THE ANNOTATED WOLFGANG SCHÄUBLE – Commentary on his Guardian article, 19th July 2013

On 19th July Mr Wolfgang Schäuble, Germany’s finance minister, published an article in The Guardian entitled We Germans don’t want a German Europe. The article was written hours after Mr Schäuble left Athens, following a controversial visit during which he told Greeks to expect no relief and to stick to the script written three and a half years ago. Below, you will find Mr Schäuble’s article (in black) annotated liberally by yours truly.


The Guardian, 19th July 2013. By Mr Wolfgang Schäuble

Germany has no taste for shaping others in its image – but we want a European Union that can compete.

YV: He wants a mercantilist Europe reflecting Germany’s mercantilist mindset. But he does not want (and I believe him) a hegemonic role for Germany. This combination of (a) demanding of the rest that they ‘compete’ and (b) the reluctance to manage aggregate demand in Europe leads, with mathematical precision to self-defeating authoritarianism.

Where do we in Europe stand today? Three years after the start of the first assistance programme for Greece, and about three months after we agreed on a programme for Cyprus, the picture is mixed. On the plus side, there are many encouraging signs from the crisis-hit countries in the eurozone. Labour markets and social security systems are being reformed; public administration, legal structures and tax regimes are being modernised. These efforts are already bearing fruit. There is more competitiveness. Economic imbalances are shrinking. Investor confidence is returning.

YV: “Ubi solitudinem faciunt, pacem appellant” (tranl.: Where they make a desert they call it peace). They removed all worker protection and turned unemployment into a norm, and they called it ‘reformed labour markets’. They disbanded social security and reduced public heath provision to a cruel joke, and they called it ‘reformed social security’. They closed down public radio and tv, and ensured that Greeks have no income from which to pay their increasing tax bill, and they called it ‘reformed public administration’. They shrank wages to third world levels and put armies of workers on the dole, and they called it ‘more competitiveness’. They pushed investment into negative territory, and they called it ‘investor confidence’.

Institutional improvements in Europe have increased the likelihood of sound budgets in future years. We have introduced more binding fiscal rules, brakes on national debt and a robust crisis-resolution mechanism that gives us time to pursue the necessary reforms.

YV: George Orwell eat your heart out! They fashioned the most fragile crisis-resolution mechanism possible and described is as ‘robust’. They sent debt-to-GDP ratios into the stratosphere and have the audacity to speak of ‘sound budgets’. They introduced more of the Maastricht-like limitations that Germany was the first to violate (quite rightly) when it faced a public finance crisis; and they congratulate themselves like latter-day King Canutes who will stem a future tide of troubles by a mere command of their debt brakes.

The next step is the banking union, which will further reduce risk, both for the financial sector itself and for taxpayers.

YV: This is the richest of rich statements, coming as it does from the finance minister who ensured that the Banking Union will be celebrated in the breach and certainly not in the observance; the minister who insists on a Banking Union which does not involve the problematic banks, or the subsidiaries of the TBTF banks; which has no union-wide resolution fund behind it; which will lead to deposit haircuts in some countries of the Eurozone but not others.

Our efforts to regulate financial markets will ensure that those who make high-risk investment decisions are liable for any ensuing losses. In other words, we are restoring the link between opportunity and risk.

YV: Except of course for German banks which will be forever shielded from any losses and from any serious scrutiny into their idiotic and quasi-criminal practices.

But there is also a negative side. There is widespread uncertainty among people in our countries. Young people in parts of Europe face a dearth of opportunity. People are losing their jobs because their country is undergoing a profound economic transition. And too often public discourse about the crisis is dominated by mutual recriminations and populist commentary. National clichés and prejudices, which we believed to be long overcome, are rearing their ugly heads again.

YV: Like in the case of Banking Union, the author is acknowledging the need into order to legitimate his steadfast commitment not to do anything that might help meet it.

This debate is full of contradictions, not least where Germany’s role in tackling the crisis is concerned. There is little consensus in Europe, either about what Germany is doing or about what it should be doing. Some commentators even claim that the notorious “German question” is back. It has been said that Germany is “too strong” to fit in, but also that it is “too weak” to lead the continent. Germany has been simultaneously accused of wanting to reshape Europe in its own image and of refusing to show any leadership.

YV: Quite rightly so. Europeans understand that the powerful, surplus countries must lead. But they also understand the gigantic difference between powerful, hegemonic leadership and idiotic authoritarianism.

And even those calling for more German leadership seem to be doing so for contradictory reasons. Some want Germany to drop its resistance to debt-financed stimuli, claiming that this would help us to overcome the crisis. Others want even more fiscal solidity in exchange for Germany’s solidarity.

YV: A venerable rhetorical strategy of timid leaders: Point to a cacophony of views about the ‘leader’ to justify his inanity along the lines: “If they all criticise me I must be doing something right.”

The views on Germany’s actual policies are no less contradictory. For example, voices outside the country have called for Germany to relax its “draconian” austerity policies while, in Germany, the government has been accused of not saving nearly enough, or even at all. As is so often the case, the truth is somewhere in between. We are working to achieve a reasonable degree of consolidation, to build confidence and thus to lay the foundations for sustainable growth in Germany and in Europe as a whole.

YV: A task at which his government’s policies are failing with aplomb.

The idea that Europe should be – or even can be – led by a single country is wide of the mark. Germany’s restraint does not just reflect the burden of its history. The truth is that the unique political structure that is Europe does not lend itself to a leader–follower dynamic. Europe signifies the equal coexistence of its member states.

YV: Only some member states are much more equal than others; e.g. a certain state which denied other states the right to declare bankruptcy when they became insolvent; foisting upon them huge loans on condition that they shrink their… national incomes!

At the same time, however, Germany does feel a special responsibility towards the mutually agreed strategy for resolving the crisis in the eurozone.

YV: Yes, it certainly does!

We are taking on this leadership responsibility in a spirit of partnership, especially with our French friends.

YV: Whom we never miss an opportunity to drag through the mud, to put in their ‘place’ (with long Bundesbank treatises on how Paris must reform itself), to push into an unnecessary recession.

Like the other countries in the eurozone, both big and small, we know how fundamentally important it is to co-ordinate our efforts closely if we want to overcome the crisis.

YV: Then why has Germany spent four years investing into the mother of all coordination failures?

From the very beginning of the crisis we Europeans have pursued a joint strategy. This strategy aims to achieve the overdue consolidation of public budgets.

YV: “Let’s pursue a joint strategy” is the Eurozone equivalent to the Chicago gangsters’ “I shall make you an offer you cannot refuse.”

But even more, it aims to overcome economic imbalances by improving the competitiveness of all eurozone countries.

YV: And how are we doing this? By converting workers in Greece, Spain etc. into unemployable wrecks or pushing the best skilled toward migrating to Germany, the United States, even China.

This is why the adjustment plans for countries that are receiving financial support call for fundamental structural reforms that aim to put them back on track towards long-term growth and thus secure sustainable prosperity for all.

YV: Quite so. Only problem is that none of these reforms are possible in failed states of the sort caused by the current policy mix.

Sound public finances create confidence.

YV: Sure they do. Which is why Greece, Portugal et al create industrial scale insecurity and shatter confidence – as debt to GDP ratios shoot for the stars, courtesy of the income destroying effect of universal austerity.

But sound public finances are not enough to ensure sustainable growth.

YV: For instance, planet Mars has perfectly public finances (no debt, no deficits) but its economy is… stagnant.

In addition, we need to reform and modernise our labour markets, our welfare state, and our legal and tax systems.

YV: A perfectly true and perfectly besides-the-point statement. It is like saying that a starved person, on the brink of death from malnutrition, needs vitamins, and would benefit from never smoking again as well as from some resistance training; while failing to add that, above all else, she needs… food and clean water. Similarly here, Mr Schäuble neglected to mention the need for large-scale investment funding, for an end to zombie-like national banking systems (that are in a death embrace with insolvent, corrupt national political systems) and, crucially, the dearth of aggregate demand at a European level.

We have to make sure that all citizens of Europe enjoy working and living conditions that are not based on artificial growth bubbles.

YV: Like the ones occasioned by the predatory lending of banks such as Deutsche Bank Mr Minister?

These reforms will not take effect overnight. We Germans know this better than anyone.

YV: Is this why you have been resisting for four years the idea of a common bank resolution mechanism and fund?

Ten years ago Germany was the “sick man of Europe”. We had to tread a long and painful path to become today’s engine of growth and anchor of stability in Europe. We too had extremely high levels of unemployment, even long after we started to adopt urgently necessary reforms.

YV: What the Minister meant to say, of course, was that, while the rest of the global economy was booming, Germany’s wage and inflation squeeze improved its relative position and managed to export deflation and predatory loans while importing net profits. Had those ‘reforms’ (effectively the wage squeeze) been tried after 2008, Germany would be in tatters now. Just like Europe’s Periphery now is.

But without these reforms there can be no sustainable growth.

YV: Not exactly Mr Minister. Your precious reforms worked well for you, and at the expense of Europe, when the rest of the world, and Europe, were growing. But they guarantee sustainable depression when the rest of the world is in a recessionary spasm; as it has been since 2008.

Stimulus programmes based on even more government debt will only shift higher burdens on to our children and grandchildren, and will have no lasting benefits.

YV: True. And this is why our Modest Proposal is recommending four policies that will see to a reduction of aggregate public debt, a vast rise in investment and a cleansed banking sector. Only problem is that Mr Schäuble’s government vetoes all such rational and systematic resolutions of the Eurozone’s systemic crisis.

To create new jobs in Europe, we need businesses that offer innovative and attractive products that people want to buy.

YV: Mr Schäuble has obviously not been educated to the difference between necessary and sufficient conditions. Attractive products are necessary. But they do not consitute a sufficient condition. In the Fall of 2008, just in 1929, the attractiveness of products did not collapse. What collapsed was aggregate demand. Europe is suffering today not because we do not produce attractive goods and services but because of a collapse of credit and demand.

European companies can do this only if governments create the right conditions to help companies to achieve success in our increasingly globalised world. That applies not just to German businesses, but to French, British, Polish, Italian, Spanish, Portuguese and Greek companies as well.

YV: How about, then, fixing our banking system (without which firms, large and small, are dead in the water) by ending the idiocy of having the insolvent Spanish or Italian governments recapitalise the Spanish and Italian banks by means of monies guaranteed by the hapless German taxpayer?

The idea that Germans want to play a special role in Europe is a misunderstanding. We do not want a German Europe. We are not asking others to be like us.

YV: Dear Mr Schäuble, it would be a tragedy (and, moreover, a lie) if Germany refused a special role in Europe. Are you really confusing, in your own mind, a German aspiration to play a special role with a commitment to effecting a German Europe? (Perhaps you need to re-think you choice of speech or article writers.)

This accusation makes no more sense than the national stereotypes that lurk behind such statements. The Germans are joyless capitalists infused with the Protestant work ethic? In fact, some economically successful German regions are traditionally Catholic. The Italians are all about dolce far niente (delicious idleness)? The industrial regions in northern Italy would not be the only ones to bristle at that. All of northern Europe is market-driven? The Nordic welfare states, with their emphasis on social solidarity and income redistribution, certainly do not fit this caricature.

YV: If the first casualty of war is truth, then the first beneficiary of a systemic Europe-wide crisis is stereotypical, quasi (or full blown) racism. Mr Schäuble you are, I am very much afraid, sowing the harvest that you planted four years ago when you committed yourself to a wholesale denial of the systemic nature of the Crisis, opting instead to treat it as a Greek crisis, a Portuguese Crisis, an Irish Crisis etc.

Those who nurture such stereotypes should look at recent surveys that show a clear majority of people – not just in northern Europe, but also in the south – in favour of combating the crisis through reforms, public spending cuts and debt reduction.

YV: Permit me not to be impressed with surveys of views amongst our bewildered fellow Europeans. Back in the bleak era of the Black Death most Europeans believed that the plague was caused by sinful living and would be exorcised through self flagellation.

The Germans themselves are the last people who would want to put up with a German Europe. We want to put Germany at the service of the European community’s economic recovery – without weakening Germany itself. That would not be in anybody’s interests. We want a Europe that is strong and competitive, a Europe where we plan our budgets sensibly, and where we do not pile up more and more debt. The key task is to create conditions that are conducive to successful economic activity, in the context of global competition and demographic trends that pose a challenge for the whole of Europe. None of these things are German ideas. They are the tenets of forward-looking policies.

YV: For once, I shall agree while, at once, repeating the well known adage about good intentions and the road to hell.

Sound fiscal policies and a good economic environment are the only ways to gain the confidence of investors, businesses and consumers and thus achieve sustainable growth. All international studies confirm this, as do the European Central Bank, the European commission, the OECD and the International Monetary Fund – organisations headed, incidentally, by an Italian, a Portuguese, a Mexican and a Frenchwoman respectively.

YV: Someone please introduce asap Germany’s Minister of Finance to the recent treatises against his policies by the IMF and the OECD.

And the policies of European governments are geared towards these objectives.

YV: Yes, Mr Minister, our politicians have been bending to your will, while citizens, North and South, East and West, are being turned off Europe – your Europe, which they increasingly see as the enemy, as the villain of the piece. By silencing all opposition among your partners’ leaders, Mr Minister, you are gutting the House of Europe and destroying its democratic legitimacy.

Those European countries currently grappling with complex adjustment processes deserve our highest appreciation for the way they are reforming their labour markets and social security systems, modernising their administrative structures, legal systems and tax systems, and consolidating their budgets. We should have the deepest respect for the efforts they are making.

YV: Echoes of British Generals in Gallipoli while sending thousand of young men to their pointless death.

Our reward – everyone’s reward – will be a strong and competitive Europe.

YV: I suppose everything, in the end, works out. Even the Black Death had its silver lining, reducing Europe’s over-population issues and, thus, giving rise to Modernity… I suppose that a determined leader will always manage to find something to caress his conscience with, however destructive his policies.

45 thoughts on “THE ANNOTATED WOLFGANG SCHÄUBLE – Commentary on his Guardian article, 19th July 2013

  1. Wolgang Schäuble’s speech is utterly cinicist. Like most neoliberal politicians today. They lie in every word. They get rich by doing so, cause they are well bribed by the economic oligarchy that is ruling the world nowhere fast. Disaster is comming and this lawyer (Schäuble) now turned into an economist by the magic appointment of the oligarchs, knows nothing but to enrich the rich and empoverish the middle classes. It’s a well designed scheme. He only cares about saving the totally rotten german banks (which obstinatedly refuse to pass any tests while they demand that from other countries) cause the morons that rule german banking monetary surplus, risked it (and lost it) in every bubble they could put their paws on (american subprime mortgages, and the irish, british, spanish etcetera construction bubbles). Now they want their money and interests back, while they soffocate the debtors, who will never be able to pay that odious and ilegitimate debt. How long will this neoliberal capitalism last?

  2. Pingback: Yanis Varoufakis: The Annotated Wolfgang Schäuble (PR Versus Reality, European Periphery Edition) « naked capitalism

  3. Well written, exactly the conundrum that Greeks face now days.
    The euro is the carrot and the Greeks are chasing it and in the process end up paying a very big price. An economy with 30% unemployment, with very low wages featuring a currency that is 30% more valuable than the US dollar. And on the other side the alternative opposition party is Syriza, a party primarily of radical left wingers that is slowly trying to adjust to the possibility it might in the near future become the majority party. Not because Greeks agree to its theories but simply because they are fed up by the current reality and of course because a large number of them are employed in the public sector and want to keep the only safe jobs that exist in Greece right now.

    All in all Mr. Varoufakis, with Germany on the one hand and Syriza on the other the situation in Greece will take a while to clear out.

    • “An economy with 30% unemployment, with very low wages featuring a currency that is 30% more valuable than the US dollar”

      Sounds like the sovereign nation of Greece made some very bad sovereign mistakes, starting with the joining of the misconstructed eurozone and not ending with still staying in the misconstructed eurozone.

  4. It is deplorable, but I can confirm that many people even in the south back spending cuts or regard them as inevitable. I’ve just been in Spain for a couple of weeks, talking to many “ordinary people”. Unfortunately very few were critical towards the German policies, and no one knew or understood that Germany with its trade surpluses (which were forced upon its population by real wage cuts – a bundle of social reforms affecting pensioners, public sector workers and social welfare benefits recipients) has a lot of responsibility for the crisis. That’s a huge problem because a solution of the crisis won’t come from Germany. Germany will continue its policies regardless of the outcome. Apart from the marginal Left Party all political Parties back the austerity course and they do not want to revise the (mercantilistic) social policies which made the German economy so competitive and so many Germans so poor. They do not want to leave the Euro or seeing the Eurozone split either, because that would mean that the German corporations would loose the loans an credits they gave their European neighbours. They probably believe that the German model (essentially wage cuts) is transferable on the whole Eurozone and do not see that a region as big as Europe couldn’t run large surpluses without its currency being revalued. They do not understand either that competitiveness is a merely comparative term and that wage cuts all over the world would lead into an economic catastrophe.

    • Hanns:

      O.k. Now let’s try to put it in practical terms. Say you are a nation trading with Germany and with which Germany is running trade surpluses. What do you ask of Germany to do? Reciprocate in imports? Or do you seek alliances with others in obtaining united better terms?

      Last month China maintained a high monthly surplus via lower German imports. In such game China maintained the same or better position in trade balance while Germany got hurt since both EU and China bought less. You could see it in the graphs below:

      It seems that if 4 key players coordinated (namely China, UK, France and the US) they could greatly reduce the 188 Bil. German trade surplus by a very substantial number. This will get German attention towards change of attitude.

    • And Hanns:

      Let me just elaborate a bit to better understand my comment.

      Actually China last month had both lower exports and imports. You can see the exports here:

      and imports here:

      But by reducing its imports by a much higher rate than exports, China achieved a very high positive trade balance (in fact a record for the year)

      Therefore in doing so it hurt Germany the most whose trade balance (still positive) got reduced by a lot.

      Therefore German with an EU economy in recession she is basically left with two major markets: China and the US.

      Now, you might say that since Germany is trade addict and US a consumption junkie the two deserve each other (no problem there, we have match in heaven conditions). But if the Chinese ,who are world class trade players not easily outsmarted, continue to buy less German products then such becomes a real problem for Germany.

      And this is when the realization could sink in for Germany that it’s a give and take and not exclusively a take game.

      Germany might also come to regret the fact that its most natural market (EU) has been practically destroyed on the basis of fiscal rectitude and the accompanying moralizing. And Germany might lose European support when she would need it the most.

    • @Dean: Yes, Germany should subsidise Greece by selling €100 worth of goods for €90 in cash and €10 in credit that will never be repaid.

      Why? Because the alternative under the best possible circumstances is to sell €90 worth of goods. And if credit is cut suddenly the resulting confidence shock means selling more like €0 worth of goods.

    • “Apart from the marginal Left Party all political Parties back the austerity course”

      Well, no. The Alternative für Deutschland (AfD) is the one and only political party in Germany which says that the so called austerity was wrong and will never be right and thus must be stopped. Accompanied by the Grexit, Porxit and so on, of course. And, mind you: debt forgivness. Since the AfD is also the one and only political party in Germany which acknowledges: the debtor nations can and will *never* pay back their debts in full.

    • @ Dean

      Your obesession with Germany is borderline fanatic. You better should focus your respectable energies on what Greece did to arrive where she is, and what Greeks can do to lift her out of this situation.

    • Thank you, Dean, for the instructing statistics. To be honest, I do not think that China cares about hurting Germany’s trade surplus. In fact, Germany never had a trade surplus with China as far as I know, but rather a trade deficit.
      I do think however, that mediterranean european countries including France should form an alliance against the north to make clear that Germany must surpass ECB inflation targets for many years from now and stop undercutting them. It must begin to run trade deficits with its european partners in a couple of years to give them the possibility to pay back theirs debts in goods and services. Before that can happen, people in the south have to understand the problem: Germany’s beggar thy neighbour policies over the last 15 years.
      Together with France, southern countries (and Belgium, Slovakia, Slovenia etc) should threaten with leaving the Eurozone together, if G. is unwilling to reverse its policies. Together they would form a zone big enough to avoid the worst consequences of an individual exit.
      But, as long as even the victims of austerity policies in countries like Spain do believe in the dominating narrative (“we all lived beyond our means”) and do not force their governments to act, there is no hope for a change.

    • @ veryserioussam: the AfD is a far more marginal party than the Left party. And it doesn’t say austerity is wrong, because it calls for even harsher austerity in Germany after an (individual) exit of some countries from the Eurozone. Moreover they are utterly antidemocratic, a kind of libertarian lunatic fringe. You could call the a German tea party movement. Some leading members of that party even urged a census suffrage system a couple of years ago (just to illustrade what kind of people they are). See e.g. here (in German):
      The debtor nations certainly could pay back their debts if Germany would begin to raise its costs to the level of her productivity. That is a solution however the AfD wouldn’t tolerate.

    • Hanns:

      Thanks for the reply. Regarding the China/Germany situation you may want to read this because despite the fact that Germany has a trade deficit with China, nevertheless China is the 5th largest export market for Germany with 66.6 Bil. euro worth of German goods landing in China(believe me I did not make up the mark of the beast, the actual exports to China in 2012 according to the German Statistical Agency were 66.628 Bil. euros 🙂 ):

      As far as the French-southern alliance you are suggesting, here is a problem in my humble opinion. France happens to be in a worst fiscal derailment than Greece at the moment. Look below at the French current account and you will see why France is actually Schauble’s #1 pre-occupation (and for a good reason I think):

      Italy and Greece are hopefuls for a trade surplus (or close to zero balance) this year and in that sense on a different category.

      Therefore if I am Schauble my real concern is France as well as my source of constant irritation (since France due to its size is not as easily handled as Greece for example).

      So, now, if I see two countries(namely Greece and Italy) joining France in a common cause and I am Germany this would be extremely upsetting. They all become targets of my wrath and since I can’t unload on France(for the same reasons I couldn’t before) I think particularly Greece could become very fast the target of an exemplary vicious attack (just to show who is boss here and because Italy is another biggie that requires glove handed care).

      So you may want to rethink this joining of hands strategy, because others have suggested it as well but the risks for Greece seem to be outside the acceptable range. I can very easily see Greece being pounded by both Germany and “Greece’s new allies” on the basis that out of all people the Greeks ought to really shut up. And I am Greek and I care about my country, so when I tell you this I am quite serious about the disproportionate risk I see staring me in the face.

      You may have a different view and I am interested in your reply.

    • Dean,

      thanks again for the links. No doubt Germany exports a lot to China. As far as I know these are mostly investment goods which is why the German industry might head for trouble in the next couple of years, if the chinese economy really will transform, as the article shows you hinted to. In fact those in this country who advocate austerity economics are rapidly running out of arguments as they always argued Germany could rely on emerging markets and didn’t really need her “european backyard” any more.

      In fact countries like China and the U.S. criticise Germany for her ever larger trade surplus ( Euro = USD only last year, more than 1 trillion USD over the last decade). They do so during G20 meetings for example. But they cannot do anything to force Germany out of its attitude (well, the US could if they really wanted, but it is difficult to make a U-turn if you always were preaching neoliberal reforms). The european countries in contrast could do so, because Germany depends on the EMU more than they do.

      The problem now is in my view, that the governments of these countries, first of all the french government, do not seem to be willing to do that. I invite you to read the following article
      telling us, that the french government did not protest when Mario Draghi presented forged figures about european productivity and wage growth (comparing real to nominal figures) a few months ago. (I would see Draghi here as proponent of the German stance on austerity). What I was trying to say is, that if the public opinon in their countries (France, Spain, Italy) would believe in a different narrative (“Germany led a beggar thy neighbour policy”) and bring their governments to act according to that, a change in european politics might be possible.

      It almost certainly won’t come from Germany. In this country nearly everybody believes the “austerity and competitiveness”-tale, together with the “swabian housewife”-tale. It seems to be too deeply rooted. And Germany will continue on this path: After having lifted the retirement age to 67 a few years ago (which is in reality a pension cut and thus a wage cut again, because we have a “pay as you go” system) now corporate lobbyists (Economics professors, the known think tanks, leading columnists) are increasingly talking about lifting it to 69 years. So the next round of social cuts is under way, pushing down wages further. Wage settlements were rather low also this year, merely reaching inflation rate. The result is stronger German “competitiveness” (i.e. lower costs), growing trade surplus and consequently more austerity elsewhere in Europe. A vicious circle somebody will have to destroy.

      You might be right regarding Greece. It has a week political position right now. France however hasn’t. And if France has a big trade deficit today it is only due to the beggar thy neighbour policies her biggest trading partner led during the last ten years.
      If we change the years on the chart you hinted to, we see that over the years France had a rather even trade balance.

    • You are totally right. But In Spain we do know german banks are totally rotten and refuse to pass any tests. They tried (as new rich) to play in the anlgo-american banking casino, where they lost loads of money and now they try to cash it from the weakest kinks of the chain, because they don’t dare to ask it from Wall Street or the City.

  5. I sometimes wish Germany would have had their colonial empire back in the day, if that meant they’d move past 18th century economics. How does Mr. Schäuble expect persistent trade surpluses to be settled? I guess he’d be happy if we plundered or dug up more gold from the colonies to pay for industrial goods, even though that would be equivalent to debt mutualization with inflation.

    Running long-term surpluses means subsidising your customer. That’s OK, a productive economy is an internal benefit. Japan understood this in the 80s, China understands it now. Germany appeared to be clued up until Mr. Kohl’s time but since then adopted a we-win-you-lose mindset.

    • I sometimes wish Germany would have had their colonial empire back in the day, if that meant they’d move past 18th century economics.

      Would you freak out if I told you that the Germans were the first practicing Keynesians?


      Under the Third Reich!

      Read Mike Whitney’s article “Hitler vs. Bernanke” in this weekend’s Counterpunch. Here’s the link:

      PS: Yes, yes, Hitler was a murderous psychopath, but that is not the point.

  6. Yanis

    You have written a post in Greek some time ago (lifo), where you explained mathematically that politicians may take a better grade/credit by doing the worst they can.

    Mr. Schauble’s name should be written with golden letters on the marble outside that school… as a founding professor

    Here, I found it

    • «Ήτο όμως κατά τας ανιστορήτους εκείνας τραγικάς στιγμάς επιτακτική ανάγκη να σωθή από την καταστροφήν ότι ήτο δυνατόν να περισωθή και να ανακουφισθή ο Ελληνικός Λαός από το βάρος της επερχόμενης αφορήτου δουλείας και δυστυχίας. Δια τούτο εδέχθην εν τέλει την πρότασιν του στρατηγού Τσολάκογλου, αν και είχον πλήρη συναίσθησιν των πολλαπλών ευθυνών, ας ανελάμβανον και των θυσιών, εις τας οποίας θα υπέβαλλον εμαυτόν δια της αποδοχής μου ταύτης. Το έθνος όμως είχεν ανάγκην των υπηρεσιών των τέκνων του. Έπρεπε να ευρεθούν άνθρωποι, οι οποίοι να θυσιάσουν συνειδητά τον εαυτόν των υπέρ αυτού κατά την δεινοτέραν περίοδον της μακρίαωνος ιστορίας του.»

      Κωνσταντίνος Λογοθετόπουλος, Ιδού η Αλήθεια, Αθήναι, 1948, σελ. 9-10

      Reminds you of anything?

  7. Sometimes i wonder why the Greeks who fought for so long for their freedom gave it up so easily? And this time you don’t even have to fight to have it back, you just have to say NO. Or maybe “nein” is more accurate.
    My wild guess is that Greece will not be the first country to leave the monetary union, but the second or the third.
    Thanks for an interesting post.

    • Ήτο όμως κατά τας ανιστορήτους εκείνας τραγικάς στιγμάς επιτακτική ανάγκη να σωθή από την καταστροφήν ότι ήτο δυνατόν να περισωθή και να ανακουφισθή ο Ελληνικός Λαός από το βάρος της επερχόμενης αφορήτου δουλείας και δυστυχίας. Δια τούτο εδέχθην εν τέλει την πρότασιν του στρατηγού Τσολάκογλου, αν και είχον πλήρη συναίσθησιν των πολλαπλών ευθυνών, ας ανελάμβανον και των θυσιών, εις τας οποίας θα υπέβαλλον εμαυτόν δια της αποδοχής μου ταύτης. Το έθνος όμως είχεν ανάγκην των υπηρεσιών των τέκνων του. Έπρεπε να ευρεθούν άνθρωποι, οι οποίοι να θυσιάσουν συνειδητά τον εαυτόν των υπέρ αυτού κατά την δεινοτέραν περίοδον της μακρίαωνος ιστορίας του.»

      Κωνσταντίνος Λογοθετόπουλος, Ιδού η Αλήθεια, Αθήναι, 1948, σελ. 9-10

      Reminds you of anything?

    • The only argument against the similarities today is… that we are living in the atomic bomb era…

      …but again… is that fear what’s holding EZ together?

  8. Hello Yanis,

    This post reminds me of the story you have told a number of times in your previous lectures/discussion regarding the fateful meeting in the early 90s which included François Mitterrand, Jacques Delors, Stuart Holland & the detailed presentation given by Mr Holland on the fiscal union architecture…the response given by François Mitterrand & his team should be documented for future generations i think…

  9. It is completely sensible for Mr Schäuble to have his public relations team whip up this little piece of propaganda. After all it goes exactly along the lines the current german administration has been feeding to their own voters for some time now.

    Of course, no self-respecting german would ever openly support any claim for international leadership. We are all too well aware of the unpleasant memories such boldness would still evoke amongst the rest of the world.

    Instead, Mr. Schäuble, a lawyer by trade, and his boss Ms. Merkel, who owns a degree in physics, stick to the image of being the uber-rational pragmatists they have been portraying since the beginning of the crisis.
    And unfortunately they have been doing so very successfully in front of their national audience.

    Despite the obvious fact that german politicians have neither done anything to prevent their own single-minded Idea of a solution to the crisis from failing nor even acknowledged this sad truth, the current polls for the september elections see them clearly in favour of the voters.

    I sincerely hope that the rest of Europe won’t subscribe to this charade.

  10. Mr Varoufakis,

    We Greeks should be proud of having scientists like you living among us.

    I wish you possessed the power to implement at least a sample of your plans.

  11. As Timothy Garton Ash [The Crisis of Europe: How the Union Came Together and Why It’s Falling Apart, Foreign Affairs : September/October 2012] wrote:

    “At the time of German reunification, German politicians never tired of characterizing their goal in the finely turned words of the writer Thomas Mann: “Not a German Europe but a European Germany.” What we see today, however, is a European Germany in a German Europe.”

    Nice piece Yanis!

  12. Dear Yani,
    You are overly kind to Schauble in accepting his denial of Germany hegemonic pursuit. Yet you very constructively demonstrate in the above embroidery of his NEWSPEAK that he, at least, among Germany’s elite is in pursuit of a very rational and complete hegemonic plan: German independence from the post-War system of alliances, control of Europe equivalent to that suffered by Germany after the Treaty of Westphalia [that one lasted two hundred years], freedom of Germany to balance as between the United States and Russia, an implicit insouciance as to the rise of China, in short a Bismarkian view of the place of Germany in the world, far too big for Europe but not too small for the world. Contrast this with the dismal picture of the analogous British plan, if the term analogy is not obscene in thus case, or the miserable equivalent of the French plan, which in the absence of any potential British presence amounts to the pursuit of Germany’s coat tails, in order to secure for France her hoped for ‘place a la table’ of the world’s great powers concert. Your kindness actually has an echo in Mark Mazower’s brave attempt to construct another model for understanding Germany’s current peculiarity, based on rules rather than authority [in his recent FT op-ed]. Why not simply accept that, after reunification, Germany has redefined her overarching national objective and is pursuing it with remarkable single-mindedness against trivial opposition, and why is this redefined objective not to be called hegemony? I think that having called every micro-spade a spade it is usefully consistent to call the only macro-spade with its proper name. Thanks for an excellent piece.

    • o.k. but Schauble in his own words said that he is not the ZuperTroika. He is just a humble man who wishes to increase German trade with the world from 188 Bil. euro surplus in 2012 to 250 Bil. euros in 2013 and beyond. And in fact he commissioned a report that shows that even Greece would benefit from the new Transatlantic trade agreement which is his preferred tool of achieving his modest goal. 🙂

      Problem is that this report/study, which uses 2010 data, shows Greece benefitting by roughly 30% in reducing its US trade deficit. And I say a problem because last year Greece has already reduced its US trade deficit by 100% and has turned such deficit into a healthy surplus in its US trade.

      So, this is all about German trade again pretending that others (such as Greece) would benefit from it so that such unfortunate/abused others join the EU parade in support of the German plan.

      The real question is what the Varoufakis-Galbraith team is doing on American soil to prevent such from happening. Come on guys let’s get organized. How is it possible for the US to give Germany such trade facilitation when in fact Germany is doing all it can to thwart all American efforts for revived growth in Europe?

  13. Schäuble is an extremely dangerous man – most of all for us Germans! Whom he hates with all his ruthless energy. He can’t ever forget that this country did not allow him to become chancellor. So he does everything to ensure huge amounts of German taxpayer’s money is forever given to the finance industry and the GIPSIFs. Sometimes I think that there are attempted assassinations which should not have failed.

    Anyway, your are still not willing or able to accept that only the GIPSIFs themselves caused the situation they are in now and only the GIPSIFs themselves can solve their problems, yous till blame the Germans for almost everything. Get real.

    • In Spain we do know german banks are totally rotten and refuse to pass any tests. They tried (as new rich) to play in the anglo-american banking casino, and financing every bubble they could to cash huge benefits, but instead they lost loads of money and now they try to cash it from the weakest kinks of the chain, because they don’t dare to ask it from Wall Street or the City.

  14. Great analysis as usual! For once, a Greek economist who seriously understands debt deflation – something missing in European economics education and taboo topic in EU and Greek political elite circles.

    Reading through the article of this dreadful person – Mr. Schauble – where is there the slightest possibility that the Germans would ever accept your ‘modest proposal’??? I see this as hopeless. Further I dispute the wisdom of any self-respecting European country being in a common currency zone with Germans, making the rules. Why not leave Germany and their dreadful currency union to the Germans and be free of it? Europe anyway has no growth prospects and is getting poorer by the day.

    Greece always suffered historically getting mixed up with central Europe and especially Germans. By nature, it is a sea power and belongs with those who control the seas like the UK and the US. Its natural markets are Eastwards – thus the importance of Cyprus as a bridge. Strategically it should have a currency that follows the US dollar – the currency of the world freight markets and emerging market countries.

    • It amazes me that once proud sovereign countries would permit themselves to be ruined economically, ruled by threats and ultimatums and generally terrorized by people like Ms Merkel and even worse Mr. Schauble – a disfigured person of special needs confined to a wheel chair, possibly suffering psychological problems – neither of them with any qualifications whatsoever in economics. Is not this moronic cowardice?

    • Sure. A world that has a 6% external surplus with the rest of the Universe. I wonder what the Clingons would think…

    • LOL! At least give him some credit Yanis!

      So far only Earth remains unruly. Mars, Venus, Jupiter and all other planets have perfectly aligned budgets and are following the Schauble program to a “T”.

      As soon as Earth falls under German domination, we will no longer be talking about such minor deviations. 🙂

  15. An excellent deconstruction of Herr Schauble’s arrogant and, I would say, imperial inanities.
    As to your comment over the Black Death’s silver lining. Quite so. It reminds me of the film “the best exotic marigold hotel”, where the hapless young Indian trying hard to keep his decomposing hotel and restore it to health,keeps repeating “It will all be all right in the end. If it isn’t all right, it isn’t the end.”
    Well Herr Schauble has made sure that we are really very far from the end. In fact through his thorough “reforms” of health services and social welfare throughout Europe, I wouldn’t be at all surprised if the continent were to be struck by some new plague there would be no health services left to deal with any more. Now there’s a thought.

  16. One curious detail…..:)

    Whereas during Merkel’s visit the Athens Hilton was in total lockdown, surrounded by 1000s of police, red cordons, snipers on surrounding roofs etc, Scheuble’s visit merited only a police bus or two parked at some distance and occasional tiny clusters (3 policemen per group) of ‘police security’ here and there, most of them lolling around gossiping with frappe & rollies.

    I waltzed down the basement parking car ramp in my flip flops without receiving a glance, let alone being stopped or frisked a la Merkel / Shimon Peres.

    Perhaps something to do with police redundancies? A missed opportunity perhaps :)…..?

  17. Yanni, I hope you sent your answer to the Guardian as well. They should publish it and let people know also the other side of the coin, as seen by an economist with a much broader perspective over the reality of the European crisis.

  18. Yanni are you aware that among other details, last Wenesday’s multibill passed by the Greek parliament abolished the 8 hour day/ 5 day week? This was a condition of the Troika. (It also gave all Troika members residing in Greece tax-free status and exemption from luxury tax: another Troika condition, but a story for another day.)

    This links back to last summer’s demand from the Federation of German Industry for a 13 hour day / 6 day week / no benefits / minimum wage 550€ (individual workers’ taxes still need to be paid from this) for their proposed Special Economic Zones in Greece. Which I suppose the 100 million ‘gift fund’ from Scheuble on last Thursday’s visit will be used to set up. Thus starts the China-ization of the PIIGS, now that we are sufficiently ‘competitive’ – i.e. equal to Chinese sweat shop conditions – and therefore ‘attractive’ enough to justify a transfer of german factories from China to “Europe”.

    Germany and the Federation of German Industry are now involved in lobbying at EU and national levels for corporate tax waivers for these ‘investments’.

    Mercantilist foreign policy indeed!

    By the way the Director of the Federation of German Industry is the ex-CEO of Hochtief, and considered the greek expert in Germany after his stint here in charge of the construction and running of Athens’ airport. Athens airport was sold to a Canadian company in February, who purchased it with the proviso that the .5 billion debt Hochtief owes in unpaid taxes to the Greek state be waived [eliminated from the books].

    • Care to provide a serious source for “last summer’s demand from the Federation of German Industry for a 13 hour day / 6 day week / no benefits / minimum wage 550€ (individual workers’ taxes still need to be paid from this) for their proposed Special Economic Zones in Greece”?

  19. I really hope Mr Schäuble reads this blog…. Because then he might actually learn something from it.

    But I am afraid that even if he does read it, he won’t learn anything from it. Because it’s not in the interest of Germany. And that is the mindset of most governments in Northern Europe.

    I live in the Netherlands, and even here ‘public opinion’ is shifting and people ask why the Dutch government does everything the Germans want without any challenge.

    • The interest of germany is not at all the interest of Mr. Schäuble, quite the contrary.

      Anyway, what says the public opinion in the Netherlands about, for instance, the miraculous recent eyesight recovery of 100 out of 152 ‘blind’ Greeks living on Kalymnos?

      Apparently, the Greek state pays certain social benefits for blind citizens: So far so godd, but this country did until recently never verify if the people who claim this support are indeed blind.

      And this is just one example out of countless of how Greece is robbed mainly by her very own people.

  20. I agree with your comments, Yani. Schauble is just full of political platitudes and possesses no capacity to grasp the complexities of economics. His education consists of typical German legalistic and bureaucratic reasoning — which has nothing to offer a world in crisis. Singlehandedly, he is responsible for the appalling and arrogant decisions made in the management of the eurozone problems. Yet the guy is so full of it (“it” being excremental in nature) that he has no hesitation even to appear in Greece to “explain” to the misguided Greeks how he is helping their economy.

    There is only one thing worse than arrogant fools — and that is arrogant fools with power. Europe has a surfeit of them at the moment.

    • “Singlehandedly, he is responsible for the appalling and arrogant decisions made in the management of the eurozone problems”

      You really believe this rubbish, don’t you? Schäuble is extremely despicable for a whole lot of reasons. But he is not the Troika. Germany isn’t even a member of this undemocratic construct.

    • @VSS: if you don’t understand that Germany is calling the shots, then you understand nothing. And within the German polity, it seems that Schauble is the principal austerity proponent (at least, within visible politics).

      If you have alternative readings of where political power lies in Europe, pray tell.

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