Saturday, December 1, 2012

Merkel Hogtied

Although Chancellor Merkel currently reigns as the Iron Lady of Europe, her actions are constrained by German domestic politics. There is an election coming up next year, and there are signs that the "chancellor's majority" is no longer holding:
The focus instead was on the 23 lawmakers from Chancellor Angela Merkel’s own center-right coalition who voted against the measure, robbing her, for the third consecutive vote on Greece, of the so-called chancellor’s majority, or absolute majority among her government’s own deputies.
While not relevant for Friday’s vote, the chancellor’s majority is widely seen as an indicator of the strength of the incumbent’s power base, because most legislation put before the lower house of Parliament requires only a simple majority of those voting. Missing it on three votes in a row on one policy matter, in this case, Greece, is unusual.
“The missed chancellor’s majority is a clear sign that even if one wants to be a good colleague, even her party colleagues do not agree with her government’s policy of pushing these packages through Parliament,” said Manuel Becker, a political scientist at the University of Bonn.

Steel Yourself

What exactly has the government now agreed with Mittal? What was agreed in the past? Who knows? Everyone involved in this tangled affair is trying to save face. There is a good deal of bluster in the air, as there always is when Arnaud Montebourg is involved, and precious little analysis.

What analysis there is is not very enlightening or even coherent, such as this piece in Mediapart. The writer simply assumes that mentioning the involvement of Goldman Sachs in the financing of the Mittal empire is ipso facto discrediting. But no one ever accused Goldman of stupidity. If Goldman backed Mittal's acquisitions, it was because it bought his strategic analysis of the European steel market. We don't really know what his strategy was or his motive in acquiring obsolete, underproductive plants such as Florange and Gandrange. Perhaps there were other parts of the Arcelor empire that were key elements of an undisclosed plan. Florange and Gandrange would ultimately have been converted to new uses. In any case, the old plan is now moot, because the European recession has sharply reduced steel consumption.

But Montebourg has forced the state to act, and so the state has stepped in as party to a deal that may be a very bad one for taxpayers if it involves large state investments in perpetuating obsolete technology rather than shifting work at the two threatened sites to new ones. This is precisely what the state should not be doing. Of course it may not be doing that. We don't really know. All we have are reports like this one that Mittal workers are "disappointed" with the "compromise." To hear some of the demonstrators describe the case, it would be more accurate to say that they are disappointed that the status quo, unsatisfactory as it is, won't be maintained. Better the devil you know than the devil you don't. Such nervous reluctance to change is perfectly comprehensible in a situation where trust among the parties has broken down completely, but it can also become an obstacle to the kinds of changes that are needed to put French heavy industry on a sounder footing.

When the sound and fury die down, we may learn something. For now, we can just sit and watch the spectacle play out in the time-honored manner of high-stakes industrial conflict in France: lots of color (union jackets, banners, smoke grenades), lots of cops, lots of rhetoric, and lots of grandiloquent pledges to defend to the death the moribund white elephant of the hour.