While France is preoccupied with the legislative elections next weekend, Germany and Austria plunge into intense public soul searching about the euro, its meaning, its relevancy, the sheer and endlessly growing expense of maintaining it. To which are now added the $125 billion for bailing out Spain, the first in a series as Greece and others have shown: the bailout to solve the problem once and for all proves insufficient and is followed by more bailouts. Spain won’t be an exception. And then there’s Italy.
And yet, the German-language media scream about the expense of abandoning the euro. They call it the crazy option of returning to the D-Mark and warn of gigantic losses. But the very fact these discussions appear on the front pages of established newspapers moves the option a step closer to reality. Because, once the debate is opened up—and it’s a big can crammed with ugly worms—it’ll be difficult for governments to sweep all these worms under the rug and to revert to the con-game.
“As it’s going at the moment, the monetary union cannot function long term,” affirmed German Bundesbank President Jens Weidmann on Sunday. To avoid the worst turbulence, he called for clarity: either establish a fiscal union with transfer of sovereignty to a central authority, or continue with autonomous national budget policies, in which case, “common liability must be limited.” He warned of the consequences of the break-up of the Eurozone, which would produce unpredictable and huge costs and risks. In the same breath, he cautioned that the threat of these costs and risks must not make Germany vulnerable to extortion.
Germans are worried. According the ARD-Welt poll published last week, 55% believe that it would have been better to keep the D-Mark, up 9 points from November, 56% fear for their savings, 78% believe that the worst of the euro crisis is still ahead, and 83% want Greece to leave the Eurozone if it doesn’t stick to the austerity and reform measures it had agreed to.
“The euro is like a knife in the hands of a child,” said Thilo Sarrazin, former member of the Executive Board of the Bundesbank and politician in the opposition SPD. As so often, “something that appears useful and sensible becomes dangerous,” he said. The advantages of the euro, including low interest rates, have led almost all participating countries astray, he said. “Now you see the consequences.”
“The problem isn’t just the construction of the euro, but the bailout funds,” said Sahra Wagenknecht, deputy chairperson of the Left Party, Germany fourth largest party with 12% of the vote in 2009. “They’re not saving the euro but the financial sector! Banks, insurance companies, hedge funds, and speculators are being ransomed. Neither in Greece nor elsewhere do the people benefit.”
“It was certainly a mistake to bring the euro to life without the necessary instruments to control it and secure it,” Austrian Chancellor Werner Faymann chimed in. Economically, Austria is joined at the hip to Germany. Most of its exports go to Germany, and for decades prior to the euro, the shilling had been pegged to the D-Mark. When Germany joined the euro, Austria did too. And if Germany leaves the euro, Austria will have to as well.
So the Austrian Chancellor, echoing his German counterpart Angela Merkel, called for a banking union “with strict rules for banks and financial markets and a common and independent banking supervisor.” Like the Fed, perhaps: of the banks, by the banks, for the banks. The US had more debt than Europe, he added, “but as a union, they have the necessary instruments to deal with this debt.”
While that type of pungent debate is missing in France, one French voice came through, in Austria: Marine Le Pen, President of the right-wing National Front and third in the French presidential election with 18% of the vote, said in an interview with the Austrian paper Kurier that she wanted to end not only the Eurozone, one of her campaign promises, but also the 27-member EU—in whose parliament she is a representative, ironically.
“I want the collapse of the European Union, to make room for a Europe of Nations,” she said. Cooperating independent nations would be the principle. She cited Airbus and Ariane. A Europe “that the people agree to freely and democratically, which isn’t the case currently.” Ultimately, she said, “you have to ask the question if the system is reformable. Can you convert a Europe that is becoming a federal state into a Europe of Nations? I don’t think so. The Soviet Union wasn’t reformable either.”
Former Deutsche Bank CEO Josef Ackermann, who knows a thing or two about skeletons in the bank’s vast closets, says he is “grateful the US is pushing Europe to act faster.” He wants massive bailouts of the banks and has “no doubt” that the German people would rescue the Eurozone, he says. But the German people aren't so sure about that. Read.... Bailout Rebellion Reawakens In Germany.