Sunday, April 29, 2012

Operation Eyewash

Angela Merkel took another step toward modifying Germany's intransigent image on the Eurozone budget pact.  Growth, she now says, will be part of the agenda at the upcoming European summit, set for late June. The European Investment Bank will figure in this agenda, just as François Hollande said it should. So she has now pre-empted Hollande's not very challenging proposals for a modification of the Merkozy pact. Tant mieux. Maybe Hollande will now be emboldened to ask for a little more, taking advantage of Merkel's pre-emptive surrender. Or perhaps Germany simply recognized that Hollande was asking for so little, and now seems so likely to win, that it made no sense whatsoever to oppose him.

It hardly matters. Events will soon force both leaders to reevaluate their positions. Timidity will not resolve this crisis.


Brian W. Ogilvie said...

I hope you're right, but I was rather depressed by reading an article in Der Spiegel this morning that suggested that austerity did work, and any other path was doomed to failure. If that represents what the Serious German People think, this crisis might last a lot longer than it should.

The Spiegel article also had a bizarre reference to the "American currency union" that has been in existence for more than 200 years. It wasn't just a throwaway line, either. If it was meant seriously, it shows a shocking ignorance of the American federal system, as well as the relative sizes of state and federal budgets in the US. I've had trouble explaining to my French friends some of the peculiarities of the US federal system (yes, we really do have elected governors--not préfets--and yes, there really are 50 different codes de la route in the US), but if Der Spiegel calls the dollar a Währungsunion without tongue firmly in cheek, then something is very wrong.

Louis said...

On this subject, a little thing that you might find interesting:

The post links to a report by the Institute Bruegel, which should be worth reading:

I like the document's approach, because they go back to early in the discussion on European monetary cooperation, and dig a bit into its intellectual roots. Useful, to me at least.