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