EXCLUSIVE: Schäuble intimates ‘briefed Holger Steltzner on ECB cover-up’ – Sources.

Yesterday’s sensational revelation in the FAZ about ECB leger de main probably came from a very high source

happywolfieWolfgang Schäuble, seen here in light-hearted mood

Mario ‘Squirrel’ Draghi has been at it again, and the right wingers in Germany are on his case. The ultra-conservative economics editor of Frankfurter Allgemeine  Zeitung Holger Steltzner has run a piece fingering the ECB, accusing it of holding back the EU’s annual wealth distribution data, and suggesting the central bank is ‘obviously’ afraid of a protest in the creditor countries involved in the decision about an aid programme for Cyprus. The reason, says Steltzner, is that the data show how the poorer countries are, in reality, bailing out the richer countries. Herr Stelzner is being a little economical with his information…and the story’s provenance begs some fascinating questions. The Slog deconstructs the spin.

The article in yesterday’s FAZ  said the data contain “politically explosive material”: Italy’s financial wealth, at a median value of €164,000, lies above that of Austria, at €76,000. But allegedly, the German median value is thought to be in a similar range – in other words way below that of Italy. The political problem this story represents for Mario Draghi and Angela Merkel is that the financially poorer ezone countries seem to be bailing out the wealthier ones.

In addition, Steltzner’s piece makes passing reference to an independent study – put out by Credit Suisse – showing that the Belgians, Italians, Austrians and the French are richer than the Germans. The French, in fact, enjoy a large advantage says Steltzner ‘as a result of rising wages which are now dogging the country’s competitiveness’.

I’ve been digging, and talking to German contacts, since I was alerted to the article via New Mexico early yesterday afternoon GMT. I think it may be time to even up the score on this issue. Let’s look at the content and the briefing involved, and see what we all think.

First up, you will note there is no mention of Greece in the FAZ piece. The reason is not hard to discern: Greece is miles below the others in terms of wealth, because its property boom started very late in relative terms…and if you include sovereign wealth in any calculation, then Greece is flat broke. Finally, wealth by country is meaningless given the social inequities that exist in each one: over 95% of Greek wealth is concentrated among the 3% Zil Laners. (I mention this because Holger Steltzner has form when it comes to truth lapses in relation to the ordinary Greeks).

Second, the France observation is bollocks. While it is true that wages here have risen faster than in Germany, the difference between ‘wealth’ as defined by the ECB’s patently daft criteria is that property ownership is far higher in France….and abnormally low in Germany. Germany in turn has a very large cash economy because credit is very limited; so most people eschew mortgages in favour of either inheritance or renting. And last but not least, German wealth per capita has plummeted because so many of the silly buggers bought Spanish property which is now worth what we financial experts call not very much. Here too, if one includes sovereign wealth, then the French infrastructure is by far the best in Europe: it’s Mairie construction, signage and road-building fest of the last decade was all afforded with EU money….the spending of which Germany stood quietly by to watch with smiling approval – and into which we all chipped bigtime.

The creditor/debtor dimension of wealth in sovereign terms is being used selectively here to suggest that individual citizens are richer in, say, Italy than Germany. This is ridiculous, and leads to the conclusion, for instance, that Estonia and Slovakia
(purely by being sovereign creditors) are bailing out rich citizen debtors. For a start, these two account for an infinitessimal percentage of the schemes in play; further, using this method you might as well rate apples and pears on citrus content. It is sleight of hand on a grand scale; and finally, this method would in turn make Germany’s motives look deeply suspect: because very few lower-middle and working class people there own property, the wealth of the electorate is extremely concentrated at the top. It also got there by very rich industrialists clamping down on wages….while at the same time doubling their durable exports on the back of a cheap euro.

But of course, it sells papers and fuels German resentment, which lets face it has never been hard to find. So let’s turn now to those who have most to gain. Who briefed this editor?

The tone of the piece has all the hallmarks of the conservative banker community typified by my ex-mole among them, the Bankfurt Maulwurf. I wrote a couple of posts last year suggesting that hysteria might be getting the better of his chums, as a result of which he has taken his ball home and refused to play out with me any more. But there are others in the city working on stuff: their general view yesterday and this morning was that the anti-Merkel faction would almost certainly have been involved – if only because, if there’s one person they loathe and distrust more than Geli, it’s Mario Draghi. And if there’s one person who loathes Maria more than most, it’s Herr Schäuble, the celebrated Dr Strangelove impersonator.

German Finance Minister Wolfgang Schäuble often gets a tough time from the FAZ. Last November, Stelzner wrote of the Greek compromise, ‘After these crisis negotiations Finance Minister Wolfgang Schäuble can no longer maintain that saving the euro costs no money. The deal must not be described as a haircut, otherwise the finance ministers of Germany, Finland and the Netherlands would lose face.’ However, Schäuble is rumoured to be worried in private about a Cypriot bailout, although thus far he’s been careful not to upset apple-carts in the media. “We’re all aware that there’s a complicated situation in Cyprus,” he told Austrian newspaper  Der Standard earlier this month, “We haven’t turned the corner yet, but we’re on a good path.” On the other hand, the IMF is on another path called “no bailout”.

All of which left me particularly intrigued by one comment late last night from Frankfurt:

“The word is that Schäuble has been briefing against Draghi. That’s nothing new, but several of us here suspect his hand in this Stelzner article. I’d guess that Schäuble’s plan is to slam the ECB and thus keep German losses in Cyprus to a minimum. Minimising losses is what Holger and his friends are into.”

It’s hearsay of course – but it fits. The Finance Minister wants to rebuild bridges with the FAZ, cast doubt on Draghi’s probity, but keep the euro going past Cyprus at the least possible cost to his reputation.

He would prefer to maintain the eurozone and shaft Draghi because Herr Schäuble has for some time been engaged in a power struggle with the ECB boss – whose intentions he suspects are anti-German, and who would be his main rival if and when the German Finance Minister takes up his role as Obergrüppenfuherfinanz in the much heralded (but so far invisible) Fiscal Union club. Our Wolfgang is a major-league control freak, and would only be happy with a German in charge of the eurozone finances. In the past, Stelzner too has written that ordinary Germans ‘are concerned about the majority composition of the ECB Governing Council, which in numerical terms is dominated by central bankers from fiscally weak countries’. The leak from Schäuble’s Ministry to FAZ thus represents a marriage of convenience for both parties.

Wolfgang himself, of course, is not above writing mendacious crap in the FAZ. Two months ago, he told its readers, ‘Wir Europäer haben gute Chancen im globalen Systemwettbewerb mit unseren offenen Gesellschaften, demokratisch legitimierten Institutionen und rechtsstaatlichen Strukturen.’ (We europeans have a great future in the globalist system thanks to our open trading methods, legitimate democratic institutions and strong Rule of Law structures).

Whatever you say, Wolfie, whatever you say.

Yesterday at The Slog: Why oligarchic people, not systems, screw up libertarian democracy

44 thoughts on “EXCLUSIVE: Schäuble intimates ‘briefed Holger Steltzner on ECB cover-up’ – Sources.

  1. ROTFLMAO… “Herr Schäuble, the celebrated Dr Strangelove impersonator.”… oh my… thank you for the good beely laugh.

  2. I’ve lived in Germany for 6 years, my daughter lives and works there and many of my friends do. The fear of what happened during the Weimar period is very very real to the Germans as many elderly people lived through it. The Germans have always considered it very unusual to buy a house before you are in your 40′s – not because of cost, but because they regard the ability to upsticks and relocate to another part of the country in a matter of weeks for work etc as fundemental. Housing policies actually control house price inflation and as areas start to heat up the government steps in and deliberately stops it – yopu will be very very lucky to make any money speculating on housing, it remains fiormly attached to regional income levels. Likewise rents (and landlords) are strictly regulated.

    Very few Germans even have a credit card let alone use one nad very few use finance to buy things. If you attempt to buy a TV, white goods, or food in a supermarket and pay with a credit card you are regarded very suspiciously. My daughter was in her twenties when she bought her property and all the neighbours were highly suspicious of her as buying property that young is usually associated with crime or the ‘seedier’ side of life.

    If people in the UK could see what €100K will buy you in north west Germany they would be burning MPs, bankers and estate agents in the streets. Likewise the quality and size of property you can rent for as little as €350pcm is staggering when you see the utter rubbish that landlords obver here routinely charge £500 and more for.

    Germans are deeply suspicious of credit and do all they can to stop runaway house prices & rents.

    • No doubt this is true and is entirely laudable. However, Germany seems to have done little to export such probity, evidently preferring to export their industrial output – and, let’s face it, some pretty unhealthy financial gaming of their own, in which they are of course just one of many.

      • They refer to the current situation as ‘the Anglo/US banking crisis’ as opposed to how we refer to it – ‘global’. They have very little patience or sympathy for any country or individual that is struggling if it is in anyway connected to debt.

        Both the German government and the man on the Berlin omnibus are quite adamant – unsecured credit is a bad thing and workers must remain able to relocate themselves and their families quickly.

      • Hieronymous

        Germany seems to have done little to export such probity

        To be quite honest, can we see it from the other perspective? How about Germany expecting people not to act like fools?

        As to the financial gaming – Deutsche bank et al, some of that was done in London and the Frankfurters were horrified by what they got up to. Only, there was a problem. With Germany’s uber-strict lending laws (see above re credit-cards) means that you cannot lend easily there. All of which meant the profits had to come from somewhere to retain their international stance. Usually this meant countries where lending regulations were less strict – the US (home of toxic assets, the result of farcical regulation) the UK and the periphery. The keeping up of this presence is now costing them dear. Only, with nothing to stop them and plenty of mugs willing to take on the loans – it was easy money.

        Only then the US decided that six trillion dollars of seriously good investments were actually worth little more than floor sweepings. That swipe at the global markets put the wind up a lot of sensible people.

      • @savep & GNR: My comment did, I suppose, contain some degree of devil’s advocacy – which you have quite fairly exposed. The German people themselves have very good reason to adhere to their well grounded financial habits which, after all, they learned the hard way. The problem is that there is a miscreant financial oligarchy which is operating without national boundaries; the German government could and should have taken greater steps to neutralise this activity within their own national boundaries, and been more vocal in condemning it internationally.

      • @Hb

        there is a miscreant financial oligarchy which is operating without national boundaries

        This to me sounds more American than European. It smacks of getting Greece in under the wire whilst EU officials are busy collating pieces of paper and getting their accounts out of the scrutiny of the auditors (again). Said banks having no small part in that too?

        In short, a set up.

      • @GNR: Certainly some – even many – of the miscreants are from the United Mistakes of America, but the truth is that they are people from almost every country on earth who are predisposed to behaving that way and care not for the consequences anyway. A set up? In some cases, very probably; in others, just criminally careless. Germany wasn’t complaining whilst the (not very) funny money available to their trading partners funded the purchase of German goods and services.

      • I have to agree with you about the funding of Germany’s industries – only can you imagine the cheering had Britain exploited this easy loophole? I must ask too, why did they want crummy Golf cars instead of decent 20 year old ones that still work better???

        Having discussed this with others, the methods of GS and their ilk are far from careless. The external appearances may well be, the thoughts running behind them are extremely well developed and organized. And let us get one thing quite straight here: in getting Greece into the Eurozone GS weren’t helping the Greeks. They have been royally shafted by all comers, worst of all the pig-ignorant EU bureaucrats whose only interest was (is) in getting shot of the paperwork by the end of the day.

        To be honest with you, my reckoning is that the banks played along with the loose fiscal regulations in the periphery in order to run up those debts to unprecedented levels – and so shaft Germany right and proper. Thereby getting rid of an implacable and almost invincible enemy. The issue of what America has left to defend has not been taken into consideration of course – the Japanese have been as hard at work as ever in surgically removing their guts. I uncover their strategies almost by the day.

      • Two minor addenda (I’m cooking, if that’s an allowable excuse?)

        “They have been royally shafted by all comers,” The Greeks have been … [middle paragraph]
        “the Japanese have been as hard at work as ever in surgically removing their guts” not a well structured sentence :-( It should read “removing America’s guts” [last lines]

    • Always interesting to get the point of view of another country. I wish we could import some of these values into the UK.
      With such a contrast between what you’ve shown here, and the live-now-pay-later attitude of the debtor countries, I’m amazed the German people have tolerated the situation.

      • At the moment in the UK anyone with those self reliant German values is being positively burned by Government policy. A combination of low interest rates and quantitative easing is ruining savers and pension funds in order to bail out the feckless who overstretched themselves largely as a result of buying vastly overpriced property with the full connivance of the banks. The Government is preaching self reliance and and paying lip service to young people setting up and paying into a pension fund but offering absolutely no real incentive to do so with their completely hack eyed rigged financial system. We will have another great disaster in 50 years when a whole generation reach old age with no savings and no pension. The real disaster in Weimar Germany happened when the entire middle class lost all of their savings destroying the bedrock of their society and ushering in chaos and extremism. This disaster will repeat itself here and in many other European countries if we continue along our present track and nobody in Government seems to give a damn. Soft default on our debts using inflation (which appears to be the big plan for the big society) will destroy middle class wealth and the value of savings. I suppose the canny people in Germany were the ones who kept hold of their 20 Mark gold coins in 1915 when the German Government abandoned the Gold standard. There simply isn’t going to be a happy ending to any of this there is no pain free way out.

      • @Mark, i doubt that Weimar Germans or anybody else had the chance to deconstruct the lies and deceit, the way we can do today via internet, on a paneuropean if not worldwide scale.
        That means we have no excuse for being a sucker this time. Still, a disaster is also a fresh start, so it will definitively happen in some form and most likely people will actually vote for it.

      • @tassosgr – “i doubt that Weimar Germans or anybody else had the chance to deconstruct the lies and deceit”

        Actually many of them did exactly that which is evidenced by the large number of Imperial German Gold 20 mark coins still in existence today, many in uncirculated condition having clearly been hoarded by a worried populace. Imperial Germany withdrew from the gold standard in 1915 withdrawing its gold coins and replacing them with banknotes in exactly the same way Britain had withdrawn the Gold Sovereign the previous year.
        The gold coins were used to pay off foreign war debts.

        You don’t need the internet to tell you that surrendering a gold coin to the government in exchange for a piece of intrinsically worthless paper with a promise on it is a really bad idea.

  3. Well it has been far too quiet recently. Old Barroso is still not being allowed to make any public comments and the IMF are saying enough is enough Cyprus is a big problem to the Europhiles. The size of the economy is tiny but the scale of the problem it represents is beyond the EZ’s capability to handle.
    This sucker is going down!

    • Perhaps one of reason for Christine Lagarde being so silent is the progress towards potential court action against her in France.

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  5. John,
    1. 20% of Germans are DDR left overs.
    2. In 1949 Germany emerged from 4 years of genocidal starvation attested at the British parliament while it happened. Thus in 1950 nearly nobody had a meaningful ownership or property or inheritance.
    It was US,UK 7 French businessmen who cut the stakes back then
    and prosper therefrom till date.

  6. A very large number of post WW2 Germans were also refugees from the lost eastern territories of Prussia and Silesia. They were forcefully removed from their homes as a result of the 1945 Potsdam agreement.

      • A condition of German unification in 1990 (which amended the original 1945 Potsdam treaty) was that Germany unconditionally give up all claims on the lost eastern territories. Chancellor Kohl signed the agreement. There is absolutely no possibility whatsoever of the Russian Government seeding back the Kallingrad (aka Koenigsberg) enclave.

      • Indeed so, all claims from the German side are anulled. As mentioned, that does not include the Poles. As to the Russians, we have heard a great deal of “no possibility whatsoever” from their side.

        In other words, it could actually happen. Unlikely, not impossible. Just look at the number of Polish and Russian lorries on the Autobahn!

      • Sorry GNR but are you really saying that the Polish Government is going to seed back to Germany its hard won sovereign territory in Prussia and Silesia? Do you honestly think thats going to voluntarily happen? This really would be the real nonsence.

  7. Europe was a safer place before the wall came down. Maggie called it right at the time. A united Germany only ever means one thing….trouble.

  8. International wealth comparisons are almost certainly useless. However, there is an issue with Italy: many Italians simultaneously evade taxes and buy Italian government bonds in large quantities. They are effectively lending the money that they should be paying as taxes. Were they to pay their taxes, the Italian government would have no trouble balancing their budget. The Italian government is already running a primary surplus; their deficit is entirely due to the interest payments on past debt.

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