The Germans have called time on the fiscal union. Now it’s over to America.
The mindless elation with which the media, stock market investors and various europhile politicians yesterday greeted the Bundestag’s passage of the EFSF’s expansion to 440bn euros has been depressing me profoundly during the last 24 hours. One can’t even call the general relief ‘premature’, because that would be to suggest some tumescence might be in store further down the line. The only thing waiting down the road for those with joy uncontained at present is flaccid reality. (There is but one thing wrong with the can-kicking parallel: the further one goes down the road, it ceases to be an empty can, and morphs into a family-size wastebin full of deeply unpleasant worms. Have you ever tried to kick a wastebin? Trust me, it’s a lot more painful than kicking a can.
But my spirits were lifted around 11 am by Ambrose Evans-Pritchard’s masterly analysis, calling upon the Kingdom of the Deaf to note that the German lips read ‘Nein, nein, nein’. During his ten years at the Torygraph, I very much doubt if AEP has written a more important piece. I was briefly in danger of calling it a wake-up call just then, but actually I needn’t, because it says more than just ‘get real’. It says ‘For the foreseeable future, European fiscal union is finished: it is doomed, ready for cryogenic trials, and wailing quietly, “Please kill me before the Greeks sell any more airports”. Brilliant, and also – I suspect – an attempt by the use of 999 to perhaps move ‘wake-up’ on to ’emergency’ – becasue it’s what this global economy with which we’re saddled now is.
It’s not an emergency for the eurozone, of course: the eurozone as anything other than a new Viking Fiscal Region is dead. It was born with a congenital brain defect, and this has now caused a fatal haemorrhage. The slowcoach is dead, long live the longboat.
No: the emergency we face is very close, and concerns not big ideas or grand designs, but rather simple, functional realities. I care not if some detractors think the warning sounds emanating from The Slog sound like morbid hysteria. They represent reality, sound sources, common sense and an ability to tell a ten-ton truck from a bluebottle.
Here, for example, is a serious heavyweight quoted on the Bloomberg site this morning:
“I’m not convinced that this bailout package is going to be remotely enough for the euro zone itself,” Wilbur Ross, the billionaire chairman of private-equity firm WL Ross & Co., said yesterday in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “I think it should start with a ‘T,’ not a ‘B,’” he said, referring to trillions instead of billions.’
I wonder how many of us any longer realise what a trillion dollars is. This is it in numbers – a thousand billion bucks:
You’d have to be pretty smart to hide a trillion bucks. But as MEP Dan Hannan told the Politics Show yesterday, if there were any trillions knocking about and up for grabs, they’d have been grabbed long ago. The Geithner plan is piss and wind devised in a desperate attempt to get the EU to borrow even more. Why? Because Timmy knows, as most American financiers know, that any moment now either the Troika will have had enough of the Athenian tap-dance, or at least one French bank is going to go bang. Or both. And if there aren’t money-stuff defences in place – even borrowed money – then the whole kit and caboodle is going to whoooosh, where’d it go guys?
It’s the changing events in Germany (to which I had already been alerted by the Bankfurt source) that AEP has correctly divined. Earlier in the week I posted that, ‘At the moment, Greek Prime Minister Papandreou could stick two fingers up to the Troika, but it would make little or no difference: the men in Athens will get their October slice of bailout aid, because somebody – probably Tim Geithner in Wroclaw – finally managed to get it through the heads of the EU Finance Ministers that the global banking system isn’t keen on collapsing just to salve European pride.’
What has moved on in Germany since then has nothing to do with a symbolic vote about being ‘good Europeans’ solidly behind Frau Merkel on the immediate EFSF issue. It is on the contrary entirely to do with those same Germans saying to their Chancellor, “If you want to go further now Geli, you’re on your own”. As predicted here last Wednesday, a concerted ‘national front’ of eclectic opposition to further endangerment of Germany’s image for sane, controlled fiscal management has been formed. This Front embraces much of the CDU, the Christian Socialists, the Free Democrats, the central bank and most of its dependents, the German electorate, but above all the supreme Court. Germany feels, this Friday evening, that it has done more than its fair share of the spadework in trying to create a peaceful and prosperous EU. As they say in that country, ‘Das Maß ist voll!’ – enough is enough. Sometimes, I think, Fritz in dem Strasse forgets just how well he has done from exporting via a euro rather than a Mark. But on the whole, I tend to sympathise with the Germans. As I posted last month, the war has been over for 66 years. Well, clickety-click – the Germans paid their reparations many times over. Now the French are, effectively, on their own.
And it is this that ensures the EU meltdown must now zip across the Atlantic with the inevitable determination of a clinically programmed intercontinental ballistic missile – because the French are defenceless. They are defenceless because (a) they’re four times more exposed to ClubMed than the Germans (b) they didn’t create a BadBank firewall like the Germans, (c) none other than Christine Lagarde allowed fiscal incontinence to continue unchecked, and (d) Angela Merkel now has, finally, no escape route from her domestic stakeholders. 440 billion euros is it for the EFSF; and frankly, Sarkozy might just as well spit at what’s coming for all the good that will do.
Frau Merkel’s trusty Finance Minister Wolfgang Schauble is a wily fox, but the hounds have now smelt out his lair. The German Chancellor is not so wily. She is by discipline and temperament a physicist, not an Alchemist. Certainly, joking apart, she is no Valkyrie-inspired Fuhrerine. German democracy has her under lock and key, and I suspect – for all that is yet to come – this is a very good thing.
I wonder tonight who history will blame for all this. The eurocrats for being so hubris-pumped and tediously slow? The banks for preferring global economic meltdown to a sensible haircut? The ClubMeds for being both greedy recipients of credit – and then mendacious reporters of its malign effects? The French for their ‘Je m’en fou’ attitude to infrastructural expenditure? The British for standing by as Rome burned? The Chinese for raising hopes, but in the end merely gloating at our fate? Or the Americans, for their obsessive belief in leveraged growth, globalist mercantilism, and debt as the answer to everything? (I might even be a tad gratuitous, and fire a small arrow of guilt at the Aussies, for being so dumb as to base their export construct on one thing – mining – and one customer – Beijing.)
Well, I rather fancy veteran Sloggers will know what’s coming. “It’s the species, stupid”. And, one can’t deny, a spreading global culture in which the ‘higher order’ of ethical and socio-moral good has become the subject of at best ridicule, and at worst contempt. Perhaps it is no accident that the worship of all things material is slowly facing the need to square up to fundamentalist religious fanatics. And maybe, in turn, it is no accident that those fanatics too must face a far less equivocal enemy in the shape of a Beijing that worships power before either God or Mammon.
“May you live in interesting times” was, in the original Chinese context, a curse. I’m beginning to understand why.