Tuesday, July 7, 2015

Eurozone Fissures and German Weaknesses Highlighted by Greek No Vote

After Greece’s landslide vote rejecting Eurozone bailout terms, German Chancellor Angela Merkel faces a fundamental test her leadership abilities as she tries to find the right direction for Europe at a decisive moment. Jan Techau, director of Carnegie Europe, a research group based in Brussels, told the New York Times : “This has taken on a political dimension that far exceeds the economics. This is now about all the basic tenets of European integration -- the balances between the economic and the political, between toughness and solidarity, whether Europe is still an example in the world for peaceful resolution, whether the southeastern flank holds." ~~~~~ Merkel is regarded as the de facto leader of the European Union, and she is expected to give direction for an array of challenges beyond Greece. Britain is planning a 2017 referendum on its membership in the EU, threatening the departure of one of the EU’s largest members. Russia’s re-emergence as a security threat has been met with disagreement among EU member countries about how to confront Russian President Putin. And as yet, there is absolutely no consensus about how to deal with the illegal migrants flooding into southern Europe in growing numbers from Africa and the Middle East, a concern that has increased as Greece falls deeper into crisis. Additionally, nationalist and populist movements have become serious challenges to mainstream EU political parties, questioning how well EU leaders and institutions connect with average citizens and whether the EU is even democratic. Nigel Farage, leader of Britain’s UK Independence Party - UKIP - rejoiced Sunday on his Twitter account that the EU “is now dying. It’s fantastic to see the courage of the Greek people in the face of political and economic bullying from Brussels.” Marine Le Pen, leader of France’s far-right National Front, on Monday morning expressed concern for the lack of leadership from French President Hollande. She repeated her call for taking France out of the Euro and out of the EU. The now-surfacing nationalism runs deep across Europe. Merkel and other leaders see it as a threat not only to their own political positions but also to decades of slogging effort since the end of World War II to purge Europe of its old nationalistic character and resolve disputes between nations through the cumbersome mechanisms of the European Union. ~~~~~ But today, the focus is Greece. Merkel and Hollande met in Paris late Monday afternoon to try to forge a common pisition before Tuesday's Eurozone leaders meeting. They failed. President Hollande said : "The door is open for discussion," calling on Greek Prime Minister Alexis Tsipras to make "serious" proposals quickly. Chancellor Merkel was more unbending : "We say very clearly that the door for talks remains open and the meeting of Eurozone leaders tomorrow should be understood in this sense. But at the same time we say that the requirements for starting negotiations about a concrete ESM program are not present at the moment." Germany has also warned against any unconditional write-off of Greece's debt, amid fears it would destroy the single currency. German economy minister and vice chancellor Sigmar Gabriel said : "The other 18 member states of the Euro can't just go along with an unconditional haircut [debt write-off]." The differences between the French and German stances on Greece reflect a chasm running through the EU. So, some countries - led by France - are pushing for a deal that wil give Greece some breathing space to stay in the Eurozone. French Prime Minister Manuel Valls says Greece must stay in the Eurozone because it could not "take the risk of Greece leaving" - for economic as well as political reasons. Others -- led Germany and including Malta, Slovakia and Estonia that are owed significantly more by Greece as a percentage of GDP than Germany or France -- are under greater political pressure at home not to bend, and wonder whether such a deal is possible. It all leaves Greece in a precarious position. The best that can be said is that it could go either way. ~~~~~ Germany is known as a law-abiding, practical, hard-working country that has the best economy and checkbook in the EU. It projects an image of rectitude and precision. But, there are chinks in that image. One chink relates to Islamists and anti-Semitism in Germany -- the number of Islamists increased to 43,890 in 2014 from 43,190 in 2013, according to a report recently released by Germany’s domestic intelligence agency. Radical Islamists are “the greatest danger to Germany,” according Hans-Georg Maassen, the president of the agency, the Federal Office for the Protection of the Constitution. “Germany is on the spectrum of goals for Islamic terrorists,” he added. There are 950 active Hezbollah and 300 Hamas operatives in Germany. The Merkel administration along with the EU banned Hezbollah’s military wing in 2013, but allows its political wing to operate. Hamas is a designated terrorist organization. According to the report, the number of Salafists in Germany increased from 5,500 in 2013 to 7,000 in 2014 . The Salafists are “the most dynamic Islamic movement in Germany” and serve as a recruitment pool for jihadist groups in Syria and Iraq, according to the report. The chapter on “Islamism and Islamic terrorism” states that at German demonstrations against last summer’s Gaza war, there “were rather more Hamas-supporting events than peace demonstrations, and there was clearly public anti-Semitism.” The anti-Semitic slogans targeted “Jews and Israel” and resulted in attacks on Jews and pro-Israel activists. Some of the protest slogans were : “Kill the Jews!” “Jews out!” and, “Hamas, Hamas, Jews to the gas!” The report also cited the arson at the Wuppertal synagogue in North Rhine-Westphalia state in June 2014. A local court exonerated the perpetrators, German Palestinians, of anti-Semitism. It said the men sought to bring “attention to the Gaza conflict” by tossing Molotov cocktails at the synagogue. The number of attacks by right-wing extremists soared to 990 in 2014, a 23.6% increase from 2013. The unifying factor for Islamists, the far right and far left, is a deep loathing of Jews, according to the report. ~~~~~ So, dear readers, it would seem that some of Chancellor Merkel's time should be spent at home, devoted to eradicating the increasing Islamist jihadism and anti-Semitism in Germany -- before she attempts to tell Greece how much Germany has already 'given' to help Greece or tries to lead Europe to a bright new tomorrow. Every country has its own homegrown problems. Some are easily handled. Some require long-term programs and patience -- both Greece's debt profile and Germany's jihadists and right wing anti-Semitism, for example. Every house is a glass house. Any people or leader who pretends otherwise will eventually feel the stones of critics and hear the shatter of glass where they assumed that they were protected by impervious brick walls. The West is patient with Germany and you, Chancellor Merkel, because we know you are making serious efforts to eliminate jihadism and anti-Semitism. In return, be patient with Greece because she is making serious efforts to un-do the austerity folly you led her into and to get back on her economic feet, even though you may find the effort un-German.

4 comments:

  1. It is said that the IMF & ECB want to keep Greece in the Eurozone. Isn’t it well known what both the IMF and ECB don’t want is a quasi-run on the membership of the Eurozone and/or the EU?

    All this talk of ‘wanting to help Greece out of its financial troubles” is 1. All about getting their investment and interest monies back from Greece, 2. Stopping the mentality among Spain, Italy, and Portugal that exiting the Eurozone & EU could be their route to take to financial recovery, and lastly 3. Not giving the English/ Prime Minister David Cameron ammunition for pulling Great Britain out in 2017.

    The help that Merkel and Hollande are extending Greece (now that the vote is over) has a very sharp, barred hook on the end of the line that will nearly guarantee Greece can’t escape once hooked.

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  2. The root of the problems in Greece are broken promises made by politicians, and a populace which (understandably and unfortunately) accepted that the politicians’ promises would be kept. Unfortunately, the promise of full pensions with no cuts and no tax hikes simply could not be kept forever. If Social Security is the third-rail of American politics, pensions are the electric fence of Greek politics.

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  3. De Oppressor LiberJuly 7, 2015 at 9:00 PM

    News stories about the Greek crisis constantly return to a familiar refrain. The country's politicians and citizens alike borrowed unwisely, spent too freely and now don't want to pay their debts. This impression isn't wrong, but it misses half the story. Loans are always two-way transactions. One party lends and the other one borrows.


    Both sides take risks and both sides receive benefits. Lenders know – or should know – that it is always possible the borrower could default. They are supposed to assess that risk and lend only at interest rates that compensate them for taking it. Portfolio managers who hold many loans should diversify to minimize the risk of unmanageable simultaneous defaults. This means defaults should not bother well-prepared lenders. They know the risks, factor them into the interest rates they demand, and realize that occasional mistakes are inevitable. Greece's lenders were not well prepared. They ignored the risks, didn't demand market interest rates, failed to diversify and presumed mistakes were impossible.


    The fact that Greece had a spendthrift government with several defaults in the past was no secret. Anyone paying attention knew a decade ago about Greece's widespread tax evasion, overly generous pension schemes and already excessive debt load. Yet they kept on lending and Greece kept on borrowing.

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  4. I’m torn when it comes to the economic situation of Greece. As an American of Greek extraction, it pains me to see the Greek people suffering. I’m sure non-Greeks, on a human level, share this pain as well. However, as a free market and libertarian-leaning individual, I can’t help but think, “Well, you did this to yourselves.” Or, at least, “What did you expect when you believed politicians could give you everything for nothing?”

    How did Greece get to this point? How did a once-proud nation get brought to its knees economically by its partner nations in Europe? Greece, a nation that stood up to the Persians, fended off the Turks for centuries and preserved its culture during occupation, fought and turned back the Italians during World War II (famously delaying the Nazi invasion of the Soviet Union to the winter, thus leading to Soviet defeat)—what happened?

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