'Atmosphere of Crisis' in August 2012 - Echoes of a Summer Lunch

'Atmosphere of Crisis' in August 2012 - Echoes of a Summer Lunch

In Mid-August, the Mid-Atlantic Club had invited to its annual summer lunch in Bonn. Personalities from politics and economic representatives, former military officials and diplomats as well as many guests had gathered for an informal exchange of ideas. The guest speaker was European Parliament member Axel Voss from the CDU whose topic was to give an insight into the work of the European Parliament. His remarks were focussed on the Euro crisis, the reduction of Greek debts as well as remarks about the European economic and financial reform efforts. The summer lunch took place at an unusually hot summer day and both the dimension of the economic problems as well as the pointed questions from the audience were making the  presentation  by Voss who since 2009 is deputy of the European Parliament and who spoke quite frankly and unpretentiously, quite sweaty.

Europa-Abgeordnete Axel Voss

 

all of a sudden we seem to have 80 million currency experts in Germany

In his introductory speech, Friedhelm Ost, business consultant and former Secretary of State in the Federal Press Office of the Kohl government, reflected some of the actual tension which exists in the political leadership. This can be seen in a series of contradictory proposals for resolving the debt and the euro crisis (“all of a sudden we seem to have 80 million currency experts in Germany”), worrying figures concerning the German debt (“the actual state debt amounts  to over $ 2 trillion and a budget gap [i.e. official and hidden future financial  obligations of the state] of $ 5 trillion”), annual interest payments of more than $ 60 billion and only $ 40 billion for public investment projects (“Is this our future? At a moment, when economic growth in Germany this year is not more than 0.3 Percent?”). The really frightening aspects of his presentation were softened by Ost with irony and humour and it was not accidental that he made reference to Heinrich Heine’s satirical “Travel Pictures” (Reisebilder), (a scathing description of the Provincial in the German character.)  Friedhelm Ost ironized at one point that the so called “Energy-Transition” in Germany had already absorbed 300 billion Euros and the “only ones who are really getting fat by the windmill farms are the foxes that eat the meat of the birds which are slayed by the wind turbine blades.”

 

which way Europe will go, what is going to happen with Greece, and how are the financial safety umbrellas going to function?

Euro MP Axel Voss presented the work in the European Parliament and did this in the context of posing the question: which way Europe will go, what is going to happen with Greece, and how are the financial safety umbrellas going to function? What became clear is that a Euro MP has to take care of range of important and some less important activities.  (How much time remains for a Euro-MP, caught in countless obligations between Brussels, Strasbourg and Bonn to really think about possible solutions, such as the euro crisis? What came to the mind of the observer is the well-known saying: “Don’t lose sight of the forest for the trees”).

 

there is no place for cross-party talks outside the European Parliament

Voss defended the Euro and spoke in favour of preserving it, but he also pointed to the difference in various national economies and their respective productivity when the Euro was created. This was reflected in distortions which arose within the euro zone. He called on the Greeks to engage in stronger reform efforts. Concerning the subject of European banking supervision (European Banking Union), he did not give any detailed comment (“since it was not yet discussed”). He also talked about the tensions among MPs from the different parties in respect to ideologically disputed themes (“there is no place for cross-party talks outside the European Parliament”). Indirectly he confirmed that there is a growing resentment between various European nations, instigated by media propaganda (“Quarto Reich” – was a headline in Berlusconi's newspaper “Il giornale” in reference to Merkel rejecting of the purchase of state bonds by the European Central Bank.) Voss was very critical about Germany and France having “forced” through the disregard for the Maastricht debt criteria (no sanctions against the “sinners” Germany and France after 2005, when Germany had 3 years in sequence violated the debt limit). He warned that this puts the EU agreements at stake. He also warned about the consequences of high youth unemployment in Spain and Greece and a growing radicalization of protests in reaction to the “radical cures” imposed on the respective countries.

 

Eliminate the "toxic financial products" - boost the real economy

On his website, Voss described in June 2011 the outset of the crisis: “In autumn of 2008 the global financial crisis started with the bursting of the housing bubble in the United States and the subsequent collapse of the U.S. bank Lehman Brothers.” He described the spreading of the crisis to the international markets coupled with the threat of bank insolvencies without outlining any substantial solution.

While the quandary of the political elites is becoming increasingly apparent, more questions are coming to the mind of the attentive observer: Should not the lessons be learnt after the Lehman collapse, whose cause (“uncontrolled financial instruments”) and consequence (bankruptcies due to the leverage of derivative bets) is increasingly shaking the global financial system? And should there not be some real “action” following the strong warnings which were coming after the outbreak of the global financial crisis 2008 from different political parties concerning the “financial toxic waste”?  Europe will be strengthened (the observer thinks), if the governments impose rules on the “gamblers of the financial world” and if the real economy is put again at the centre of the European political debate. As Friedhelm Ost remarked at one point during the discussion, the fight against the euro crisis resembles more a solution which makes the choice between “Cholera and plague”. Along with it goes the question what are the costs of “a failure” and how much worth for us is a "non-failure" of the euro project?  Should not the political executive in the various European countries use its power to defend the “Common Good” in the fight against the “impudence of the financial market” (as Professor Kirchhoff commented in his article „Constitution Woe” in the FAZ of 07/12/12)?

One is talking about a package of measures (the observer thinks), that range from isolating “toxic financial products” in the international financial markets, to banking supervision, an effective debt solution, to strengthening real economic innovation and create jobs for young people which makes use of the German experience in the (“dual education system”)-  measures which must be taken to overcome the crisis in Europe. This will only succeed if the people are “included” in the finding of the solution and if they feel that effective containment is imposed on the “presumptuousness of the markets”. There should also be no taboo in respect to effectively reorganizing the global financial system.

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