Streetwise Professor

November 19, 2011

Without Panzers–and the Will to Use Them–This Won’t Work

Filed under: Economics,Financial Crisis II,Politics — The Professor @ 2:05 pm

The Telegraph reports that elements in the German government are contemplating a radical strengthening and centralization of EU government:

The six-page memo, by the German foreign office, argues that Europe’s economic powerhouses should be able to intervene in how beleaguered eurozone countries are run.

The confidential blueprint sets out Germany’s plan to tackle the eurozone debt crisis by creating a “stability union” that will be “immediately followed by moves “on the way towards a political union”.

It will prompt fears that Germany’s euro crisis plans could result in a European super-state with spending and tax plans set in Brussels.

The proposals urge that the European Stability Mechanism (ESM), a eurozone bailout fund that will be established by the end of next year, should be transformed into a version of the International Monetary Fund for the EU.

. . . .

The German plan begins with a proposal to create “automatic sanctions” that could be imposed on euro members spending beyond targets set by the European Commission. Germany is demanding that if euro rules are “consistently violated”, it should be able to demand action from the European Court of Justice.

Germany, Finland, Austria and the Netherlands would be able to ask EU courts to impose sanctions, from fines to the loss of budgetary sovereignty, to protect the euro.

The memo states the EMF would be given “real intervention rights” in the budgets of euro members who have received EU-IMF bailouts.

This. Is. Not. Gonna.  Happen.


For two reasons.

First, most Germans don’t have the stomach for it.  It cuts against everything in the German post-war identity, most notably the intense desire among most Germans to turn their backs on the nationalism and will to power that brought on two world wars that ended with the utter destruction of the old Germany.  And knowing this, those who would be subject to Teutonic dictates will play the guilt card for all it is worth.  The only risk of this is that they overplay their hand.

Second, and relatedly, this brings to mind what Andrew Jackson said about a Supreme Court decision he didn’t like:  “…the decision of the Supreme Court has fell still born, and they find that they cannot coerce Georgia to yield to its mandate,” often punched up to “John Marshall made his decision, now let him enforce it.”

Germany will find that it cannot coerce Greece, or Portugal, or Spain, or Italy–or France–to yield to its mandate.   Demanding action from the European Court of Justice?  I don’t think I’ve read anything so hilarious in months.

The courts can decide–but what executive power enforces the decision?  And how would said executive power–which does not now exist, and which would have to be created with the agreement of those against whom it would be wielded–deal with the riots, the strikes, the economic chaos that any attempt to enforce such decisions would inevitably create? What would the Greeks or Italians have to lose?  And think of the havoc they could wreak on Germany.  Like Sampson, facing penury anyways if they meekly submitted to German demands, it would be far more viscerally satisfying for them to pull down everything on everyone–including the Germans.  Which the Germans would soon figure out, and refuse even to attempt such coercion.

Germany doesn’t have much in the way of a Panzerarmee any more, and even less the will to use one.   So just how could it possibly enforce its will on unwilling and recalcitrant foreigners?  Even if–as unlikely as that is–said foreigners were to agree formally to submit ex ante, does anyone seriously imagine that these promises would be credible ex post?

This German foreign office memo is a bureaucratic fantasy completely disconnected from gritty realities.  Decisions, dictates, and ukases are useless unless they can be enforced.  German politicians and diplomats can thunder all they want, but absent credible coercive powers their threats are empty.  Germany does not have these coercive powers–largely a result of decisions Germans consciously made as an effort to distance themselves from their past.  If it did, it would not use them.

No.  The real choices remain amputation or gangrene: between breaking up the Eurozone, or socializing and monetizing (which is a form of socialization) debts.  Coercing the deadbeats to pay–the essence of the German foreign ministry document–is not a viable option. Germany has neither the means nor the will.

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  1. “Invited to the planning commission were Herr Krupp, Herr Farben und other notable citizens. While disagreements still remained, the commission had a consensus on the principles of Ein Volk, Ein Euro und…”

    Comment by Charles — November 19, 2011 @ 3:01 pm

  2. @Charles–too true. Which is exactly why it won’t happen. Hell, many Germans are scared of the Germans (old school, that is).

    The ProfessorComment by The Professor — November 19, 2011 @ 3:24 pm

  3. Understand this is more relaxing than posting about an ongoing litigation you may get called to testify on — for either side. Can’t wait for the Corzine perp walk, perhaps his surrender to avoid such a thing and to get released on bail DMK style is being negotiated at this hour.

    But at least you’ve lost your illusion that the 4th Rei…er EU, represents freedom for the Eastern Europeans from Muscovy’s Mordor.

    Comment by Mr. X — November 19, 2011 @ 3:47 pm

  4. @Mr. X–you crack me up at how wide of the mark your shots fall.

    First of all, nobody will enjoy watching Corzine walk the perp walk more than I. Didn’t you pick up on the schadenfreude in my first post? (Ironic use of German there, if you didn’t notice.) I despise that schmuck, and think it only deserving that he serve time. But I’m a compassionate guy. Maybe they’ll let him make license plates close to home, at Pekin or Marion.

    Second, my illusion? Come again? Are you fucking kidding me? I was a Euroskeptic from day 1. Since the ’90s I have known it was only a matter of time before it would come crashing into pieces. And I have despised the controlling, French rationalistic, dirigisme of the entire European “project” from the beginning. I’ve repeatedly said Europe (and the UK, and California) are like the Ghosts of Christmas Future. Hint: that is not a compliment. Sadly, we haven’t been as sensible as Scrooge.

    As another example, look at my post saying that Mifid is “Frankendodd on PCP.” Obamerica is exceptional now only to the extent that it hasn’t slouched quite so low as the EU–despite Obama’s concerted efforts.

    Insofar as Russia is concerned, I have also excoriated the EU–and in particular Germany–for going into at-your-feet mode with the Russians. No, the Euroweenies have no clue about anything, whether it be Russia or personal liberty.

    The ProfessorComment by The Professor — November 19, 2011 @ 5:13 pm

  5. Meh, well I just meant the EU is always presented as the good guys while Muscovy are the bad guys in Ukraine, in particular, even though it’s obviously in Ukraine’s national interest to trade freely with Europe AND the FSU and Asia rather than getting chained to any bloc — America’s included.

    Hell Professor, you’re writing to a guy who once asked Matthew Brzezinski (son of the leading globalist and the ‘let’s conspire to keep Russia down forever’ Grand Chessboard author — ole’ Z. Big himself) if German investments that he observed in Russia and Ukraine while writing his book Casino Moscow were attempts to achieve old ends by different means. He nodded and said sure. But what else would you expect from a Pole after he’s had a few drinks? As Marian Tupy once said to me, the old Polish joke is upon being invaded from both sides, one fights the Germans first. Business before pleasure.

    Comment by Mr. X — November 20, 2011 @ 12:04 am

  6. But hopefully, the next time the powers that be present some hashish’d out whore-frequenting Persian used car salesman from Texas as the mastermind behind a terror plot, you won’t quite buy it and say hell yeah and start singing ‘Bomb, bomb, bomb, bomb Iran’ to the tune of Barbara-ann like Misha the Tie Eater’s best buddy McCain. God, has there been a war since the 1980s McCain hasn’t loved?

    Comment by Mr. X — November 20, 2011 @ 12:06 am

  7. > EU, represents freedom for the Eastern Europeans from Muscovy’s Mordor.

    It is not so much about “representing” freedom from the Mordor as it is about being able to actually preserve freedom. In that regard, the bad EU is vastly superior to the good Moscow Khanate any time of day. As the Professor observed, there is about zero probability for those nations of seeing the German panzers any time soon – not quite so with the Russian tanks, as the ongoing occupation of Georgia most clearly demonstrates.

    Comment by Ivan — November 20, 2011 @ 5:29 am

  8. Unfortunately Our good Professor, Germany has an option. They can develop their marketing and investments towards a country with ample capacity to pay them back, and that, infuriatingly, is the Russia of Our rebellious servant Vladimir!

    Oh, how We burn with fury that this will put Russia’s energy sector even further out of Our reach! We have no choice but to intensify Our efforts to… extract… Our due from the US and Southern Europe.

    Fortunately with your help in diverting attention to Russia, Our good Professor, this is developing very well for Us.

    Comment by a — November 20, 2011 @ 6:44 am

  9. Ply a German with alcohol, and the Euro weenie mask comes off. As for the Russian tail wagging the “pusillanimous” dog, yeah right.

    Comment by So? — November 20, 2011 @ 7:36 am

  10. Here here ‘a’. I never understood why The Economist never had so much fury towards China. One could ask if even Hugo Chavez doesn’t get quite as bad press as Russia, considering their opposite economic directions in the past five years.

    Ah, but then I realize China being used to deindustrialize the West is all ‘part of the plan’ as the Joker said in the Dark Knight. But a Russia that pushes back, even on TV sometimes, is NOT.

    Comment by Mr. X — November 20, 2011 @ 12:33 pm

  11. “Ah, but then I realize China being used to deindustrialize the West is all ‘part of the plan”

    And if China gets out of line, Our navies can blockade them. Russia is distressingly self-sufficient.

    That is another thing We hate about Russia, that they can resist the imposition of Our will.

    Comment by a — November 20, 2011 @ 2:32 pm

  12. So what nationalism and war could not do, debt can?

    Wow. I hope not.

    The EU story is disappointing to say the least. Greece is the relative size of Los Angeles in the EU. Let it go broke. It is countries like Germany and Finland that should leave the EU so the Euro can die in peace. Besides, this is just a precursor to the tsunami to come; all of Europe’s governments are structurally bankrupt by 2040 when debt rollover alone will require 20%+ of world GDP.

    Comment by Jim — November 20, 2011 @ 3:22 pm

  13. I’ve repeatedly said Europe (and the UK, and California) are like the Ghosts of Christmas Future…

    It’s funny you should call California a Ghost of Christmas Future, SWP, while ceaselessly singing praises to Texas – a state that manages to rival California’s budget deficit despite oil revenues, contributing less in net federal transfers, and doing worse on practically every indicator of social welfare.

    Then again it does execute the most people so I guess that’s a conservative “achievement” of sorts.

    Comment by Sublime Oblivion — November 20, 2011 @ 5:23 pm

  14. Just because something is incredibly stupid and doomed to failure doesn’t mean it won’t happen, Professor, especially not in Europe.

    The way it’s done is that some outrageous proposal is leaked and it is then vigorously denied that it’s a proposal. It then appears under another name and is claimed to be something wholly different. It is then put into effect and we’re told we agreed to it and it’s time to move on.

    As for the supposedly “intense desire among most Germans to turn their backs on the nationalism and will to power that brought on two world wars that ended with the utter destruction of the old Germany”, I respectfully half-disagree.

    While I agree most Germans don’t want Germany physically razed to the ground again, which is what happens if you stuff up an attempted military annexation of your continent, no such downside risk arises from an economic annexation. In fact, the greater risk to Germany is if such an annexation is not attempted. At present they write the cheques, and if the recipient pisses the money away, Germany gets to write another, bigger cheque. It makes much more sense if instead, Germany can make Italy auction the Pope, or something. At least there’s a meaningful sanction available that may recover Germany some of its money.

    The idea that Germans wouldn’t take such measures because they don’t want to be nasty seems fanciful though. The only reason Germany and Japan are such well-behaved non-invasive model world citizens these days is because they had their cities fire-bombed flat between 1943 and 1945. Belatedly they discovered the aversion to invasions and pogroms that everyone else had previously arrived out without the need for a rain of napalm from the sky.

    Suffering huge civilian casualties in a war is a good guarantee the country won’t initiate any more wars. The USSR sometimes appears to be an exception to this, being quite warlike despite losing 25 million in WW2. But then again the USSR didn’t start that one, and Stalin would have killed almost that many even if Hitler hadn’t invaded, so the connection between wars abroad and deaths at home is probably less obvious in Russia.

    Comment by Green as Grass — November 21, 2011 @ 6:50 am

  15. “And if China gets out of line, Our navies can blockade them. Russia is distressingly self-sufficient.”

    “That is another thing We hate about Russia, that they can resist the imposition of Our will.”

    True, so long as Russians don’t need fresh fruit in the winter and can subsist on black bread, cheese, butter and kashas (wheat and buckwheat).

    Comment by Mr. X — November 21, 2011 @ 2:00 pm

  16. I agree with G as G that while 90% of the German people want the Deutsche Mark back and to be left the hell alone by the rest of EUrope, I’m afraid their elites as in WWI and WWII believe they know what’s best for the Deutschen Volk, and that would include plans to pursue old aims by different means, for fear that millions of Germans would lose their jobs if export markets collapsed across southern Europe and even Russia and China buying less.

    But ultimately, if Italian and Greek kleptocrats have stolen money from national budgets that require endless bond issuance in euros to buy Bumers, Mercedes’, and Bosch appliances for their villas, one can see how this Ponzi is gonna fall apart with only Germany’s bete noire of hyperinflation or massive deflationary debt write off as the Cylla and Charbidis left. I’ll take deflation anyday no matter what that jackass Bernanke thinks about it being the worst thing, a hyperinflationary depression as in Weimar is far more dangerous to liberty than ‘Oh my God!’ FALLING prices which are a signal for people to start buying homes and stuff again.

    Comment by Mr. X — November 21, 2011 @ 2:04 pm

  17. […] […]

    Pingback by EU Politics - Hamsterwheel - Page 49 - PPRuNe Forums — November 21, 2011 @ 3:37 pm

  18. France won WWI at great cost. Didn’t put up much of a fight in the sequel.
    The USSR won WWII at huge cost. Surrendered everything in 1989 without a shot.

    Comment by So? — November 21, 2011 @ 8:31 pm

  19. Russia self sufficient? hahahahahaha. Or should that be xaxaxaxaxaxaxaxa?

    The ProfessorComment by The Professor — November 21, 2011 @ 9:50 pm

  20. > Russia self sufficient? hahahahahaha. Or should that be xaxaxaxaxaxaxaxa?

    Well, actually, it is. Russia is perfectly capable of producing enough ethanol (maybe with some methanol supplement) and xenophobic propaganda for the rest not to matter all that much.

    Comment by Ivan — November 22, 2011 @ 12:02 am

  21. I really wonder what the deal is with Ivan.

    Is he a non-Russian with a Russian name? Or a non-Russian pretending to be Russian?

    If he is a Russian, what motivates him to hate and despise his own country so much?

    I really do wonder.

    Comment by Sublime Oblivion — November 22, 2011 @ 1:22 am

  22. @Ivan. Very funny. Once you have the essentials, what else matters, right?

    The ProfessorComment by The Professor — November 22, 2011 @ 9:41 am

  23. Sublime Oblivion, you ain’t too bright are you? He could be Latvian, Estonian, Lithuanian, Ukrainian, Georgian, Chechen, Belorussian, etc etc etc….

    I also know more than a few Ivans who are Irish….

    And why exactly do you hate the US so much, it is supposed to be your country after all.

    Or do your loyalties lie elsewhere (rhetorical question I know….)

    Comment by Andrew — November 25, 2011 @ 4:08 am

  24. […] Streetwise Professor asserts that German plans for fiscal discipline in the eurozone via financial sanctions can’t work. He’s totally right if they’re implemented via […]

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