News from a country that matters

While the Boy Wonder and Sarcoma, having burned their bridges with Colonel Daffy, strike liberal imperialist poses and get the UN to approve military action against his regime, the Krauts have abstained and continue to decide how Europe will be run. 

Openeurope reports a motion by the German Bundestag that explicitly requires the German government to rule out any purchase of government bonds from tanking Eurozone countries by the European Financial Stability Facility, in direct contradiction to last weekend's Eurozone leaders' agreement to give the EFSF precisely that authority.

Germany is the biggest (27 percent) guarantor of the EFSF bonds, followed by France (20 percent) and Italy (18 percent). The rest are relative minnows.

While the motion is not binding on Chancellor Merkel's administration, she needs Bundestag approval for any deal to increase the scope and size of the EFSF. Among those voting for the motion were members from all the parties in the governing coalition. As Openeurope observes, at Westminster this would be considered a rebellion.

Matt Frei - pretentious bore of the week

Of course he's one of the Bitchy Boy faces and by definition an arsehole, but I would have expected Frei to make a better job of Berlin. His attempts to imitate Alastair Cooke from America have been laughable, of course, but dammit - he was born and spent his first ten years in Germany. If he was going to be interesting on any subject, it should have been on his heimat.

But no - disconnected visuals barely linked by superficial commentary with portentous background music. WTF did he think he was doing on top of the Brandenburg Gate? From Frederick the Great to Hitler, the only link material was on Marx, Liebnecht and Luxembourg and some socially "meaningful" art.

Hello? Heard of Bismarck? Unification of Germany?

What a waste of time, money - and of an opportunity to inform, educate and entertain.

The primacy of politics over markets

In a preface written for the French edition of his Tract on Monetary Reform (1924), Keynes described the attitude of the French government in terms that apply with even greater force to Angela Merkel:

Each time the franc loses value, the Minister of Finance is convinced that the fact arises from everything but economic causes. He attributes it to the presence of a foreigner in the neighborhood of the Bourse or to the mysterious and malignant influences of speculation. This is not far removed intellectually from an African witch doctor’s ascription of cattle disease to the "evil eye" of a bystander and of bad weather to the unsatisfied appetites of an idol. - From Liaquat Ahamed, Lords of Finance (2009)

Hat-tip: Ambrose Evans-Pritchard

The Euro - why Germany should pay the costs of maintaining it

Many thanks to Burning Our Money for this highly illuminating graph.

P = Portugal
I = Italy
I = Ireland
G = Greece
S = Spain

Fair enough, you may say. The Big Bad Wolfsburgs had to cope with the indigestion of swallowing East Germany and they have just - well - run their country far more competently than the happy-go-lucky PIIGS.

That's not the way it works, though. The houses of wood and straw may have blown away, but there is always the final refuge of a floating currency that simply sails with the prevailing wind.

Seems to me that if the Germans want to keep the advantages of the Euro, they should also shoulder the cost of maintaining it. Bit of a political problem for Merkel, though. If she admits this to her domestic audience to pacify their self-righteous outrage about the PIIGS's profligacy, she will make it extremely difficult for the the PIIGS leaders to sell austerity to their own people.

The view from Berlin

Spiegel reports that "Several German opinion-makers were clear that the election was more of a referendum on the president, who comes across as 'cold, arrogant, and elitist', and less of an endorsement of the Republicans and their policies."

The view from where?

Germany - a well run country

Christopher Caldwell's piece "The Germany that said No" in the latest Weekly Standard has some important insights about why that nation is coming out of the recession so powerfully. The key point is that the German political DNA rejects Keynesianism as leading inevitably to inflation. 

Germany has been scolded, even browbeaten, by Obama administration officials, from Treasury Secretary Timothy Geithner on down, for saving too much and spending too little. It has refused to stimulate its economy as the United States has done, on the grounds that the resulting budget deficits would not be sustainable and the policies themselves would not work. 

Administration officials have not been the only ones to warn the Germans about the path they’re on. On the eve of last summer’s G‑20 summit in Toronto, in an interview with the German business paper Handelsblatt, economist and New York Times columnist Paul Krugman said that, while Germany might think its deficits are big, they are peanuts "from an American viewpoint." Germany cannot say it wasn’t warned.
 
And now the consequences of Germany’s waywardness are clear. Germany’s growth in this year’s second quarter was 2.2 percent on a quarter-to-quarter basis. That means it is growing at almost 9 percent a year. Its unemployment rate has fallen to 7.5 percent, below what it was at the start of the global financial crisis - indeed, the lowest in 18 years. The second-biggest Western economy appears to be handling this deep recession much more effectively than the biggest - and emerging from it much earlier.

And Brits think Americans don't "do" irony.