This is the week when everybody says everything is at stake. December 9 is billed as the date that makes or breaks the Euro Zone. It’s roiling the world’s economic markets.

But according to Der Spiegel the Germans feel good. The Christmas markets are busy. The shopping malls are crowded. 55% of Germans say they aren’t personally involved in the Euro Crisis. They have faith in their Chancellor. Her popularity rating is above 50%.

Despite the fact that they think worse is yet to come for the euro before everything settles out, they like the fact that Merkel holds firm on her positions and doesn’t yield. They like being the leaders of Europe. They don’t want to return to the German mark. They realize the euro is good for exports, and Germany is an export-oriented country.

It’s expressed best by Volker Kowder, the floor leader for Merkel’s CDU. He says, “Europe is speaking German.”

People in Anglo countries may think this sounds like a chauvanistic statement for a country that lost two world wars. But from a broad historical point-of-view Germany’s been emerging since unification in the mid-nineteenth century. It’s the powerhouse of Europe. And despite defeats, it still wants to figure out how to be the leader of Europe. Germans think they may have finally figured it out.



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_ Wolfgang Schauble wants 20% of the debt for each member country of the Euro Zone to be put in a redemption fund to be paid off over 20 years. Every country needs to strive for a debt at 60% of GDP. Germany has a national debt at 80% of GDP. They are trying to reduce it. So they would put 20% in the fund, too. They intend to pay off the debt with tax revenues. That is what all member countries should do.

This all seems perfectly reasonable to Germans. It’s the German way of doing things and want to spread it around Europe. Merkel says it’s “interesting” but intends to push mainly for the main proposal with “teeth” at the summit on December 9.

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_ Merkel and Sarkozy want treaty changes with a majority vote in the Euro Zone to carry the day, not a unanimous vote which has been required until now. Certain smaller countries express doubts, but do they really have any choice? Smaller countries will probably go along with the majority decision whether they grumble about it or not. I think it’s very unlikely that many of the countries will drop out and go it alone. They certainly don’t want to join Russia!

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Unemployment is at a 2 decade low of 5.5% in Germany. It’s only 4.1% in Austria. The jobless rate across the Euro Zone reached a record high of 10.3% with the highest rate of unemployment being 22.8% in Spain. This highlights the north/south divide in the Euro Zone. Germany can’t prevent everyone else from falling into a recession. That’s why the ECB plans to lower interest rates next week.
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_ Not only is the U.S. holding free trade talks with the EU, it has signed a secure trade pact with Europe. It doesn’t act as if it expects the Euro Zone to dissolve tomorrow. To prove that point today, Wednesday, November 30, 2011 the Fed announced that it was going to lend money to European banks. The Bank of the United States becomes the Bank of Europe. Obviously in the wake of World War II we want Europe to become the United States of Europe.

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_ In 1940 National Socialist economists wanted to join Europe together into one giant economy. It was an ideal that was of course never realized. Hitler never moved on it. During the summer of 1940 he was totally preoccupied by the British, Churchill, and whether he was going to invade or attack England. Then of course the next year he was preoccupied with Russia. After that it was all downhill.

Over fifty years after the end of World War II the Euro Zone became a reality. After taking so long to bring it into being, the Germans want to keep it going despite the latest economic news from Italy and the declining French credit rating in jeopardy.

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Wolfgang Schauble of the German Finance Ministry said, “We are working intensively for the creation of a Stability Union. That is what we want to secure through treaty changes, in which we propose that the budgets of member states must observe debt limits.”

The German Finance Minister said you can’t get an agreement among the twenty-seven member states. They are aiming for an agreement among seventeen instead. The big thing is that they must do it quickly. The markets won’t wait. He thinks the shortcut is additional protocol to the EU’s Lisbon Treaty.

He doesn’t care if small states like Luxembourg and Finland have expressed reservations. Euro Zone countries have to give up budget sovereignty.

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_ If you were a Martian you might think that the narration I’m reading in The Duel about the summer of 1940 is taking place right now in 2011 in the EU. Germany is lawing down the law for the rest of Europe. They are setting the standard and are insisting that everybody else conform — or else.

But instead of the Third Reich we have the Euro Zone and the EU. And what is happening is that Germany has bribed France to go along with its insistence on treaty changes to give it more power. How did it bribe France? All along France wanted Germany to agree to issue Eurobonds. Germany has now agreed to do so only if France agrees to the treaty changes.

Germany knows that certain countries like Ireland, Greece, and Portugal probably won’t go along. And even if all the Euro Zone countries did, it would take over one year. The markets won’t wait that long. So Sarkozy and Merkel are planning a summit in early December to announce a treaty signed by 8 to 10 of the member states of the EU. Everyone else won’t get to vote on it. But if they don’t conform to the new rules, they will be out of the Euro Zone.

There’s no democracy here. But before Americans object, remember that the Fed isn’t elected either. And there always will be an unwritten Italian exception. No doubt Italy will sign the treaty, but then won’t do everything it’s supposed to do. And no one will kick Italy out of the Euro Zone. It’s just too European.

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_ Germany will not bend on the issues being debated within the EU. They will not permit ECB intervention or printing money that brings back bad memories of the hyper-inflation of the 1920’s. Nor do they approve of Eurobonds which would put a burden on German taxpayers. Merkel says, “This is not a matter of give and take.” To her it’s a matter of simple necessity.
It doesn’t matter that Italy is appealing directly to the IMF for aid. Germany would be satisfied with a union that included only northern European states that think the way they do such as the Netherlands, Austria, Finland, etc.

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_ There’s been a media campaign by the German tabloid, Bild, portraying the Greeks as lazy and irresponsible. 76% of the German taxpayers are opposed to Eurobonds. Only 15% favor them. The interest rates on German bunds would go up if they issued Eurobonds. This would cost the German taxpayer billions per year. This is why the Germans want teeth in the laws if they take a risk and introduce Eurobonds. They want to be able to enforce good economic practices throughout the Euro Zone.

Merkel has no wiggle room on the issue of Eurobonds that are so popular with the French, the Italians, the Spanish, and everybody else in the Euro Zone. The two other parties in her coalition are totally opposed to them.

Nor do the Germans and Merkel want the ECB to become the banker of last resort. Not only does this violate the treaties, it reminds the Germans of the hyper-inflation of the 1920’s. This was one of the causes behind the rise of the Third Reich.

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