German euro founder calls for ‘catastrophic’ currency to be broken up

Oskar Lafontaine, the German finance minister who launched the euro, has called
for a break-up of the single currency to let southern Europe recover, warning
that the current course is “leading to disaster”.

“The economic situation is worsening from month to month, and unemployment has reached a level that puts democratic structures ever more in doubt,” he said.

“The Germans have not yet realised that southern Europe, including France, will be forced by their current misery to fight back against German hegemony sooner or later,” he said, blaming much of the crisis on Germany’s wage squeeze to gain export share.

German Domination: An Accidental Empire?

“Germany has created an accidental empire,” German sociologist Ulrich Beck said on March 25. In an interview with EUROPP editors Stuart Brown and Chris Gilson, the professor at both Munich University and the London School of Economics invoked the memory of the last “accidental empire,” Great Britain. But he stopped short of calling Germany a military power—which Britain was. Germany’s de facto empire has an economic power base, not a military one, he proposed.

In the turbulence of the ongoing European financial crisis, one nation has emerged from the storm as the clear leader of the Continent. For the third time in a century, Germany has set itself apart as the top dog in European economics and politics. The Berlin-led bailout of Cyprus proved that point in a tangible way.

That’s just the way it happened to turn out, some may argue. But is this true?

Welcome to Berlin, Europe’s new capital

You’re not only looking at the de facto leader of Europe, which still most people don’t realize it for what it is, but you’re also looking at the next potential world leader. Critics can laugh at the notion, but when one is ahead of the curve, today’s jokes are tomorrow’s reality.

Berlin does not feel like an imperial city. The new government buildings – the chancellor’s office, the Bundestag and the foreign ministry – have all been designed with plenty of glass and natural light, to emphasise transparency and democracy. The finance ministry is, admittedly, housed in the old headquarters of the Luftwaffe. But most of the grandest architecture – Unter den Linden and the Brandenburg gate – is a legacy of the Prussian kings. Modern Berlin presents a more welcoming face, and has become a magnet for tourists and teenagers.

Yet while the German capital has deliberately eschewed the trappings of imperial power, the fact is that Berlin is increasingly the de facto capital of the EU. Of course the EU’s main institutions – the commission and the council – are still based in Brussels. But the key decisions are increasingly made in Berlin.

Germany and Merkel hold Europe’s fate in their hands

The once-divided city of Berlin now has the task of holding Europe together and, for Chancellor Angela Merkel, this will require a difficult balancing act.

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Angela Merkel does not do trick or treat. She does slow and steady – not shock and awe.

But over the past year or so, she has made greater efforts to reach out to countries where strict austerity measures are being imposed to persuade them that yes, she does care. Germany cares.

And she is trying to make the same case to her core constituency.

Germany’s Merkel Calls for EU Veto Power Over National Budgets

Instead of bullets and bombs, it’s the erosion of national sovereignty and nearly complete capitulation of EU member states that were known to not qualify from the very beginning. It was known it would fail as the cultures and economies were to diverse to begin with, and now, according to plan, they’re seizing the moment.

Guess what’s back: The Fourth Reich under a new EU, or United States of Europe.

German Chancellor Angela Merkel is pushing a scheme that would purport to give an unelected official within the increasingly powerful but unpopular European Union the authority to veto the budgets of elected national governments. If approved, the EU would have more power over its formerly sovereign members than even the U.S. federal government has been able to usurp from American states.

Speaking to the EU summit before an EU summit on October 18, Merkel declared that it was time for the emerging Brussels-based super-state to have even more powers. “We have made good progress on strengthening fiscal discipline with the fiscal pact but we are of the opinion, and I speak for the whole German government on this, that we could go a step further by giving Europe real rights of intervention in national budgets,” she told the Bundestag lower house, drawing swift criticism.

The day we’ll find out what Germany wants

The meeting of the European Central Bank of August 2 has been declared crucial for Spain and Italy, who are waiting for help. This will be the moment we find out who in Germany — be it the Chancellor or the President of the Bundesbank — is to decide on its position on the crisis.

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What will happen now, in this stage of existential doubt over the euro? For a few days it seemed that Angela Merkel, Chancellor, and her finance minister, Wolfgang Schauble, accepted the proposition of the southern countries like Spain and Italy, supported by France, traditional partner of Berlin but afraid of being backed into a corner by Germany: that the European Central Bank (ECB), together with the European bail-out funds, would come to the rescue of their doomed sovereign debt.

Opinion these days has tended to emphasise that Germany has shifted its position, even though its two most visible leaders in this matter have not made a single statement backing that purchase of debt or any other additional measure. However, from Germany there has clearly emerged the outright rejection by the economic establishment, led by the Bundesbank, Germany’s central bank. Influential German economists, politicians and industrialists have rallied round this flagship institution. The arguments of the debate are known, and they are not worth repeating here.

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A historic day

It is obvious that Merkel cannot go back to the Bundestag to request more resources for another bailout, which was just around the corner for Spain and Italy, as the markets were anticipating too – right up until Mario Draghi, the head of the ECB, delivered his spell-binding utterance last week.

Without the political space to orchestrate a Greek-style bailout and under unyielding pressure from the markets, the most comfortable solution for Merkel was to dump the dossier into the hands of the ECB, which in national terms means the Bundesbank. The latter, observing the manoeuvre – that is, it would be the bank that would run the risk of absorbing the losses if the operation turns out badly – has stonewalled.

This would be the logic of a clash between Merkel and the bank, and not the logic of a division of roles. If this scenario is true, the ECB council meeting on Thursday will see the emergence of an alliance between central bankers from southern Europe and the majority of the eurozone governments, including Germany, against the Bundesbank and some allied central banks. A historic day.

Full article: The day we’ll find out what Germany wants (Presseurop)

Islam in Germany: “Germany Does Away With Itself”

A powerful statement from a culture that welcomes, but will not bend:

“The values represented by Islam must correspond to our constitution. What applies here is the constitution, not Sharia law…. Those who do not accept this are in the wrong place here.” — Chancellor Angela Merkel

German President Joachim Gauck recently said in a newspaper interview that Muslims living in Germany are a part of the country, but that Islam is not.

The comments — Gauck is the ninth prominent German politician to voice an opinion about Islam — have sparked a new round in the on-going debate over the role of Islam and Muslim immigrants in Germany.

During a May 31 interview with the German weekly newspaper Die Zeit, Gauck was asked about a quote from the previous German president, Christian Wulff, who during a keynote speech to mark the 20th anniversary of German reunification in October 2010, proclaimed that “Islam belongs in Germany” because of the four million Muslims who now live there. Germany has Western Europe’s second-biggest Islamic population after France, with Turks the single biggest minority.

Full article: Islam in Germany: “Germany Does Away With Itself” (Gatestone Institute)

Lloyd’s of London preparing for euro collapse

The chief executive of the multi-billion pound Lloyd’s of London has publicly admitted that the world’s leading insurance market is prepared for a collapse in the single currency and has reduced its exposure “as much as possible” to the crisis-ridden continent.

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Mr Ward says Lloyd’s had been working hard on contingency planning and had the capability to switch settlement of European underwriting from euros to other currencies.

“We’ve got multi-currency functionality and we would switch to multi-currency settlement if the Greeks abandoned the euro and started using the drachma again,” he said.

Lloyd’s has de-risked its asset portfolio in recent years, with investments split equally into cash, corporate bonds and government bonds, mostly in the US, UK, Canada and Australia. “We have de-risked the asset portfolio as much as possible,” he said.

The contingency planning comes as German politicians piled the pressure on Greece ahead of elections on June 17.

A conservative member of German chancellor Angela Merkel’s cabinet said today Germany would not “pour money into a bottomless pit”.

On Sunday, Swiss central bank chief Thomas Jordan admitted his country is drawing up an action plan in the event of the euro’s collapse

Full article: Lloyd’s of London preparing for euro collapse (The Telegraph)