Atlantic Review

Wow, I did not realize the German and Italian Nazi leaders were so young when they came to power. Should I be worried about the political radicalization of youth in Europe today due to the economic crisis? Will some of them turn into Fascist leaders in five years? Walter Laqueur in The New Republic in July:

If youth is the season of hope, it is also the age of credulity and fanaticism; the radicalism on behalf of which youth has served as a vanguard has not always been so admirable.  Consider Italy's fascist movement. Mussolini was not yet 40 at the time of his march on Rome, and those surrounding him were even younger-Achille Starace, the future secretary of the party, was 33; Dino Grandi, the future minister of justice, was 27. Galeazzo Ciano, the future foreign minister, claimed to have participated at the age of 19. (The anthem of the fascists was "Giovinezza primavera di bellezza": "Youth, Spring of Beauty.") 

Continue reading "Be Afraid of Young Europeans"

"It's hard to detect which matters more: German behavior over Libya or its course in the management of the euro crisis, but, in short, most US analysts believe that Germany got both wrong," writes Ulrike Guérot in the European Council on Foreign Relations' blog .

I think it is the Eurocrisis, as many US analysts were not in favor of the Libya mission either, at least until the rebels succeeded.

Naturally, US pundits and politicians have plenty of advice for Germany on how to get it right. Dr. Guérot concludes: "Whatever the solution, Germany needs more ears to listen to what is said about our country beyond our borders and be capable to integrate this into the domestic policy discourse."

I agree, but the German government disagrees.

Continue reading "Giving advice is easier than taking advice"

Former Chancellor Helmut Schmidt is the only elder statesmen who constantly smokes cigarettes on TV and sometimes uses the term "shit" as a description. He gets away with it because of his huge popularity. His outspoken manner and lack of concern for political correctness also reinforces his popularity, especially at a time, when Germany is governed by uncharismatic politicians, who lack vision and do not even make much of an effort explaining their policies (link in German).

Schmidt has used the term "shit" repeatedly when talking about the World War II. Last week, however, he used the term (for the first time?) to describe the financial crisis.

Continue reading "Outspoken Helmut Schmidt"

"Aspreading financial crisis has accomplished what tradition, habits of alliance management and shared security concerns could not: It has given Europe a central place in President Obama's view of global affairs," writes Jim Hoagland in The Washington Post:

Continue reading "Obama Turns to Europe?"

From a Washington Post editorial:

ABOUT TWO weeks ago, Germany's finance minister described U.S. economic policy as "clueless." We don't want to sound childish, but after yet another bailout for an insolvent European country - about $137 billion for Ireland - we are inclined to ask: If the United States is clueless, what does that make Germany? The de facto leader of the crisis-ridden, 16-nation eurozone, Berlin has not performed its role brilliantly over the past year.

A good defense of German policy against US criticism of its "export-led growth model" can be found on Atlantic Community: Stop Lecturing and Do Your Homework, America!

Thomas Kleine-Brockhoff: America's argument about the Chinese currency manipulation may be valid but it is also a distraction. It is America's own lack of competitiveness that is hurting the US more than anything. America will be able to revive the credibility of its global economic leadership only when it stops blaming its democratic peers and instead starts doing its homework.

"Bashing Germany is the new favorite sport for policy makers and economists who want a more balanced world economy," writes The Wall Street Journal and points out: "That Germany's economy is unbalanced is clear. Household incomes and consumer spending have stagnated for a decade, and economic growth has come almost entirely from exports and related investment. Consumption is set to drop 1.4% this year, even though the overall economy will grow 1.9%."

The WSJ explains the German position very well, even though it does not quite agree with it:

German Chancellor Angela Merkel argued in an interview last week that balancing the budget could even unlock consumers' wallets-whereas deficit spending might only lead to even-higher household saving. Germans save because they are worried the public pension and health-care systems will run out of money, and would save less if they had confidence in sustainable public finances, she argued.

Ms. Merkel's first term doesn't offer good evidence for that view, however. Germany cut its budget deficit from 4% in 2005, when she took office, to nil in 2008, before the financial crisis struck. In that time, Germans' household savings rate rose rather than fell-to 11.2% of disposable income, from 10.5%. The core problem is lack of growth in Germans' disposable income, not high savings rates which are largely justified for an aging population, say most economists.

Endnote: Does Obama sound French, when he says that he is "concerned by weak private-sector demand and continued reliance on exports by some countries with already large external surpluses."? He was clearly asking Germans to buy more American stuff. (Hey, nearly everyone is walking around with iPhones and the city is full with huge iPad advertisements. Or are that Chinese products?)

Finance Minister Schäuble hits back at Obama by saying: "Governments should not become addicted to borrowing as a quick fix to stimulate demand. Deficit spending cannot become a permanent state of affairs." Oooch. I think most Germans agree. According to polls a majority of Germans are even against tax cuts. Can you believe it?

Ahead of the G-20 summit we are witnessing rising German-American disagreements. Germany wants to reform the financial markets and deal with the debt crisis, while US academics and the president prefers economic stimulus plans and criticize the teutonic export champion. Spiegel International:

Krugman is far from alone with his concerns about German and European austerity packages. Last week, US President Barack Obama sent a letter to other G-20 countries in which he fired a not-so-subtle shot across Berlin's bow. "I am concerned about weak private sector demand and continued heavy reliance on exports by some countries with already large external surpluses," he wrote in a clear reference to Germany. He also warned against reversing economic stimulus policies too soon. "We worked exceptionally hard to restore growth," he wrote. "We cannot let it falter or lose strength now."

Germany and France were hoping that the G-20 summit would focus on measures aimed at reforming global financial markets. In particular, Merkel would like to see an international tax on financial transactions as well as a mandatory bank levy, which would go towards a fund to be used to bail out banks in future crises. But opposition to both proposals has been stiff. And the US, in particular, is hoping to use the G-20 to push for more economic stimulus rather than less, given ongoing high unemployment at home.

Personally, I am not sure, if the US and Europe really need and can afford more stimulus plans right now. They make the long-term debt crisis worse. Besides, tax cuts do not lead to more consumer spending, when citizens are smart enough to realize that the economy and government finances are in trouble and consider tax cuts for what they are: desperate measures to stimulate growth. In those cases citizens use the tax cuts to save more money to prepare for the worst. Of course, stimulus is more than tax cuts.

ENDNOTE: I am sorry for the lack of blogging. In the last six weeks, I learned quite a lot of stuff the hard way: First, a new bike with strong front wheel breaks is not necessarily a good thing. Second, I cannot fly. Third, a broken elbow joint requires two surgeries, the second one kept three doctors over four hours busy. Fourth, doctors and nurses are nicer and more caring than I thought. Even the hospital food was good. Our health care system is still okay. Fifth, even if only the elbow is broken, fingers don't work (typing etc.) very well. Regaining full flexibility apparently takes months. Sixth, one can get quite a lot done with just one functioning arm. Now "I'm a graduate of pain." Yeah.

Sixteen months ago, I began to grow worried about Greece's debt problems and its implications for the euro. At the time, I wrote,

The euro area has yet to demonstrate its cohesiveness when confronted with the growing economic divergence of its member states and even the specter of a sovereign debt default....Leaders will have to act together to show their commitment to preserving the single monetary policy in the euro area.

Yesterday, EU leaders rose to the challenge and solidified the euro's position in world monetary affairs. The announced $1 trillion package does more than provide indebted countries with a source of funds during periods of crisis; it demonstrates the commitment of leaders to the concept of European integration. In so doing, European officials have significantly increased the credibility of the EU in the eyes of their American counterparts and taken the first step towards some degree of fiscal integration.

A few details of the announced aid package are particularly noteworthy:

Continue reading "The Euro Comes of Age"