Angela Merkel’s tenure will be remembered as Germany’s, and Europe’s, cruelest paradox. On the one hand, she dominated the continent’s politics like no other peacetime leader — and is leaving the German chancellery considerably more powerful than she had found it. But the way she built up this power condemned Germany to secular decline and the European Union to stagnation.
by Yanis Varoufakis
Part 2 - Episode 1: Pan-European Socialism for Germany’s Bankers
In 2008, as banks on Wall Street and in the City of London crumbled, Angela Merkel was still fostering her image as the tightfisted, financially prudent Iron Chancellor. Pointing a moralizing finger at the Anglosphere’s profligate bankers, she made headlines in a speech in Stuttgart where she suggested that America’s bankers should have consulted a Swabian housewife, who would have taught them a thing or two about managing their finances. Imagine her horror when, shortly afterwards, she received a barrage of anxious phone calls from her finance ministry, her central bank, and her own economic advisers, all of them conveying an unfathomable message: Chancellor, our banks are bust too! To keep the ATMs going, we need an injection of €406 billion of those Swabian housewives’ money — by yesterday!
It was the definition of political poison. As world capitalism was having its spasm, Merkel and Peer Steinbrück, her Social Democrat finance minister, were ushering in austerity for the German working class, advocating the standard, self-defeating mantra of belt-tightening in the middle of an almighty recession. How could she now appear in front of her own members of parliament — whom she had for years lectured on the virtues of penny-pinching when it came to hospitals, schools, infrastructure, social security, and the environment — to implore them to write such a colossal check to bankers who until seconds before had been swimming in rivers of cash? Necessity being the mother of enforced humbleness, Chancellor Merkel took a deep breath, entered the splendid Norman Foster–designed federal Bundestag, conveyed the bad news to her dumbfounded parliamentarians, and left with the requested check.
At least it’s done, she must have thought. Except that it wasn’t. A few months later another barrage of phone calls demanded a similar number of billions for the same banks. Why? The Greek government was about to go bust. If it did, the €102 billion it owed German banks would disappear and, soon after, the governments of Italy, Greece, and Ireland would probably default on around half a trillion euros worth of loans to German banks. Between them, the leaders of France and Germany had a stake of around €1 trillion in not allowing the Greek government to tell the truth; that is, to confess to its bankruptcy.
That’s when Angela Merkel’s team came into their own, finding a way to bail out Germany’s bankers a second time without telling the Bundestag that this was what they were doing: They would portray the second bailout of their banks as an act of solidarity with Europe’s grasshoppers, the people of Greece. And make other Europeans, even the much poorer Slovaks and Portuguese, pay for a loan that would go momentarily into the coffers of the Greek government before ending up with the German and the French bankers.
Unaware of the fact that they were actually paying for the mistakes of French and German bankers, the Slovaks and the Finns, like the Germans and the French, believed they were having to shoulder another country’s debts. Thus, in the name of solidarity with the insufferable Greeks, Mrs Merkel had planted the seeds of loathing between proud peoples.
Unaware of the fact that they were actually paying for the mistakes of French and German bankers, the Slovaks and the Finns, like the Germans and the French, believed they were having to shoulder another country’s debts. Thus, in the name of solidarity with the insufferable Greeks, Mrs Merkel had planted the seeds of loathing between proud peoples.
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