Pettis writes as clearly as anyone about the unsustainable
structural dynamics. This is my interpretation, though I'm no
economist.
There certainly is an element of the worker bees subsidizing the
profligate drones.
However, it doesn't make sense to paint Germany as saint or
villain. Germany has long pursued an aggressive export policy which
was much aided by the currency union (Euro) and its own
export-financing policies.
Fine, except that net trade surpluses for Germany mean equal net
trade deficits in other countries. Excess import and consumption
(with unsustainable debt) by net buyer countries grew faster due to
cheap financing, courtesy of Germany's excellent credit rating.
Net deficit countries had no automatic mechanism for rebalancing
trade and debt, unlike when they had with a floating currency and
interest rates before. Checks and balances got out of whack.
It is to a great degree German banks that Eurobonds would be
saving. Honesty about who pays and who benefits from policy
decisions should make the hard choices easier for the public to
tolerate. I don't see a viable alternative to default, but that
might hurt the Germans as much or more than the Greeks.
and the Constitutional Court is removed from Berlin both
physically and sometimes philosophically. If they are impartial
judges, they will rule that the ECB purchases of debt violate the
Mast. treaty, but no one should assume politics won't influence
their judgment. From various German comments over the past few
weeks, as well as another defeat for Merkel's party in local
elections over the weekend, the tide does seem to be turning
against German support for holding the Union together.
Posted by talleyrand on 6th of Sep 2011 at 10:26 am
I beg to differ...
The opposition parties SPD and Grunen in the Bundestag already
stated that they will vote for more payments, Euro-bonds and so
on.
There is a vast majority in the political class that argues
there is no alternative for Germany other than the European
unification.
Other opinions get marginalized by calling them nationalism and
and by evoking fear of the historical tensions between European
nations.
So the Germans will pay, as they did the last 60 years.
The only question is: Will there be a centralized financial
control led by the biggest payer, which would be Germany, or will
Germany pay without having influence.
to Parliamentary influence/control. It does raise the question,
though, of what happens when the ECB/EU policies fail even more
dramatically in the markets. Is there not a point at which basic,
decent German self-interest kicks in to say no more (nationalism
& history be damned)? I realize that German interests lie on
both sides at this point (ultimately people vs. banks there as in
the US).
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Any European members here care
Posted by steve on 6th of Sep 2011 at 10:05 am
Any European members here care to share their insights on the German vote tomorrow?
Read Michael Pettis
Posted by sankaty on 6th of Sep 2011 at 11:45 am
Pettis writes as clearly as anyone about the unsustainable structural dynamics. This is my interpretation, though I'm no economist.
There certainly is an element of the worker bees subsidizing the profligate drones.
However, it doesn't make sense to paint Germany as saint or villain. Germany has long pursued an aggressive export policy which was much aided by the currency union (Euro) and its own export-financing policies.
Fine, except that net trade surpluses for Germany mean equal net trade deficits in other countries. Excess import and consumption (with unsustainable debt) by net buyer countries grew faster due to cheap financing, courtesy of Germany's excellent credit rating.
Net deficit countries had no automatic mechanism for rebalancing trade and debt, unlike when they had with a floating currency and interest rates before. Checks and balances got out of whack.
It is to a great degree German banks that Eurobonds would be saving. Honesty about who pays and who benefits from policy decisions should make the hard choices easier for the public to tolerate. I don't see a viable alternative to default, but that might hurt the Germans as much or more than the Greeks.
This will be coming to
Posted by dylan398 on 6th of Sep 2011 at 12:53 pm
This will be coming to the US....just a matter of time, when we ask US taxpayers to bail out liberal states such as California and Illinois
Eurobond option looks DOA...
Posted by lessarda on 6th of Sep 2011 at 11:56 am
again, S&P will put Greece's credit rating on any Eurobond and they only work if they get Germany's rating.
German Vote
Posted by jamtoday on 6th of Sep 2011 at 10:28 am
Best take on what will happen from Ambrose Evans-Prichard who has been way ahead on his reporting for sometime. See http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8740389/German-endgame-for-EMU-draws-ever-nearer.html
Impossible to call. A no vote has such immense consequences & so I would not expect a clear cut verdict.
Thanks for the feedback -
Posted by steve on 6th of Sep 2011 at 10:17 am
Thanks for the feedback - this is the central issue currently driving the markets at this time. Please continue to feel free to share your insights.
German President sees ECB purchases as 'legally questionable'...
Posted by lessarda on 6th of Sep 2011 at 10:15 am
and the Constitutional Court is removed from Berlin both physically and sometimes philosophically. If they are impartial judges, they will rule that the ECB purchases of debt violate the Mast. treaty, but no one should assume politics won't influence their judgment. From various German comments over the past few weeks, as well as another defeat for Merkel's party in local elections over the weekend, the tide does seem to be turning against German support for holding the Union together.
I beg to differ... The opposition
Posted by talleyrand on 6th of Sep 2011 at 10:26 am
I beg to differ...
The opposition parties SPD and Grunen in the Bundestag already stated that they will vote for more payments, Euro-bonds and so on.
There is a vast majority in the political class that argues there is no alternative for Germany other than the European unification.
Other opinions get marginalized by calling them nationalism and and by evoking fear of the historical tensions between European nations.
So the Germans will pay, as they did the last 60 years.
The only question is: Will there be a centralized financial control led by the biggest payer, which would be Germany, or will Germany pay without having influence.
You are right about this next move...
Posted by lessarda on 6th of Sep 2011 at 10:48 am
to Parliamentary influence/control. It does raise the question, though, of what happens when the ECB/EU policies fail even more dramatically in the markets. Is there not a point at which basic, decent German self-interest kicks in to say no more (nationalism & history be damned)? I realize that German interests lie on both sides at this point (ultimately people vs. banks there as in the US).