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Angela Merkel has one week to save the Eurozone. Again

July 8, 2012 11:49 am

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It has almost become uninteresting. The Eurozone will collapse (it probably won’t). Angela Merkel is bound to cave (she almost certainly will not). We are on the brink of a European mega-recession, from which the continent will never fully recover (it will almost certainly be fine).

The remarkable fact about Europe since 2008 is not chaos, but survival: a currency that has been one week from the knacker’s yard since Lehman Brothers collapsed is still being used to buy everything from cappuccinos to missile silos, Greece has yet to default, and Angela Merkel is still refusing to blink.

Why does she do it? She’s become a hate figure everywhere from Corfu to Coventry, a two-word shorthand for unthinking austerity. One Berlusconi-backed tabloid referred to her as ‘fat-bottom’. She is the bête noire of social democrats across Europe, and, barring an unprecedented recovery for her coalition partners, the Free Democratic Party, almost certain to be turfed out of power in next year’s federal election. And yet, despite everything, Europe’s great survivor – she has seen Blair, Brown, Chirac, Sarkozy and Berlusconi fade and fall during her term of office – refuses to budge.

The woman that the Left has come to see as the great defender of the neo-liberal order, is, in some respects, its greatest heretic. Across German politics – with the exception of some eccentric members of the new Pirate Party and some outliers in the FDP – there is a general distaste for the unbridled and uncontained power of the market. Whether you are a radical member of the Left Party or a committed Christian Democrat, you are almost certainly deeply unimpressed by anyone claiming to be a ‘master of the universe’. Merkel is no exception.

Why, then, does she refuse to change course? Because throughout her life, the most important political event in Angela Merkel’s career has been the failure of capitalism to fall. Born Angela Dorothea Kasner, Merkel’s father, a priest, relocated to the Communist East when she was still a baby. She was raised and educated in the east, becoming an academic at the University of Leipzig, where she would almost certainly have remained, had the Berlin Wall not fell. She became a key mover in the pre-unification government, and was rewarded with a plum post in the CDU.

Merkel’s opponents in the East were undone because capitalism defeated Communism; far from being on the verge of collapse, the capitalist system showed it had the ability to renew itself, to survive and to thrive, while the alternative collapsed in its place. Her entire political programme has been immured in scepticism towards the ability of the state to deliver a better world.

Merkel’s refusal to bail out Greece, to change course, is based on the fact that capitalism didn’t collapse, and that her social democratic opponents – including her predecessor as Chancellor, Gerhard Schroder – had to accept the primacy of the market. She still believes that capitalism will not collapse now, that, no matter what happens, there will not be a European-wide collapse. Capitalism, believes Merkel, has shown that it will always survive.

It’s a hell of a gamble. But for someone who went from a little-known Eastern academic to the most powerful woman in the world, it’s one she’s very comfortable making.

This Week’s European Talking Points

  • France’s high court has ruled that immigrants may not longer be detained if they do not have the correct residency papers. New interior minister Manuel Valla has signalled that legislation will be swiftly brought forward to reflect the ruling. “This ruling is lax, ultraliberal and pandering to the whims of a European legal oligarchy,” the Front Nationale frothed in a press release.
  • Helle Thorning-Schmidt’s administration has been thrown into crisis by a budget spat between her Social Democrats and their coalition allies, after she eschewed a budget deal with her coalition allies and instead made common cause with the Right. The deal increases tax credits, cuts corporation taxes…and hands a tax cut to high earners. If Thorning-Schmidt can’t save her coalition’s majority, except an early return to government for the right-wing Liberal-Conservative ‘blue bloc’.
  • “Monti has lost his allure”. Left-leaning newspaper La Repubblica, a long-term ally of technocrat Mario Monti (after all, he’s not Silvio Berlusconi), stuck the knife in this week. It looks like the end of the road for ‘Super Mario’.

Related posts:

  1. The Eurozone summit: a fissure in the UK’s relationship with the EU
  2. The Eurozone predicament is undesirable, not unexplainable
  3. Another week in Strasbourg and it’s the same old Tories acting up yet again
  4. A ray of hope in turbulent times
  5. Ratings agencies – a sideshow in the Eurozone debt crisis
  • aracataca

    Sorry Stephen but this piece is full of inaccuracies. Firstly, Greece has in fact defaulted. Perhaps what you meant to say is that it hasn’t defaulted on 100% of its debt rather it has only defaulted on 70% of its 2008 debt. Secondly, of course capitalism hasn’t always survived. It collapsed completely in over 50% of the planet’s surface during the twentieth century. In the beating heart of capitalism itself, namely the USA, it did survive the 1930s but only just with the colossal intervention of the state and the positively socialist policies of Roosevelt. 
    In Germany and Italy in the 1930s it collapsed into Nazism and Fascism respectively and by the 1960s 50% of the population of the planet were living under an economic system that did not describe itself as capitalist. The unfaltering success of capitalism is of course a myth and illusion and  this myth mirrors  the illusory, magical and mythical character of the unfailing and indomitable market itself.  

  • John Dore

    Stephen undoubtedly you do your research, but pahlease this is santimonious rubbish.

    Merkel a hate figure in Cov……. Do me a favour..

    The reality is that the PIGS were sold down the river by their own politicians. The experiment is un ravelling exactly as predicted. Their are two eventualities neither of which are going to be great. Merkel is an impossible position, and is being asked to pay for the FAILURE of others.

  • JoeDM

    The Euro crisis will continue until the countries concerned deal with the economic fundamentals of the imbalance in the Eurozone, huge deficits and the general european lack of international competitivness.

  • Mark Myword

    There will be a denoument to the Eurozone drama. It will not occur initially by the actions of politicians, nor by bankers or bondbuyers. It will happen when the ordinary people of Spain or Greece or Italy, or some other country panic,  and decide to take their money out of the bank or banks and deposit it elsewhere.  We got close to this in Spain two weeks ago. Sometime soon it will happen – and when it does, the whole edifice will unravel.

  • aracataca

    An urgent message has come through from Tory HQ: ‘David Cameron would like to remind voters that Andy Murray was inherited from the last Labour government.’

  • Politique

    The Eurozone “Probably Will” collapse. It is only a matter of time. Great Britain will better off longer term.  Germany should never be in a position to dictate Euro policy on the level they do.

    The overwhelming majority of Britons wish to leave the Euro. The party that agrees and confirms a referendum will be in power in 2015.

    • leslie48

      …but all a “diversion” from capitalism’s real crises a bit like the Nazi party when they sought expansion into Czechoslovakia in the late 1930s. Leaving Europe would drive us mad.

  • Hamish Dewar

    The Germans have a genuine commitment to the European ideal.  They believe the EU has kept the continent free of internal wars since its formation.
    Merkel and Westerwelle also stress that what is needed is not just the harsh medicine of auaterity but the tonic of investment in growth.  Ten years ago Germany was also toiling and being described as the sick man of Europe, but they took the medicine and boosted small business, with the result that they are again thriving.

    • jaime taurosangastre candelas

      ”They believe the EU has kept the continent free of internal wars since its formation.”

      I can see that this is a statement that you make, but I do not believe that to be true, nor even if the Germans believe it to be true as you state.

      Peace in Europe since the Second World War was maintained by NATO and Soviet policies of deterrence, nothing to do with the EU.  The EU (and predecessor organisations) was allowed to grow and to prosper because of an absence of war – it is nothing more than an open trade and labour market, although EU politicians believe it to be somewhat more important than that.

      But more interesting is the discussion to be had that perhaps the EU and the foolish project of the Euro (not only foolish in conception, but then ineptly executed) now perhaps increase the chances of conflict, whether economic or worse physical.

      What is certain is that the Euro as a fiat currency will fail, and probably within this year.  No one with any sense now has any holdings of investment in the Euro.  I am not a betting person by nature or practice, but I bought a “bet” with a London index company on the value of the Euro against the pound, and it returned 27% in 6 months when I sold my position (this was enough to buy outright my wife’s 4 year old Land Rover Discovery, so I am grateful to Frau Merkel for her obstinence which has given us a free car, and one built in England).  It was not a bet as I could understand – it was nearly a certainty.  The “odds” are now not so attractive, as it appears that anyone with a quarter of a brain can now see what will happen.

      • Alan Giles

        The reason Ted Heath and Harold Wilson were pro-EEC, as it was back then, is because they had witnessed the carnage of WW2 and genuinely believed that peace could be maintained by having closer links.

        Whether or not they were right (and other politicians of all parties of the same vintage) might be up for debate, but I don’t think you can doubt their sincerity.

        Unlike Blair, who enjoyed mincing round playing the war leader, that generation had seen the most unimaginable horrors and they wanted to do everything to prevent further conflict.

        Speaking of the Great Leader, if Iraq was a waste of life and money, so is Afghanistan:

        http://uk.news.yahoo.com/afghan-womans-public-execution-slammed-163155172.html 

        • AnotherOldBoy

          Harold Wilson was, at best, equivocal about the “Common Market”.  Heath was dead keen, because he was a power maniac who thought that his only chance of playing the part of a “World leader” was to join forces with the French and Germans.  The post-war years witnessed a loss of confidence in the UK (at least in the political class) with the end of Empire and the relative decline economically as other countries (including, in particular, those who had signed the Treaty of Rome) outperformed the UK.

  • leslie48

    Bloomberg has run a piece July 6  with N.Y. economics guru Professor Nouriel Roubini predicting very imminent crisis – the perfect storm -China has seriously stalled, EuroZone plaster coming off , America & UK in crisis. I like his comments on Barclay’s where he believes yet again immoral and criminal bankers are still being let off  ( Diamond is to get upwards of the obscene 30 million pounds). The banks are even bigger and more dangerous than 2008. As a party we are still being too soft on the Banking crisis – the ideology of the crisis of financial capitalism is far too defensive , too passive and we need to be even harder and critical than the one Osborn.

  • Tuton

    German girls are hot!

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