same time trying to maintain the fiscal compact but “independent”, and at the same time trying to keep fiscal rules that require disinvestments of large magnitudes in critical areas like HC (more critical now than ever) is, to say the least, disingenuous particularly when some are interested only on playing with money flows to keep their unemployment low. Some economists have said the same with better words than mine but following this Centroeuropean recipe is almost certainly a roadmap for a rupture. The longer this is kept, the more violent will it be.

        The stupidity of generalized observations on some calvinist virtue saver (for instance) against those pesky Southern spendthrifts just drives me crazy. This has nothing to do with cultural differences, there are of course, but simply with ideology.

        I would ask drexciya why it is so that many of these that have been shown to escape taxes in Spain have done so through institutions in The Netherlands. Funny you are so serious about your own fiscal rules while favouring fiscal exemptions for foreigners. Yeah, The Netherlands are supposed to change attitude about 2021, how timely. Just in case preparing lower taxes for companies to see if you can attract more registrations and taxes from foreign companies, isn’t it?

        1. drexciya

          I think the tax haven thing is bad for the Netherlands (and in general). It should be killed pronto; the average person won’t be worse from it. My guess is that certain political parties are more influenced by the people profiting from it, than by the plight of the average citizen. In the most recent cabinet, Rutte tried to put in another corporate-friendly measure (getting rid of divident tax for companies), but was called out on it, and then went back on that plan. So maybe some things might be changing.

          Generally speaking the problem is not the people, but the bought and paid for media and the sclerotic politic parties. It’s just like in the US; if you don’t call out the politicians, they will not change. Also, we have too many sheeple; they will just do what the media tells them. We have had some remarkable swings in elections, also the most recent one, which have been caused by a one-two between media and mainstream politics.

      2. Clive

        A crucially important observation. Did EU-boosters seriously think this day would never arrive? The EU was always a Faustian bargain, albeit without the morality overtones. The irony being, political union was — is — the quintessential thing which Europeans need to embrace.

        But there was shed-loads of dishonesty put about by a great many intergrationists — ever-eager to suggest the creation of the ultimate union, but all the while seeking to keep the existing (and completely inadequate) governance and political apparatus of the current EU intact. They were trying to take the politics out the hands of the voters and shuffle it off into the eyrie of the Commission who could run things “properly”. Not, in other words, like the messy, argumentative and unpredictable rabble that are us Europeans would want to do things. But of course, that’s who we are, as a people. It is the European people as a body of humanity that the status-quo integrationists hated. The removal of Europe from the hands of us Europeans was their ultimate goal and dirty little secret.

        Let’s keep our collective fingers crossed that a true Europe can emerge from the dead-hand clutch of the EU. I’ll keep my fingers and toes crossed that the UK’s last-vestige foot-in-the-door might even permit the UK to be a part of it, if it happens.

        Time will tell.

        Oh, and sympathies to Denmark. You’re now the EU27’s new UK-replacement — talker of a lot of common sense (or, at least, explainer to the tone-deaf of some unavoidable political realities) and getting nothing but agro, brickbats and slurs on the nation’s character for your trouble.

        1. John Jones

          “The EU was always a Faustian bargain,”

          Unfortunately it’s only now dawning upon the German population – it’s a hard sell to tell any population that you’re gonna lose much of your hard earned savings.

          Merkel has always known this – the truth always , eventually outs.

          Denmark is a tidler – hard to seeing it take over the UK common sense role, given its size and lack of sphere of influence.

    4. chuck roast

      You forgot one:
      – The balance of payments surplus must be maintained in Germany.

      Now it’s fixed.

    5. lou strong

      Drexciya, consider these things :
      -Italy, believe it or not, and if you want you can easily check it, is the most fiscal responsible country in EZ , much more than Netherlands, as it’s running budgetary advances since 1992, with the only exception of 2009
      -there’s tax evasion , but tax elusion is an even more serious problem for Italy , as some of our major companies have tax-residence -guess where ?- in Netherlands
      -the Italian banking sistem became unhealthy because it was hit by the European choice to penalize NPL instead of speculative casino , in which Northern banks were more specialized, in a moment when austerity measures brought down internal demand causing our PMIs to fail , so we got to the NPL problem fot the banks who had lent to PMIs
      -when you apply austerity it’s hard to reduce the deficit, if you follow the basics and not the “expansive austerity ” shenanigans
      -ESM it’s no use for me, but as it’s been funded by Italy too, and more than Netherlands, in my parallel ideal world I would prefer to see it abolished and get our money back without strings attached

      Anyway, I fully understand the fact that you are right saying that Dutch haven’t signed up for a transfer union, It’s our ruling class who made the enormous fault to sign up for a currency based on a internal competitive, not solidaristic , mechanism with some rigged game addenda, and I’ll never forgive them .
      The suicide was to put things together with people who have this mentality :
      “As a Social Democrat, I attribute exceptional importance to solidarity. But those who call for it also have duties. I cannot spend all my money on drinks and women and then hold my hand up for help. That principle applies on a personal, local, national and also on a European level”
      Jeroen Dijsselbloem

    6. Ctesias

      I remember a Chomsky interview in which he explained how he was often invited to some Canadian radio show, and any criticism thrown at US foreign policy was enthusiastically received by host and listeners.
      Once he figured out the reason for his popular presence, he then decided to talk about crimes committed by the Canadian government against indigenous people and in foreign adventures. All of a sudden host and listeners got “rather annoyed” by him (more than that, actually) and he was never invited back again.

      As a Dutch person myself, having lived in Brazil for over 20 years now, I found it to be a long and painful process to shed national pride. I can finally say that I don’t get any more annoyed by Dutch bad press than any other country’s bad press. In my experience what has been most revealing is that the Dutch are just as intoxicated with nationalistic and MSM narratives as people in, say, the U.S. or China are, even from traditionally respected publications such as the “Volkskrant” and the “NRC” and “Trouw”. The Dutch are a bit arrogant and think that their press is more serious and honest, but in fact it’s a cesspit of lies as much as what you see anywhere else.

      The terrible handling of Greece some years back, the MH-17 investigation, what we now see with Corona bonds, its role in foreign military adventures, Its diplomatic support to Israel, and the list goes on. There’s a lot of bad press that the Dutch deserve to be getting.

    7. Mario

      The reason why you have a balanced budget is hidden in the private debt to GDP ratio. (well above 100 %) It`s one of the highest worldwide. You are right in criticizing the chronic problem of tax evasion in Italy, but don`t forget that one of the biggest money laundering facilities sits idly in the Netherlands.

  13. Bugs Bunny

    In my years of living, lobbying, working and fretting about the EU, I’ve never seen it turn on a dime, as it were. It won’t here. I think the UK, with US “intelligence” help, doomed the project with the “wider, not deeper” philosophy.

    This ship has sailed. The s**t will come to the shore for us to regale.

    1. Clive

      The UK voted to leave the EU 4 (nearly) years ago. It triggered Article 50 over two years ago. It’s getting a bit long in the tooth to keep blaming the UK for everything that ails the EU. My parents told me off for pinning guilt for spilt paint, glue on the carpet or lost jigsaw pieces on my big sister for my mistakes when I was 5 years old — time to be a big boy and take responsibility for my actions was, in the round, the lesson they were (right to be) trying to teach me.

      1. vlade

        That doesn’t change the fact that before the UK left, it was a very large contributor and arguably the instigator of moving the EU towards the neoliberalism practiced by the UK in the last 30+ years.

        Whether the US intelligence (or lack of) had anything to do with it I’m not going to speculate on.

        1. Clive

          If the EU really wanted to confess and offer penance for its neoliberal sins, it’s had ample opportunities to start down that path in the past few years. It has conspicuously failed to do so. Rather, it is doubling down.

          The outpouring of neoliberal tropes which some members of the EU are currently providing shows that, rather than the U.K., like a moustache-twirling villainous character in a silent movie dragging the virtuous Europa off and tying her to the railroad track to be run over by the oncoming train of neoliberalism, being the hiss-boo nefarious actor in a one-man-show, there are no shortage of coconspirators in the EU27 who are in it up to their necks.

          If anything, they’re worse.

          And if not, what, exactly, is the statute of limitations on (still…) trying to pin it all on the U.K.? 5 years (we’re 4 years through that stretch)? 10 years? Who knew the U.K. had such pernicious, long-lasting, apparently irresistible geopolitical reach? A bit odd, considering that I’ve spent the past four years being told the U.K. can’t influence its way out of a wet paper bag and the Commission is running rings round it. One notion, or the other, please, but not both.

          And if the EU really wanted to shrug off the dead ideological weight of the U.K. and couldn’t wait to cut loose and party, why did it offer extension after extension after extension to the transition period? It could have been shot of us a year ago, but it kept the U.K. hanging around (it certainly assisted with the machinations of the previous parliament to delay things and in doing so increased the odds of the U.K. rejoining).

          And what about Macron? Is the U.K. to blame for him, and his labour-crushing policies, too? And was it the U.K. which faced down Italy when it wanted to be let off the Growth and Stability Pact Wheel of Pain, or the Commission supported by a majority of the other Member States?

          In short, this argument is beginning to wear a bit thin, now.

          1. Peter B

            Maybe shifting the discussion away from national govtm to regulating capitalism. Fiscal union through progressive personal capital taxes. Piketty has outlined the first three steps: EU data exchange between banks; democratic transparency incl fiscal oases; yearly progressive taxation. (2013, ch.15) Using the money to stop the coming crisis in 2020-21

  14. chuck roast

    I’m checking in here at around 3:30 EST/USA, and I am seeing a pretty amazing universal agreement among the commentariat. The woman is what you would call a known quantity, and at the risk of annoying any central europeans, the Germans could be characterized here as “non-flexians.”

    And lest we forget, the “prime directive” must be tended to wit: Deutsche Bank and the precious bag-men The Landesbanken need to be keep robust and vigorous. And in service of the prime directive all stress tests are hereby discontinued.

  15. Tom Bradford

    Rather a lot of conscience-prodding and guilt-stirring in that letter. Look what WW1 (which you started) brought down on all our heads, and look at what we did for you after WW2 (which you started, don’t forget.)

    1. c_heale

      The Nazis started WW2. There were many brave Germans who tried to stop them, just as there were many Germans who after the war tried to hide their past. There were also many non-Germans who supported the Nazis either directly or indirectly. It is not clear to me who started WW1. However, the comment imo is unhelpful. If we want to go about attributing blame for past events, Spain, the UK, The Netherlands, Belgium, Germany, Italy, and many others have done horrendous things to their own and/or other countries’ people.

      The real question is that do the countries currently in the EU want it to succeed. If they do, I think the only way forward as it is currently constructed is some kind of fiscal transfer.

    2. Barry Fay

      I, too, noticed the use of the standard German guilt trip to “nudge” Merkel in the “proper” direction. This, however, after SEVENTY-FIVE years is beginning to wear thin. Also, Angela is an East German and they ridded themselves of all that guilt long ago! If anything, the WW I and II stuff only irritated her. One wonders who wrote that stupid text.

  16. Sound of the Suburbs

    How did it work in the good old days?
    historically the German D-Mark had been strengthening since its introduction in 1948 against the currencies of its neighbours, and this reflected – and compensated for – increased German competitiveness. Their weakening currencies allowed German trade partners to keep their export industries in business and their workers employed.” Professor Werner

    This is the problem; the German economy is so strong compared to everyone else’s.
    They used to have a solution; everyone else devalues their currency to maintain their competitiveness against Germany.
    Then they introduced the Euro, which gave Germany an undervalued currency making its export led economy even stronger.
    The weak economies, got overvalued currencies making life more difficult, and they could no longer devalue with respect to Germany.
    The Euro does the opposite of what it needs to do in its current form.

    It was always going to need fiscal transfers from the stronger nations to the weaker nations, but Germany (and perhaps other stronger nations) would not join unless there was a guarantee that it would not be a transfer union.
    Early success at the periphery was achieved by the stronger nations lending the weaker nations the money, and many periphery nations boomed on borrowed money.
    After 2008 this lending stopped, and the repayments began, so the financial transfers were now taking place in the wrong direction, compounding the problem that was there from the start.
    After 2008 there were many efforts to strong arm Germany into financially supporting the weaker nations. The pressure was so intense it reduced Merkel to tears, but she did not relent.
    The general public in the North were told that the Southern nations were irresponsible and had to be bailed out. They weren’t told that money would then go straight back into Northern banks as debt repayments.
    This is how public opinion in the North was turned against the South, rather than being directed at the irresponsible lending of their own banks.
    A US Ivy League Professor has investigated those early financial flows in the Euro-zone.
    (The important stuff starts at 16 mins., long intro.)

    The stronger nations joined the Euro-zone as they were told it was not going to be a transfer union.
    If it isn’t a transfer union the Euro-zone doesn’t work.
    What were the policymakers in the stronger nations playing at?

  17. Charles 2

    Back in the days of the Greek crisis, Merkel only moved when Sarkozy dingled the prospect of Frexit in front of her eyes. Nothing less than Macron doing the same thing will move her. Right now, Macron lets the Southern European countries do the rhetoric, but he is the « Fat Lady » in this Opera. The real question is « has he the courage to do it ? », as in the courage to follow through if Northern Countries refuse to bulge. It means Crash Frexit and simultaneously crash Spexit and Italexit. This requires a war level type of planning !

    On the other hand, now is not a bad time for a EU exit : oil is cheap, borders are back already, people are confined so cannot run to the bank, police and army are already in the street, young people are thinking about something else than their clubbing trip to Ibiza…

    If I was in Macron shoes, I would go for a marriage proposal after more than 50 years engagement : propose to France a referendum to become absorbed inside the German Federal republic (with instant mutualisation of debt and, say, Strasbourg-Khel as capital and French and German as official languages Canada style), also requesting that any euro country which go through the same process should be in if Germans accept. Essentially, it is saying the German Federal State is the backbone of the Union, not the Treaties. It is a good compromise : Germany has a very decent political system and France has a few goodies in the marriage basket (not least a nuclear deterrent).
    I think the French would be opened to the idea (not so long ago, they accepted annexion by Germany at far worse conditions…). The pure Frexit crowd would probably support it because they would believe that Germany will decline and they would therefore have their wishes fulfilled. A 70-80% yes would be conceivable.
    That would raise the stakes : the financial chaos would trigger balance of payment controls Until Germans come to a decision, and would teach the Dutch how fragile is their so called virtuous retirement systems invested in bonds or shares of countries with Re-denomination risk.
    I believe Italy and probably Spain would follow, at which point Benelux would have to join in as well. Europe as a real nation could finally start. I put the odds of this choice at 1/4

    If Germans don’t accept the marriage proposal (odds 3/4 then), then engagement is broken, a.k.a. Frexit and EU disintegration. Not fun, but more palatable from an public opinion standpoint once people has pondered matters of life and death during the pandemic.
    The whole point is to remove the « do nothing » option from Merkel’s choices.

  18. eyebear

    The eurobonds are something similar to a war bond – but for which political or military goal? The euro area is only a monetary union, not a fiscal or political. To get that to a working solution, the corona bonds are not necessary or at hand.

    It might be helpful, that we (ze germans) declare war on France – it wen’t not that bad in 1870 – but I’m not so shure, if that helps nowadays. Might be better to use the ESM, nowadays. Something like the “dicke Berta” is a little bit out of fashion.

    To be earnest: the coordination between the European council and the ECB AND the national governments is just starting. At first the spreading of the corona virus has to be brought under control. If the national public health services can deal with the outbreak, the next step will be, to restart the economy. But if we look at the commercial aviation, we will have to learn that a level much lower than previously thought is needed. A level of 20% less seems to be the new normal for the next months. Ok, all but toilet paper…

    1. charles 2

      In 1914-1945 period, it was quite bad… My proposal above is to skip the war phase and go directly to surrender phase, just not completely unconditional. Saves a lot of lives and treasure compared to the war option.

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