In an article from the Wall Street Journal on Saturday, June 11, “Gates Questions NATO’s Future”, Gates makes a speech in Brussels decrying that the U. S. provides 75% of the funding for NATO. The Europeans don’t shoulder their part of the burden. The U.S. has doubled its defense spending since 2001. In Europe it has fallen by 15%. He even accuses the countries on the Continent of trying to get a free ride.

He complains about the Netherlands, Spain, Poland, and Turkey by name. He never mentions Germany under Merkel, no doubt because that’s what he’s really talking about and it wouldn’t be politically correct. Of all the nations in NATO, next to the U.S. itself, Germany has the biggest economy and could shoulder the biggest burden.

Gates alludes to countries in Europe that spend all their money on a “cradle to grave” social welfare system instead of spending money on defense. The Germans were the ones who invented the socialist welfare state. It’s been there during many administrations and changes of government from Bismarck to the Kaiser to Hitler himself. (Remember that Nazi is a slang word. The real term for Hitler’s party was National Socialist).

I wouldn’t be surprised if the system was taking shape back during the time of Frederick the Great. Remember, this is the land where socialism actually works unlike Anglo countries such as Britain and the United States. When they complain about national health care they come up with failing examples from Canada, France, and England. They never mention Gemrany.

Bismarck, the Kaiser, Frederick the Great, and Hitler were all leaders who started wars, all leaders who depended on Germany’s Prussian military establishment where they invented the modern idea of the standing army. You notice that socialism in those days didn’t prevent Germany from engaging in massive military build ups such as the one that Hitler was supervising in the 1930’s. First Hitler got the capitalist economy back on track. Then he signed a Naval Treaty with Great Britain, and the rest was history.

Historically Germany can do both at the same time as you would expect, but they lost the will to do so after they were defeated in World War II. What’s curious is that the U.S. expects Germany to be defeated but somehow not to care. Just because the Americans have discovered that they can’t manage Europe without Germany’s cooperation doesn’t change the situation.

They are competing with us on the economic front by inventing the euro and building up the second biggest economy in the western world. But Germany’s Prussian miltary tradition is in abeyance within living memory of the last war when they were firebombed and invaded. Only after waiting forty-five years did they finally manage to reunify East and West Germany.

The fallacy for Americans, I think, is to under rate what World War I and World War II meant for Europeans, especially Germans. Henry Kissenger had it right, not Gates, when he said that leaders on the Continent can’t ask for sacrifice. The people adamantly refuse after losing so much to war.

It is now up to the United States and the United States alone to bear the military burdens of defending the free world. When Gates was silly enough to warn that the “U.S. won’t underwrite the defense of Europe forever”, he was making a fool of himself. Of course they will as long as they carry the mantle that they got in 1945. To throw off that mantle — remember it was England losing the mantle that enabled World War I and II to take place to begin with — would surely mean World War III.

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Angela Merkel, Chancellor of Germany

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Adolf Hitler, Chancellor of Germany

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Kaiser Wilhelm II

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Otto von Bismarck

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World War I images

The Western Front has a new war, the one between German’s Finance Minister, Wolfgang Schauble, and the Head of the European Central Bank, Jean-Claude Trichet and his minions, which includes a German by the name of Stark. Everyday there is a new assault. One side fires a volley at the other, the other fires back, and everyone takes refuge in their long-held positions in the trenches from which they don’t plan to budge any time in the foreseeable future.

It is three years shy of the 100th anniversary of World War I, the First World War, or the Great War. This is no way to celebrate the men who laid down their lives with useless slaughter so their troops could advance a few yards in the mud or at best hold onto their entrenches positions. The European Union was created in the aftermath of World War II, the Second World War. The member sates ought to value it enough to make sacrifices to keep it together.

Instead Germany’s lower house of Parliament approved a non binding motion to support further “tranches”. They will continue to support the current 110 billion euro package of 2010 and the new aid package for the next two years only if the IMF assistance is assured and only if there is adequate participation by private investors.

On the other hand, Jean-Claude Trichet’s minion, Stark, said, “The ECB can’t compromise without threatening its credibillity.” He claims that if the Germans have their way, the Greek banking system will be crippled.

It doesn’t help that if you listen carefully you discover that Jean-Claude Trichet and Wolfgang Schauble really don’t disagree with each other at heart. They both think that the Greeks can’t pay back their debts and that default of some sort is inevitable. The only disagreement is about a smoke and mirrors arrangement of the ECB called the “gentlemen’s agreement” or the “Vienna Accords”. The Germans insist that everything be on the table. The ECB wants everything hidden from view. According to Trichet, it’s OK if the private banks buy more bonds from the Greeks with a new, longer term maturity. But they must do it voluntarily and without signing anything first. This implies a lot of jawboning behind the scenes, arm twisting out of public view, a lot of what Americans would call “political intrigue”.

The ECB should consider if this sort of trench warfare that doesn’t accomplish anything is really appropriate for the twenty-first century. After all, this was how the twentieth century began in the most inauspicious fashion in history. After all, we don’t want those Vienna Accords to become another Treaty of Versailles.

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German taxpayers must pay the price of their new economic empire. Jean-Claude Trichet has spoken, and he’s the President of the European Central Bank. He says there will be “no credit event” and “no selective default” that would spread from pig to pig in the EU and cause banks to close.

Wolfgang Schauble, Germany’s Economic Minister, still insists upon a restructuring of the Greek debt. He suggests a 7-year bond maturity extension plan vis a debt swap. Bond holders would shoulder some of the burden. That is what the German taxpayer will tolerate — nothing more.

How will this stand off be resolved? The ECB suggests a “gentlemen’s agreement” similar to the “Vienna Accords”. When the Greek bonds mature the banks will automatically buy new bonds.

Germany warns that is smoke and mirrors. Gentlemen’s agreements won’t work. Only austerity programs will.

It’s like the clash of the Titans. Who will win? Trichet or Schauble? Only time will tell. At least this time Germahy’s attempt to create a new kind of economic empire won’t end with Dresden firebombs. Perhaps there will be a financial panic or a second recession. But those are nothing compared to the invasion of Berlin and forty-five years under the Iron Curtain. It’s a new day, and everything’s in the numbers.

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Jean-Claude Trichet

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Wolfgang Schauble

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Despite the recent resolve to give Greece the rest of the aid package for this year, there’s always the concern about the next aid package. The battle has shifted to the future, and the shape of the battle is already familiar.

Greek Prime Minister George Papandreos has seen the writing on the wall. He wants Greece to continue to be a member of the EU. In order to do so, following the dictates laid down by Germany and the Northern Europeans, he claims he will make new cuts and sell off state assets. He will ignore the protests about cuts that will eliminate 1000’s of government jobs.

Papandreos is taking big political risks. He may be voted out in the next election in a country used to high government employment and great inefficiency. But as Andreas Schmitz,President of the BdB, said on Wednesday, “An extension of Greek sovereign debt maturities could be a possible solution in potential restructuring of the country’s debt.”

Europe remembers the two world wars and the part that economics played in them. They have vowed never to go there again.

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Belshazzar’s Feast, the Writing On The Wall

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Andreas Schmitz

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Version:1.0 StartHTML:0000000167 EndHTML:0000002024 StartFragment:0000000454 EndFragment:0000002008 Germans are moving back to the city center in record numbers — to Berlin, Frankfurt, and Munich. In the 1990’s they moved out to hamlets and small towns on the fringe of suburbs. Now the population is retiring and want to make it easier to get around. They want to give up their cars now that their children have left the nest.

What is shows is that Germany’s population is getting older. Not enough couples are giving birth to babies. Only the immigrants such as the Turks are reproducing. This was a lamentable trend that Hitler noticed one hundred years ago. During the Third Reich he gave speeches to rally the spirit to produce more children. Dr. Goebbels gave a symposium about the subject in the 1930’s. He said that Germany’s women ought to stay home and reproduce. They shouldn’t take so many jobs. He was even successful at getting the population to increase for awhile until World War II started.

What would Hitler think if he could see the swanky new development in Munich called Isargarten condos? It’s south of Munich in the heart of Thalkirchen District at the U Bahn Station. It’s along the river and almost all sold out. I think he would shake his head and sigh that the demographics problem is getting worse.

Photo: Isargarten condos in Munich

In the 1920’s the United States passed the Smoot-Hawley Tariff Act. It raised tariffs on all sorts of imported goods and hurt trade world wide. It put all the economies of the world on track for the Great Depression and World War II.

But the United States didn’t learn. In the 1930’s it became the first western country to adopt the law that manufacturers must label all products by their country of manufacture. They wanted to boast about what was made in America. But it was an Isolationist move and continued to hurt trade.

Now the southern European countries want to imitate the U.S. in another protectionist move meant to restrict free trade in a time period of economic hardship. No wonder Germany and the northern countries in the European Union are against it. Germany remembers the hyper-inflation of the 1920’s and the collapse of their stock market, the time when money lost all value, followed by the rise of the Third Reich.

So hopefully Germany will continue to say no to its southern neighbors.

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Adolf Hitler

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In two respects Hitler was ahead of his time — he was a nonsmoker and a vegetarian. Germany is, too, over 66 years after his death in the Fuhrer Bunker in Berlin. But now Germany is paying for it with the scare about E-coli in lettuce, tomatoes, cucumbers, and bean sprouts.

In his day Hitler was lectured to by all and sundry all over Germany. He was told that he should eat more meat. It was good for him, but he merely smiled and continued to eat eggs and potatoes along with vegetable concoctions prepared by his chefs and dieticians that he hired to serve him. Martin Bormann, who controlled nearly all access to the Dictator in the last years of his life, planted a vegetable garden on the Obersaltzberg near the Berghof, Hitler’s country estate.

In those days Germans were meat and potatoes people. They would be puzzled by the article in the Monday, June 6 Wall Street Journal, “Hamburg Restaurants Just Say No To Vegetables”, talking about what a financial hardship the current scare is for the food business in northern Germany. You’d think that Germans had been piling lettuce, tomatoes, and cucumbers on top of their meat and cheese sandwiches forever to hear how the vegetable deprivation is affecting restaurant sales. Apparently German farmers are losing 30 million euros/week in sales. The Cafe Knuth in Hamburg has reduced its offerings by one half because one half of them were vegetables!

Hitler would be astonished at just how much the people he ruled over in the 30’s and 40’s have changed. But he would join in their lament about the lack of edible vegetables.

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Adolf Hitler, the vegetarian

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Port of Hamburg

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Prime Minister Angela Merkel called Prime Minister Zapatero on Friday to suggest that they both ask the EU for aid for their farmers, affected adversely by the recent E-Coli outbreak. Germany, Portugal, and Sapin plan to presne their case. Millions of euros are being lost as vegetables sit rotting and uneaten in a ban that affects all lettuce, tomatoes, cucumbers, and now as of Sunday, June 4 bean sprouts.

Granted that the outbreak has been traced to a farm in Lower Saxony. Granted that Spanish cucumbers are not the cause of it. Granted that there have been 1733 cases so far in Germany and even 4 in the United States traced to tourists who just returned from Germany. True that there are cases in 11 other European countries according to the European center For Disease Control in Stockholm, Sweden and that this is the worst outbreak in living memory.

But Germany is putting a political face on this and playing along with being “just one of the other kids on the block” of European states. This is how they plan to finesse a greater union of Germany and the other states. But don’t kid yourself. Germany’s still in charge (witness how Merkel was the one who had to do the calling and suggest the plan), especially when it comes to financial matters.

In order to be ipolitically correct Germany must ask itself for aid.

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Angela Merkel

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Jean-Claude Juncker, the Luxembourg Prime Minister and the President of the European Group Council of the Euro Zone Finance Ministers, met with the Greek Prime Minister, George Papandreou, on Friday. He announced that the Euro Zone countries would provide the extra aid to Greece in the form of loans. The IMF chimed in by agreeing that Athens would get in July the next installment of last year’s bailout money.

This is obviously a carefully crafted political compromise meant to conceal the real conflicts underneath. Juncker hinted at what could impede further progress after this summer by insisting that there must be involvement by Greece’s “private sector creditors” — which, of course, it doesn’t have and can’t have until it institutes major reforms. And that’s why the Greeks are still taking to the streets.

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Greek riots

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Jean-Claude Trichet, European Central Bank President, who calls himself a “true European”, gave a speech accepting the Charlemagne Prize for European Unity. He proposed a “deeper intervention” in the economies of struggling countries such as Greece and praised the idea of a “fiscal union” instead of merely a “currency union”. This would give leading countries such as Germany, France, the Netherlands, and Finland “veto power” over sloppy budgets proposed by such countries as Greece, Spain, Portugal, and Ireland.

Of course what’s he’s prosing is a greater political unity which he terms, as many have before him, “the United States of Europe”.

This is not a new idea. Alexander started it. Caesar perfected it. Charlemagne, the emperor for whom the prize is named, achieved it once more in the Middle Ages. Centuries after that Napoleon dreamed of it. And even the unsuccessful Adolf Hitler had vaguely romantic notions back in the 1930’s when he nicknamed his train, “Amerika”.

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