Germany holds all the cards when it comes to the Greek debt crisis and the expansion of the euro to the Balkan country, Greece. And they are not saying what Merkel will do when she goes to the summit meeting of EU leaders on June 24 in Brussels. Tensions and suspense build. Before the summit there was supposed to be an agreement on new aid for Greece. Leaders like Merkel were just supposed to ratify it.

Wolfgang Schauble, the German Finance Minister under Merkel, is still shaking his fist at the two Jean-Claudes, Jean-Claude Juncker and Jean-Claude Trichet along with Mario Draghi, the next in line to become head of the European Central Bank. Schauble wants the bond holders to openly share some of the losses along with German taxpayers. The Jean-Claudes want a “gentlemen’s agreement”. They don’t want anything on paper but behind the scenes they expect the bond holders to share the losses, keep their mouths shut, and continue to buy the new Greek bonds.

The last chance to come to an agreement before the summit on June 24 is on Monday, June 20 when the Euro-Zone finance ministers are scheduled to meet.

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Wolfgang Schauble

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Germany’s dream of expanding its euro empire took a new hit on Monday. In the Wall Street Journal article, “Greek Debt Hits New Low Monday”, we learn that Standard & Poors cut Greece’s debt rating by 3 notches. It was lowered from B to CCC, oine notch lower than Moody’s CC. This makes Greece the lowest rated country in the SSP index. It’s now lower than Jamaica, Pakistan, and Figi. It’s below Argentina and Equador, wihch have both recently defaulted on loans. The Congo might be worse, but certain countries aren’t rated at all. The chance of default for Greece is put at 74% over the next 5 years.

The bond rating has been lowered in response to Germany’s position that Greek bond holders should share the losses and not just the German taxpayer. This is the position opposed by Jean-Claude Juncker and the European Central Bank.

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Germany’s dream of expanding its euro empire took a new hit on Monday. In the Wall Street Journal article, “Greek Debt Hits New Low Monday”, we learn that Standard & Poors cut Greece’s debt rating by 3 notches. It was lowered from B to CCC, oine notch lower than Moody’s CC. This makes Greece the lowest rated country in the SSP index. It’s now lower than Jamaica, Pakistan, and Figi. It’s below Argentina and Equador, wihch have both recently defaulted on loans. The Congo might be worse, but certain countries aren’t rated at all. The chance of default for Greece is put at 74% over the next 5 years.

The bond rating has been lowered in response to Germany’s position that Greek bond holders should share the losses and not just the German taxpayer. This is the position opposed by Jean-Claude Juncker and the European Central Bank.

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Greek riots at the Parthenon

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Whoever said we are now all national socialists knew what he was talking about. No, I don’t mean the political philosophy of dictatorship. But I do mean the economics of a crade to grave socialist state.

According to a Monday, June 13, 2011 article in the Wall Street Journal, “Europeans Found Taxed Heaviest: Russia Rich Have Lightest Load”, national socialism is still alive and kicking in Western Europe sixty-six years after the end of World War II in 1945. Italy supposedly has the highest tax rate, but no one pays taxes in Italy. Germany is number 2, which means they’re really number one. A citizen earning the equivalent of $200,000.00/year in Germany keeps only 56% of what he earns. That means he pays nearly $100,000.00 in taxes! In the U.S. a similar person keeps 69.9% and in Britain 60.9%.

Hitler would have been comfortable with such statistics.

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Adolf Hitler

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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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