Friday, October 19, 2012

Merkel and Hollande Disagree About Agreement

Angela Merkel, it was said, did not like Nicolas Sarkozy, but she was able to feign agreement with him from time to time. Apparently she cannot do this with Hollande. The two no longer even pretend to be discussing the same subjects. Hollande thinks he got a banking agreement in Brussels that will take effect before the end of the year. Merkel things there was a framework established for a future banking union and no agreement as to direct recapitalization of Spanish banks until all the details have been worked out. Hollande flatly rejected Merkel's call for a budgetary czar in Brussels and insists that Europe already has all the fiscal union it needs.

What can possibly alter this destructive cycle in the European discussion? Is it actually worse than before? Perhaps not. Open disagreement is at least informative, whereas veiled disputes merely enhanced the confusion. But I think we will soon see a market run on Spain.


Mitch Guthman said...

I think that there is now a clear, but unspoken consensus among the European elites to follow Andrew Mellon’s prescription and allow the depression to “liquidate itself.” What we are seeing now is some minor adjustments to make it easier to save banks and bankers but there will be very little done beyond that. We will simply have to wait until the middle class and the social welfare liquidated and the rich (who are being protected by the states) have finally decided that now is the time to step in and buy up whatever remains that they don’t already own.

In that context, Hollande’s waffling makes perfect sense. He understands that everything has already been decided. He knows what is expected of him---that’s why he submitted the Merkozy treaty unchanged. But he knows that the future will be unpalatable for most French (and most particularly for the base of the PS) and so he feels the need to throw them a bone by making the occasional gesture against austerity.

In many ways, the West faces the same choice in this Second Gilded Age as it did in the first, namely, whether the superrich will seek a total change in our societies so that they look more like Third World countries with their small number of superrich, slightly larger “middle class” of personal servants of various kinds, politicians, bureaucrats and so forth, with the bulk of the people becoming what the Conservatives in England happily call “proles.”

At some point, then, the “rottenness” will have been purged by the system and the natural business cycle will take effect and thing will probably improve a bit. Still, we will eventually face the same question as before: Will the superrich moderate as did their predecessors at the end of the First Gilded Age thereby allowing us to have the considerable more just societies we now enjoy or are we in a “pre-Revolutionary period”?

In the coming war of all against all the only remaining question is simply, who will liquidate whom.

Anonymous said...

Once the German economy crawls to a halt we will have a more accommodating Merkel. Until then, the German will keep thinking they are the "Chosen" and force their destructive recipe to others.

Anonymous said...

@Anonymous: Once the German economy crawls to a halt we will have Euro meltdown, EU-wide civil unrest and global crisis round three. Hollande has no solutions. The problem is far bigger than France, his ideas so far just make matters worse.