[International Herald Tribune, France]



Financial Times Deutschland, Germany

Public Anger and the Post Financial Crisis


"Now an intelligent policy must be quickly implemented: one that forces the recapitalization of the banking sector; devises a consistent approach to the exchange rate policies of the Chinese and Japanese; … and coordinates policy so that economic recovery doesn't come to a halt. And at the same time, skeptical voters must be convinced of the value of the endeavor."


By Wolfgang Münchau



Translated By Stephanie Martin


September 23, 2010


Germany - Financial Times Deutschland - Original Article (German)

Recently, a colleague from outside Europe wrote to me after having conducted a series of interviews with top European Union politicians. He was struck by the extremely aggressive tone toward the U.S., toward China and particularly internally, France for example. In view of how European diplomacy is much vaunted abroad, this came as a surprise. That one would endure such brusque utterances in Berlin would surprise no one, but in mild, outward-oriented Brussels?   


Our financial crisis, which is now over three years old, has gone through various phases. Now we're experiencing exactly the same thing in politics. After the shock phase and hyperactive bailout phase, we've now reached the anger phase. We are familiar with this phenomenon from psychology, which describes the stages of grief and other trauma. Anger comes at a late stage, when one becomes aware of one’s impotence - which is precisely what happened to Messrs. Barroso and Sarkozy and a host of other actors that are part of the Brussels power center.


They were all overwhelmed by this crisis. To this day, the president of the European Commission [José Manuel Barroso] fails to understand the causes of the crisis. Herman Van Rompuy, president of the European Council, is about to propose an unambitious reform of the European Monetary Union and its bodies. The otherwise hyperactive French president now stands on the edge of the political abyss. His hyperactivity is now a political drawback.  




Retaining power is now almost impossible without a common enemy, and who is better suited to the role than Brussels? French euro-skeptics are also considering Luxembourg.  When a political friend of Sarkozy’s calls the Grand Duchy's existence into question in French media, it doesn’t bode well for Europe’s sense of community. [Editor's Note: Brussels hosts the official seats of the European Commission, Council of the European Union, and European Council, as well as a second seat of the European Parliament 9in addition to Strasbourg, France). Luxembourg hosts the Secretariat of the European Parliament].


Despite the recent conciliatory tone, Sarkozy’s rift with the E.U. over his Roma policy [deporting gypsies to Romania] has left deep scars. This episode makes cooperation with France more difficult. In a situation with so many conflicting variables, it’s no wonder that politics are becoming more and more unpredictable, and that similar episodes recur. We’ve also experienced elements of this unpredictability in Germany, with a law on the issue of short-selling, which originated in the gut rather than in the head. We too have a tendency to lash out, albeit in a different way.    



Overwhelmed and underprepared, European policy is short-circuiting with increasing frequency. We threaten China with trade sanctions but have completely forgotten to develop a coherent trade and economic strategy for China in the first place. 


Where is German strategy given China’s emergence?


It’s one of the most striking differences between Washington and Brussels: U.S. politicians and experts show a very strong interest in trade and monetary policy and frequently discuss the topic at conferences. Here in Europe, we rarely have such discussions - not even behind closed doors. After a decade of introspection, discussions on European treaties, deficit controls and sanctions, politicians have to start looking beyond their narrow horizons.   




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In this column, I’ve written several times about the misguided policy of protecting banks with unlimited bailouts without imposing a simultaneous restructuring of the sector. During the crisis, policy both here and elsewhere in Europe rather than shaping future developments, was a reaction to events. Problems were put off until tomorrow and now we're in the frustrating position of having to acknowledge that this supposedly distant future is already here.  


And now an intelligent policy must be quickly implemented: one that forces the recapitalization of the banking sector, devises a consistent approach to the exchange rate policies of the Chinese and Japanese, advances the restructuring of international organizations, offers solutions for the fight against global and regional imbalances, and coordinates policy so that economic recovery doesn't come to a halt. And at the same time, skeptical voters must be convinced of the value of the endeavor. The combination of inactivity and anger makes this task increasingly difficult.  




Angela Merkel’s stoic calm appears to be a stabilizing force among the ranks of European heads of state. In contrast to Sarkozy, she's too smart to isolate herself within the European Council. But her problems are not fundamentally different. She can’t be sure that she'll remain in power. Her expectations for remaining in power are hinged on the hope of averting the anticipated catastrophe outcome in the 2011 state elections. In view of this situation, those who hope that Germany will fill Europe’s strategic vacuum are certain to be disappointed. We can hardly catch our breath as we run from one crisis to another, simply because there’s no time left for shaping international economic policy that provides strategies for the future.   


Just ask someone in Berlin about the German strategy for an exchange rate and trade policy toward China. You’ll get either the big relativists from the Foreign Office or free-market ideologues from the Economic Ministry, but definitely no one who has even has a clue about for an intelligent policy for Europe that defines objectives and alternative routes to those objectives.


Our success in the post-crisis period will critically depend on whether or not we're capable of this type of strategic goal-setting. My confidence in European leaders has now fallen so much that I see no solution in the foreseeable future, as long as anger and helplessness prevail.



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[Posted by WORLDMEETS.US September 26, 6:29pm]



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