June 19, 2012

Hard and Soft Options

Posted in Sunday Business Post · 78 comments ·

Should we focus on what Angela Merkel says and ignore what she actually does? Or should we ignore what she says and focus on what she actually does? This is important, because the difference between what the German chancellor says and what she actually does is widening by the day.

We hear from the German government that it is ready to do whatever is necessary to save the euro, but actually it is doing as little as possible. Every time the Germans are asked to clarify what they mean when they talk about taking actions to save the euro, they spoof and bluster – but do very little.

This raises the question whether Germany actually wants to save the euro in its present form. And if it doesn’t, what does it want?

The working assumption of the European elite and Europhiles here in Ireland is that Germany will eventually subjugate its own interests for the greater good of European solidarity.

This means in reality that the Brussels mainstream view is that Germany will ultimately accept the responsibility for paying all or part of the debts of the rest of the eurozone. Such a prospect chills many millions of German people. The assumption of the europhiles is that Germany remains, in the words of the great chancellor Willy Brandt in the 1970s, “an economic giant but a political pygmy”.

What if Germany 40 years later in 2012, is a bit less of an economic giant and also a bit less of a political pygmy?

The europhile elite seem to be stuck in the 1970s or 1980s, when a divided Germany did not have either the “permission” or the “confidence” to stand up for itself. Germany has changed, but the European elite has not. The new Germany has moved on.

Ahead of today’s Greek election, it might be interesting to speculate that the German view of Europe could be quite different – and that Germany’s interests and those of Brussels are not indefinitely aligned.

Quite apart from why the Germans might not want go for the europhile solution, what if Germany has figured out that the solution – the mutualisation of eurozone debts – will not solve the currency’s problem?

Let’s try to see things from the German perspective. If I were German, I would suspect that the reason the periphery has huge debts is that they tried to have German lifestyles without the German work ethic. When you want something you can’t afford, you borrow to get it. This is the oldest trick in the book.

So, unless the Italians and Spanish and Irish are prepared to create products for sale at the same rate as the Germans do, we have to borrow to have the lifestyle the Germans have earned. We rent prosperity, rather than earn it.

How could you best see this?

Well, let’s look at Italy, because the relationship between Italy and Germany will become the crucial one with the eurozone. The choices made by these two countries will define the next ten years.

For far too long, Italy has been the butt of Anglocentric jokes and jibes, largely manufactured in the London press. But Italy is a proper economy with a proper industrial base, and a long heritage in manufacturing, design and finance.

However, since joining the euro, Italy has lost enormously vis-à-vis Germany.
Look at the chart. It shows how, until joining the euro, Italian industrial production and Germany industrial production more or less moved in tandem.

These two countries with their large industrial base were able to compete with each other, and the end products of this competition were proper jobs for millions of European citizens.

But since joining the euro, Italy’s industrial production has slumped, while Germany’s has soared. Why is this? It is because the Italians used to maintain competitiveness with Germany by regular devaluations of the lira, which obviously worked. Italian local costs would rise because the Italians tolerated higher inflation than the Germans. Every so often, to rebalance things, the Italians devalued the lira and got a boost to competitiveness, and this allowed Italian industry to compete.

This is not in any way unusual. Successful devaluations have been at the heart of the industrial policy of many countries. Italy, Sweden, Finland, Spain and Ireland are cases in point.

Without devaluations, Germany is simply too strong. The reason why Germany is so strong is that its productivity is so much higher.

Its cost of capital is low and the workforce is highly productive, generating more stuff per euro invested than anywhere else in Europe.

This gives the Germans a competitive edge. The more productive German worker should be “rewarded” by having a strong currency, stronger than anyone else. But in the eurozone, the German worker isn’t rewarded with a stronger currency that would mean he could go on cheaper holidays to Italy.

The surplus the German worker makes doesn’t go into his wages, it goes to German banks.
Then this gets recycled because the less productive Italian borrows the surplus German cash to maintain his lifestyle, which he is no longer earning.

Ultimately, Italy takes on more and more debt.

Now, if the EU forces Germany to accept the mutualisation of all debts, will this solve the underlying problem – which is the falling Italian productivity vis-à-vis the German worker?

Of course it won’t.

In fact, by backstopping the Italian’s debts with the German money, it gives the Italian the incentive to borrow more, not less. This leaves the German picking up the tab.
Therefore, in the context of punishment and reward, not only is the German not being rewarded for his hard work and superior productivity by being paid in a stronger currency, but he is actually being punished by being asked to dig deep to pay Italian debts.

This interpretation is how the world looks from the perspective of a German worker and voter and it explains why, in the latest You-Gov survey, 69 per cent of Germans want Greece to leave the euro zone.

It seems reasonable to suggest that what Germany wants is a stronger, tighter euro to protect it from the implications of continuous infusions of cash to the periphery. This is a core euro centred around Germany. Then the EU can let the Italians and others revert to devaluations, which will work.

This solution makes perfect sense if you are German. As for chancellor Merkel, this approach – moving towards a core hard euro and a periphery soft euro – could explain her behaviour of the last few weeks. Putting Germany first might leave Merkel isolated in Europe, but she would be very popular at home.

You decide what is the priority for an elected politician who is facing an election next year and who wants to get voted back into office.

  1. molly

    What Germany says and what Germany does.
    Our biggest problim in Ireland is we don’t think outside the box.
    But we also need to grow a huge pair of ba::::::
    Ireland/government seem to be a lot like the German government,they play a game with the Irish people.
    Ireland survive on exports /farming/and the export led section.
    What’s this government are doing is putting the domistic system here back 30 years .starve a plant of water and it dies.
    Look at all the Irish people leaving,look at all the machines/ tools/jcbs beening sold and sent to warmer countries.
    What we will be left with is growers of food and export led company’s producing products for overseas.

  2. RapidEddie

    Will Germany backstop the euro and is it paying for others’ profligacy? Well, it all depends (a) how much the euro is worth to Germany and (b) where the money eventually, finally ends up.

    The euro has been guided – you might say controlled – by German interests. The interest rate has followed German domestic interests. It was low when the German economy needed boosting at the same time as a higher interest rate might have helped cool down the overheating Irish economy and property bubble.

    The eurozone – enthusiastically enlarged by Germany – enabled Germany, as a huge exporter to sell into a 400m strong quasi-domestic market, unhampered by a soaring Deutschmark making their exports prohibitively expensive. Outside the eurozone, the euro traded at a value way below where the Deutschmark would have been.

    Long story short: the euro made German exports much, much more competitive both within the eurozone and outside the eurozone. So the question is: how much has the euro been worth to Germany in the last ten years in terms of additional exports? Tens of billions? Hundreds of billions? Trillion plus?

    And what about the German banks? On average, German depositors squirrel away about a quarter of a trillion euro each year. Banks don’t like money unused and with the eurozone, they could lend freely unhindered by exchange controls and fluctuating exchange rates. Obviously, the Irish, Greek banks, etc., borrowed like there was no tomorrow and in the case of Greece and Ireland there barely is. Once again, how much was that additional banking activity worth to Germany?

    People seemed astonished that Germans don’t seem to (a) follow or appreciate the gravity of the situation or (b) understand that their policies are ultimately counterproductive in that austerity is exactly the wrong thing to do in a recession and it will contract the economies it is extracting money from.

    But Germany understands it all very well. What Germany is currently doing is not a failure to react to the circumstances but a calm, medium-to-long-term game plan. They (and their banks) are owed money – rather a lot of it. What they are doing is extracting the maximum possible amount of payback until payback is no longer possible. So if they can get Ireland to pay back all those pesky bonds/promissory notes, then they might ease up thereafter. The Irish government knows this, which is why they’re playing good boy in the class. In the case of Greece, they will keep the austerity and ‘fiscal discipline’ for as long as possible, until the Greeks cannot or will not pay any more. But it’s a rational, if cold, German tactic. Keeping squeezing until the pips squeak and the juice runs out.

    The Germans will backstop the euro because it benefits them to a far, far greater extent than any other national economy. In the meantime, they’ll take the maximum benefit from the plunging euro rate, extract the maximum payback from the debtor states and do as little as possible, as late as possible. Germany and Merkel are quite happy for people to characterize what they’re doing as a muddle, inaction or too little, too late. Too little, too late is the strategy that benefits them most.

    • Reality Check

      +1, Eddie. Also Merkel is getting the idea that internal devaluations do work from Latvia and the “Lat” currency. Latvia has 5% growth. The austerity won’t work in Ireland not becuase internal devaluations don’t work but because of the croke Park agreement.

  3. mick downey

    Jeez, the germans seem to be taking all of this very well to be fair to them. I’ve been hearing they’ll do this and do that for the longest time now…and in fairness they haven’t done anything. They must have a lot more in the bank than they’re letting on.

  4. Adam Byrne


  5. joe hack

    The Germans are doing what is in their best long term interests; Wow who would have guessed that

    Germany bank s want their carelessly lent money back; Wow who would have guessed that

    Merkel is a politician; Wow who would have guessed that

    Wow welcome to the reality of politics David
    But you may have a point as Enda Kenny does not get this

    Enda Kenny is “nice man” but we need a leader

    KENNY the GOOD but not good for Ireland

  6. coldblow


    You have to register (for free) with the FT to read Munchau’s article.

    • joe hack

      The responses to this opinion piece are very interesting; it does seem that his point about Spain and Italy leaving the euro would affect France and Germany more than Italy and Spain

      • StephenKenny

        That sums up the last 5 years rather nicely – the threat is to the financial sector rather than the wider economy.

        The wider economy has done what it’s done and will have to sort that out, the financial services sector has done what it’s done and are being bailed out by the wider economy.

        Add to this the resulting unprecedented moral hazard, and the looming risk is that the broad population will, quite understandably and even rationally, eventually turn on the governments.

  7. uchrisn

    As usual a couple of years ahead of the curve, it seems we may have a stronger and weaker euro area/currency it will take a few years for this to sink in, maybe when unemployment is 30% in Spain and Greece

  8. uchrisn

    Who will win the next German election?

  9. Adelaide

    No electorate will vote for reality. The contract between citizen and government (more accurately between government-dependent citizens and their employer/provider government) has bebased to a contract of mutual connivance. It is a mutation of the democratic principle. Democracy does not require political parties or governments or elections. The sooner this archaic political system and its puppet-master ponzi monetary system is swept away by the nearing economic tsunami the better.

  10. That’s another well explained article by DmcW and one which attempts to go deep.

    I would go a step deeper and focus on the process by which money is created as the root of the problem.

    All the money in the economy, even German money, is created through bank loans and this is why every euro has a corresponding debt. All banks, even German banks, cancel money out of existence through loan repayments and this is the basics of how modern economies operate.

    Germans may be quite productive but any Italian money required to purchase their products can only be created through bank loans also and if the money ends up in Germany, the debt stays in Italy.

    This system is unsustainable because it requires ever increasing creation of money through borrowing for us to have any money to trade. So far, mortgage holders have been the main creators of money in the economy but they’ve finally hit the natural limit of taking two careers to repay. We need to start discussing alternative ways to create new money for the economy. Expecting it to comes from bank loans is no longer feasible.

  11. The deliberation by Merkel between hard & soft is Porn.

    This is the nest level after debasement of any currency and is more ethnic in objective than in union of sovereign minds.

  12. piombo

    Germany will choose the option suited to their mittelstand, landesbanken and savers. It will depend on which country gets hoisted onto the pyre first, Italy or Spain.
    If it is the former, Germany reverts to the D-Mark over a long weekend as it does not have the fire power to finance the Italian public debt of €2 trillion.
    If it is the latter, Germany will get the centralized bank control it is holding out for as a “do ut des” for allowing the ECB to backstop the ESM through the issuance of a banking license and shore up the recapitalization of Spanish (but not Irish banks who are regarded as off shores of the UK and US big boys).
    In the case of a new D-Mark, Germany gmbh would embark upon an M&A campaign to source market and “cheaper” production in Italy etc.,
    I have said this before, Northern Italy is a far cheaper and more productive area than any area in Germany excepting for the old east. Italy’s problem is the corrupt State and the structural presence of organized crime which deters investment.

    • bonbon

      Italian Europarliamentarian Submits Question on Bank Separation and Credit System

      MEP Mario Borghezio, a European Parliament member from Italy, raised the “three-part” policy of Glass-Steagall bank separation, national credit, and modern infrastructure platform investment, in a question directed to the European Commission in parliament. Borghezio represents Italy’s Northern League party, and his intervention is reported by the Itlian press agency Agenparl:

      “Greece is insolvent; a faction in the Eurozone is ready to negotiate a debt moratorium and an exit from the euro, but no one knows what the consequences of default will be, as stated by MEP Borghezio (Northern League), in a parliamentary question to the EC. Robert Zoellick, who will continue as president of the World Bank until the end of June, wrote in the FT May 31 that if Greece leaves the euro, there would be no way to avoid contagion. `Those who live in the eurozone, especially, those in high places, are deaf to the warning bells. Events in Greece could cause panic in Spain, Italy, and throughout Euroland, pushing Europe into a dangerous zone. If Greece goes out of the euro, it is impossible to predict the contagion, in the same way that [the crash of] Lehman had unforeseen consquences.’

      Borghezio said that the only available tool {within the system is monetary expansion}, whose potential for hyperinflation has already exceeded threshold levels. He asked, “Does the Commission not believe that the only way to prevent disaster would be banking separation, a system of parity among national sovereign funds, and a policy of productive credit and a New Deal of the 21st century?

  13. molly

    Lets look at this from Germanys side what’s in it for them,from all I read it’s Germany calling the shots and it seems to be a bad deal for the fatherland .
    What Germany seems to be asked to do is to use its money to prop up the euro,regardless of who they export there goods to.
    If they pull the so called plug on the euro will they survive,I think they will more than survive.
    I can’t get my head around why Germany wants to be in the euro,because they surly can’t keep propping up the euro ponzi credit card that we call the euro.if there was no euro would the country’s in the so called euro survive ,they would.
    That it’s back to Ireland ,if we where run right ,I believe this would be a great place to live and bring up your family.
    But instead ask yourself what have we at the present time,a government that milks the system.
    From there pay ,there expenses ,there croneys there pension there gold pleated pension.
    A system run by milkers for milkers it makes me sick,when I employed people and payed all my tax ect I may as well have put the money on a bonfire.
    My pension is not gold plated far from it so some of my tax went to fund them plonkers,what a fu:: of a system I hope it falls in on top of the greedy people maybe then they will get there just rewards .

    • joe hack

      hi molly,

      “why Germany wants to be in the euro”

      History, politics, a desire avoid war and conflicts, a desire to move forward and build trust but pressure from others will play a big part.Politics.

      The euro will survive, more countries will join it will change and evolve, it will not be easy and may be part of a one world currency by the end of the century but don’t hold your breath.

      Europe and the rest of the world has a responsibility to those that can’t even feed themselves

      The amount of money that was used to bail out Greece would go a long way to help third world countries survive.

      Don’t believe anyone who says that they know what way the economy will go or that they know winning lotto will be, if you’re travelling on a bus to Dún Laoghaire and a dunk on bus tells out to get rich be glad you’re not travelling to far.

      Be careful of taking advice from taxi drivers too, even if they are German as they too might not be able to predict the future.

      Be careful what the media says according to the media Sunday’s election in Greece was a vote to stay in the euro or vote to leave it of course we know in was not.

      Don’t underestimate the rise of Syriza in Greece this sent a message across Europe and the success of the left in France too will make right very concerned you don’t have to win an election to make a difference.

      I can give you prediction — at sometime tomorrow and every day afterwards it will be one minute past six.
      I also predict that there will be another boom and bust cycle but I can’t tell the time of the boom or the bust oh! I may be wrong about the clock, as they may change the way we measure the passing of time in the future.

      In my humble opinion the Euro will survive and we Irish will soon be voting for some form of further integration fiscal/banking initially and more in the future.

      Where do you want to be?

  14. I’ve worked in the UK all my life. The work ethic is tough but rewarding if you want to make a bob. But it has its drawbacks too. Generally speaking over a career, through work, I’m there or thereabouts.
    I don’t know anything about the German work ethic barring what I have read but it seems very thorough, albeit quite mundane.
    Deco will SLAUGHTER me for this, but while yes we must work, for that is the way it is, we also must live.
    A quality of life respecting local traditions and cultural nuances is as much a part of the whole fabric of humanity as is being aware of money and stuff!!!!

    Well done the few who sang at the football.
    If this were England, they’d be hailed as heroes.

    The country is (PML)well sick of the same old scutter trotted out over the last 4 years.

    And ye people who trot on here to promote the same old scutter need to realise that we long term internees look at @GTCost, Namawinelake and many other analytical sources before we comment here.

    But we are still allowed to retain a personal viewpoint on this site for which I thank David McWilliams.

    I think Deco is right.
    We need to get with it. We can be sharper and better and faster. Our people abroad are. And well respected but they won’t have anything to do with a Lilliput where two thirds live off the rest, where the rest are taxed into non existence. The inverse of Utopia.

    It’s not right to badmouth the Germans, indeed broad generalisations per se are just an expression of ignorance.
    I’ve said this over the years. We are a young country and we have been led by parochial and patriarchal politicians that we ourselves have elected, mostly without question.
    We are now thrashing about looking for a target to blame. There is one clear target, those in the banking sector who knew exactly what risks they were taking, to the detriment of the Irish State as a whole.
    And another clear target, those politicians from whatever hue, who were subsumed into the madness for filthy lucre and who failed in their duty towards the State.
    And those with beards who sold their souls to suck on the teat of Eire Nua, and besmirching Croke Park in the process.
    This country has borrowed beyond it’s means since the 50′s.
    It’s not stood on it’s own two feet since Churchill offered Dev independence during WW2

    We are only four million with influence across the globe. We should be Switzerland. We should be prosperous or at least someways comfortable. Our best and brightest shouldn’t have to go to make room for those who know at twelve years old what government department they will work for.

    There is one thing to be said about Britain, Germany, the United States or the other developed nations, if you can and will work, you’ll get a chance.

    Here you’ll get what you’re given if you’re lucky and toe the line.

    I thought we gave 800 years trying to get rid of servility and patronage.

    We’ve just reinvented the same old wheel and with 2016 round the corner, who will fill the boots of those who laid down their lives way back then?

    But Mayo will win the All Ireland so thats ok.

    Naid Ona Naid a Phiuc.

    • Deco

      Furrylugs – It’s OK. One should never fear what others think your deductions, but only for any flaws that might never be uncovered when it becomes too late. The honesty of public discussions is important.

      By producing deductions, and analyzing thier worthiness you are advancing the level of public discussion.

      Yes quality of life is important. Though I have a bone to pick with much of what we are told is quality of life, when it descends into a means of distracting the people from a deterioration of quality of life. We seen this in the boom era. People were encourage to splurge. 100 ways to spend (your SSIA). And if you don’t have any money left, don’t worry. Spend anyway. Mary Harney says that “we must not talk ourselves into a recession”. We talked ourselves into a banking collapse instead. Quality of life is not equivalent to a new show off motor, or participation in the latest “join the crowd and get on board” (before it is too late, and while you can still get attention) adventure of the prevailing era.

      At the heart of our problems is a personnel problem in Ireland, with respect to authority. We keep allowing ourselves to be run by gombeens, for the benefit of gombeens. Our enemy as a society, is the “gombeen ethic”.

      And I have learned something useful recently. We are far too naive for the gombeen ethic.

      This is why gombeens are always in control.

      Because we have a prevalent more in our culture towards being naive. We lack scepticism towards authority, towards the motives of the rich/powerful/well connected. And we are all too willing to put our hand into our pocket and pay them a living.

      Though, the way Ireland works they have clever ways of getting into our pocket, when we do not comply. They have the media to assist them in this. And they can influence state policy.

      The current policy with regard to the banks is a classic example. Or NAMA. The professionals should be getting squeezed from all the delfation in the asset markets. They should be hurting from bad investments. Instead the taxpayer is bailing them out.

      I am resigned to the fact that there is very little we can do about these things in the short term. In the medium term, we can improve the level of honesty and transparency in public discussions like this. That will improve matters. It will reduce the degree to which people are naively pulled along into consenting to schemes that cause societal impovrishment.

      The lesson of the crash for most of the citizenry amounts to the advice “Do not buy a pig in a poke”.

    • coldblow

      Can’t agree about the singing. I heard it was 20 mins of Athenry after the Spain match. (Almost certainly the one same verse.) Then there’s the Boys in Green (to the tune of Mary Hopkins’ hit) and maybe Olé, which were probably first used on terraces by a 17 year old Everton fan (called Barry) in 1969 and some drunk English supporter in the 80s respectively. Vocal support is undoubtedly an asset in an away game but otherwise, as I argued here a long time ago, “passionate” support is an albatross around a team’s neck. I know all about it, and in the end you have to conclude that it’s just narcissism and doesn’t work. To paraphrase, in reverse, the Biblical story about sparing the cities of S&G, would they have kept singing if the score had been 5? Or 6? At a certain point they would finally stop and turn on the team and the manager. And in turn, the player’s response (as in Dunphy’s Only a Game?) is **** them.

      • coldblow

        It’s a field of study in itself. Ritual behaviour. All right I’m pushing it there, but bear with me. Once upon a time you’d hear chants based on songs by the Beatles (Hey Jude), Steam, Deep Purple (Black Night)etc, all composed by juvenile delinquents in a state of nature, but that all seems to have gone now. Even if occasionally you might still hear something on MOTD to make you laugh. Although that old reliable to the tune of the Wild Rover, with the same curious final line that fails to get up to the high note, is still de rigeur. And where do the Irish fans get the idea that they are the best supporters in the world? That is some claim. I remember Liverpool supporters (MOTD c1970) singing that they were the best behaved supporters in the land (they’d been given that award) but it was meant as irony. A lost golden era of football chants, it’s daft. But the Irish support is truly a parody of a parody. Although that is so strange that something interesting might emerge in the end. But I wouldn’t bet on it.

        And then you had the phenomenon of Irish pubs always showing rugby internationals on BBC (with Bill McLaren) rather than RTE. Thing was, Bill (despite his mellifluous voice) never had a clue why decisions were given – I’d spent 7 years at grammar school studiously avoiding acquiring any knowledge of the rules of that game but that much was obvious even to me. (I just wanted to say that.)

      • Deco

        I have to agree the sight of a crowd of people “celebrating” a non-achievement, posturing as patriotic, and making some of statement is in itself a dangerous omen.

        For it tells us that a lot of the lemming tendencies in recent years have not gone away.

        And unlike Welsh rugby fans, Irish soccer fans don’t sing – more a case that they all shout at once….

        I regard people going with the flow as a form of intellectual laziness.

        Nobody bothered to chant insults at the FAI and the media for having hyped up the prospects of the team for the previous three months.

        • Adam Byrne

          Exactly. People can do what they want of course but in my own opinion and considering the pathetic efforts of the team on the fields of play I thought it was wholly inappropriate.

          Fields of Athenry my arse.

          John Delaney said the abiding memory of the Spain match was the singing of that song. What a tosser. My abiding memory was of a disgraceful performance by inept individuals under the restrictions of a conservative manager’s outdated approach. It’s not enough to say that Spain have better players than Ireland. Lesser teams such as Swansea have shown that it’s possible to play the game properly without a team of superstars.

          All Ireland were interested in doing in the matches was hoofing the ball into the oppositions’s penalty area from wherever on the pitch they could ‘win’ a free kick.

          Despicable. They got what they deserved.

          • Deco

            John Delaney. 400 thousand euro a year.

            What exactly does he do that deserves a pay packet more than Obama gets for running the US ?

            Come to think of it, what does he do ?

            FAI = Farce Association of Ireland.

            I am reminded of the article that David wrote about the FAI paying the second highest pay packet for any international manager. It reflected the difference between ambition and ability that prevails still in many aspects of Irish life, especially when it comes to payment.

            Except, because of the changes in the English FA a few months back, we are probably now in the number one position.

            We are still doing something out of proportion to reality in this country.

            The FAI are a ripoff outfit. But not many have that figured out yet.

        • Colin

          I agree with all of you here. If they are the best football fans in the world, why don’t they turn up at their local League of Ireland team’s club matches? Those who turn up for LOI matches are the REAL best fans in Ireland, and they don’t sing the fields of athenry in an inane fashion for 20 mins at any time at these matches.

          The singing was more about making a statement, like ‘Hello Europe, I’m Irish, I sing a lot, and I have a few pints too, so please like me, I promise I won’t harm you, just as long as you don’t say something I disagree with’.

          • Deco

            The funny thing about the best football fans in the world, is that they are only at it because of the booze.

            These clowns are being encouraged on the path of self deception by the media.

            Well, that is the role of the media in Irish life. Leading people to act against their interests, and praising the people who follow choices that are to their own detriment.

            Apply scepticism to everything that ultimately originates from the agenda proposed by the media, to support “our advertising sponsors”.

            What McDonalds is to the US, Guinness is to Ireland. Saturation of the market to the detriment of everybody’s well-being.

        • suilleabhan

          Is it not ignorance in itself to criticise something you dont understand? The Fields of Athenry was not a ‘celebration’ at the end of the Spain game. It was a much needed lift for the many people who were present. It was more akin to the violinists in the film Titanic than a celebration.

          • Adam Byrne

            I used to be a professional footballer suilleabhan so I think I have some understanding of the game.

            If I had played like Kevin ‘The Muppet’ Doyle and the rest of those wasters had and my fans still serenaded me, I’d upchuck and walk off the field in disgust.

            The team were an absolute disgrace to football and at the risk of repeating myself – Fields of Athenry my arse.

            All the best.


  15. http://bit.ly/Lb5Nyh
    I’m really getting to like this guy.
    He keeps saying what I said two or so years ago, just after David McWilliams said the same thing.
    Which, I suppose, makes me piggy in the middle.
    Oh never mind…………

  16. pablos

    The publics relationship to the financial crisis can be likened to that of an elderly dependant parent who realizes that her son has taken up gambling and is busy squandering a considerable fortune. The publics reaction to the crisis can be likened to that same parent recommending that her son visit a different gambling house in the hope that they might go a bit easier on him.

    • Deco

      Do you mean the media’s reaction to the crisis or the public’s ?

      The media seems convinced that no crisis is too small to be fixed by a bailout from somebody else.

      The media also seems convinced that the greatest travesty ever would be if people actually lived in a financially sustainable manner, and in their own private interests.

      I do not know to public’s reaction, because there are so many different players that constitute the public. Even in a country like Ireland, where the media is highly successful at getting fools to part with their hard earned wages.

      There are always people who know enough about life, and the complexities of the underlying reality, to know that it is best to opt out of many things that are supposedly the defining patterns of the prevalent mood.

      Pablos – by the sounds of your postings, I am certain that you are one of those who is sufficiently sceptical of the crowd effect, to plot your own course.

      • redriversix

        Shout “crisis” often enough and people no longer react nor care

        Apathy is raging…….

        • “Apathy is raging”

          only 96 hits on Google for that phrase surrounded in
          quotes. Impressive. did you make it up yourself?

          I love it RR6

          It is a perfect contradiction

          DMW would have loved to coined such a peach of a phrase himself I reckon

          • redriversix

            Morning PaulDiv

            I did coin the phrase “Apathy is raging”……My mother always said I was very talented.

            Today I was going to show the good people of Dublin how to make fire,but the German rain-machine seems to have thwarted my plans !

            Have a great day PD


  17. bonbon

    Germany : Karlsruhe Constitutional Court Strengthens Parliamentary Rights, Offers Basis To Defenestrate ESM

    In what is effectively a smashing defeat for the ESM as such, and provides for courageous parliamentarians an opportunity to refuse voting on the ESM altogether, Germany’s Constitutional Court in Karlsruhe ruled this morning that the German Parliament must henceforth be informed “as early as possible” on international negotiations, such as the ESM, and allow for the Federal Parliament to participate in these matters, before the government can conclude treaties or issue internationally binding declarations. The court said that a stronger involvement by Parliament into such treaties compensates for the shifting of jurisdictions towards the European Union.

  18. bonbon

    German Economists’ Open Letter Protests ESM: “Madam Chancellor, Stop This Policy”

    June 19, 2012 (EIRNS)–In what they call an “extra-parliamentary query,” a group of 40 economists and legal experts has sent an open letter to Chancellor Angela Merkel recommending that Germany not ratify the ESM. They call on the government to stop the policy of “conditional rescue packages,” which they say have long since been discredited in past interventions into Ibero-America’s crises. The group also asks the government about scientific surveys that prove that Germany has benefitted from the euro, which they doubt, and that furthermore prove that Germany would really suffer disadvantages from a return to the D mark.

    “Madam Chancellor, stop this policy,” the open letter states. “The German people has the right to be comprehensively informed about potential alternatives to the ESM and about the motives behind your policy. Regrettably, none of the parliamentary groups in the German Bundestag has insisted this right be respected.”

    The 40 signers on the letter include Ulrich van Suntum (Muenster), Ronald G. Asch (Freiburg), Charles B. Blankart (Berlin), Matthias Erley (Clausthal- Zellerfeld), Carola Groppe (Hamburg) and Volker Grossmann (Fribourg, Switzerland).

  19. The Government made recent hard and soft options relating to their decisions to cause to delay the releasing of the Revenue tax demand notices to tax payers who had made early declarations , until after the recent elections .

    Suddenly …this week they all appear …why did it take so long for the early bird disclosure tax abiding citizens to have to wait so long ?

    Fudge & Fudge & Co

  20. Deco

    Well, now it appears that Merkel has blinked.

    She has consented to a bailout of Italy, and Spain with money that she will find impossible to get from the German Bundestag. And that is before she asks the citizenry. Meanwhile the Dutch and the Finns will start demanding things like accountabality, and collateral from the PIGS. This will cause a massive problem in Greece, where the two parties who created the mess are now going to form a coalition, on the pretext of saving the Euro, as the currency of the Greek state (which is bankrupt).

    The financial assets markets will probably get a surge of good feeling for the rest of the week.

    Until somebody asks the question “where is this money coming from ? “.

    I imagine that Merkel got a concession as a result of the current gesture. Maybe the US will agree to return that gold that is supposed to be in safe keeping from the Cold War era, on the pretext that it was safer in New York, than within the reach of the Red Army. Or maybe it will be an agreement concerning collateral from Greece, Spain, or Italy.

    The governments of the bankrupt countries are now all eager for a closer union, on the basis that it will bail out the state systems that they have patronized with cronies for decades.

    But for now the Ponzi scheme is looking a lot better than it was yesterday.

    Long term, I doubt that this will fix anything.

    All of the PIGIS need to put their state institutional complexes on an efficiency drive.

  21. Stiofan

    Hi David. I fail to see how it became the sole responsibility of the Germans to ‘save the Euro’. How can one country be responsible? How did this happen to Germany? Doesn’t Luxembourg use the Euro? Could they ‘save the Euro’? Why do I read about Angela Merkel every day? Why not Elio Di Rupo, the prime minister of Belgium? They have the Euro, don’t they? I think more should be heard from Lawrence Gonzi. The Maltese have every reason to lift their voices and ‘save the Euro’. Maybe Enda and the School Teachers will ‘save the Euro’. God help us.

    Meanwhile, nobody dares mention that the USA continues its overt financial war on Europe. Nobody (other than Barossa a few days ago) makes the point that Holy Bond markets of the world lie in US hands. Day after day they attack the national debt of Europe, driving up risk, destabilizing, weakening, stealing, impoverishing. Could the USA ‘save the Euro’? Probably not,as they don’t use it. But then, David Cameron doesn’t us it either. He and Barack O’Bama sure have a lot of great ideas about how to ‘save the Euro’ however. Maybe Cristina Fernández de Kirchner has a few ideas. Argentina doesn’t use the Euro either. Hell, Even Julius Gillard the Australian prime minister had an opinion recently. Still, nobody ever mentions the financial war being waged by the yanks.

    I think we should all agree that it’s ‘US Bond Markets Out of Europe’. Let them do as they please at home. We might even give a few suggestions on how to fix the US economy, if they would like, like. US Bond Markets Out of Europe, because US bond markets have nothing to do with us. Thanks Yank, go home. If you won’t, we’ll make you. It’s 67 years since WW2 ended. Go home. Ta ta now.

    • Tull McAdoo

      That’s Julia Gillard, there Stiofan, not sure if she would approve of being called a “Julius”…..who knows, with her background in the legal profession she could have you up before the “wig” for that indiscretion…ha ha.

      Anyhow jokes aside I am not sure that I agree with your take on the Bond markets…..My experience of the bond markets as I have pointed out before on this forum, is that they are made of mostly bluffers and chancer’s who would sell their mothers for a margin…These sharks could give a toss about Obama or anybody else for that matter, who stands in the way of their bonuses……enough said….

    • bonbon

      Ye got it wrong there- Volcker admitted to bailing out EU banks at American taxpayer expense – 42 trillion, and actively refuses to install Glass-Steagall to reign in his bankster friends.

      So the FED is “saving” the Euro.

      How does that add up?

  22. Germany stormed thought the group stages of Euro 2012 and there have been German flags sprouting up all over the place here since then. The Germans are definitely not afraid of a bit of the old nationalism. Can’t wait to see what happens on Friday…


  23. joe hack

    Money is relative,

    Germany is “rich” in relation to others in the EZ, this is a flaw in the Euro, if Germany balances it’s “wealth” with the rest of EZ then EZ can function again but the flaws will still have to be fixed.

    The problem with Markel solution at least up until Los Cabos it appears was that she wanted to fix the flaws first. I believe Germany has been told some home truths in the last months by EU leader and others.

    Merkel wanted austerity and fiscal union etc before balancing the Euro this is a insane dangerous logic or she was being untruthful she is killing the patient before the operation and the patients are Pist at the German way.

    Markel and others may announce changes at the next Euro meeting or she may hold off until she is re-elected next year but I am not too sure the rest of the EU/world will be that tolerant.

    The moral hazards have to be addressed those that allowed excessive borrowing and those borrowed should not be let off the hook why should someone like me or Germany have to pay for those that had the party but we cannot fix the patient when its dead and Germany has to realise this and grow up the” fatherland” must keep the child alive before it can be educated but the Germany was part of the Flaw too.

    The Euro is dead long live the Euro

  24. joe hack

    Ireland should have a “Plan B” even if it is only used to wave or hinted to at the Euro Zone but it makes sense to have a Plan B

    Which PIGS will beat Germany Portugal, Italy, Grease or Spain?

  25. Dorothy Jones

    Wetend End Boys..Dead End Town….Which Do You Choose….Hard or Soft Option :)

    Here’s a pic of the Angela Merkal lemon squeezer; ‘out’ some years back, making a good comeback now.
    [2nd row down, third in from the left.......]

  26. Excerpts from Tragedy and Hope by Carroll Quigley:

    Commercial Capitalism

    The Primary Goal of Capitalism

    The Operations of Banking Were Concealed So They Appeared Difficult to Master

    Bankers Obsessed With Maintaining Value of Money

    Bankers Create Money Out of Nothing

    The Dynasties of International Bankers

    Bankers Felt Politicians Could Not Be Trusted With the Monetary System

    Money Power–Controlled by International Investment Bankers–Dominates Business and Government

    The Power of Investment Bankers Over Governments

    … and so on

    The link below contains 10 pages of excerpts. In the article there is link to more article containing 40 pages of excerpts


    Thanks to Aiden in Roscommon for providing the link

  27. bonbon

    Remember Volcker, the Volcker Rule supposed to control banksters? Well here is Volcker’s true face!

    Volcker Confesses to $2 Trillion Swindle

    LPAC has learned that former Federal Reserve Board Chairman Paul Volcker is conducting a call-up campaign against the reinstatement of Glass Steagall, arguing that the so-called Volcker Rules are sufficient because they do not “punish” bankers by demanding that they take responsibility for the more than $2 trillion in still-outstanding gambling losses.

    Imagine that? We must bail out the banks not punish banksters! So Volcker has made a public exhibition!

    • bonbon

      Volcker is the guy who put interest rates at 20% in the 1980′s as FED chairman, bankrupting countless farms and businesses.

      We can be sure his call up campaign includes EU luminaries.

  28. molly

    Can some body out there explain to me about all this talk about taking money out of the pension fund,
    What’s the fund for if not to pay for pension and if the money is taken from the fund what happens when the money is needed for pensions and the money is not there.

    • Tough luck for believing in 1950s suburban fairy tales

      They are often portrayed as ‘poor pensioners’. Every emotional button in the book is pressed to amass sympathy for the innocent victims

      It is dereliction of personal responsibility

      They never wondered where all the money comes from. If they were to investigate the activities of their pension providers it would probably make for some uncomfortable home truths

      By paying into a pension scheme you are supporting the system. The system makes it money in shady dealings

      Turning a blind eye and pocketing the cash is the ultimate selfish act

    • bonbon

      Targetting the old, by stealing the pension fund, and the very young and chronically ill by shutting down health care are listed as crimes against humanity at the Nürnberg Tribunal. Dr. Alexander there said , at the trial of the war criminals, that putting a value on human life, with some lives not worth living, opened the door to the Holocaust.

      I hope this explains the situation now. We may have to explain this to some on the dock very soon.

  29. bonbon

    Just to clear up some loose opinions above :

    At G-20, the British Empire Agreed with Itself that Germany Must Bail Out the Entire Trans-Atlantic Banking System

    About the only thing that the participants in the June 18-19 G-20 summit could agree upon, it seems, is the spelling of the names of the next blowout victims: Spain and Italy. Other than that:

    1) British media like the {Daily Telegraph} trumpeted “reports” that a bailout package worth 750 billion euros (about a trillion dollars) had been put in place, including funds from the EFSF and the (non existent) ESM, which would buy Spanish and Italian sovereign bonds. They characterized the deal as a major step towards a European bank union and eurobonds.

    2) British Chancellor of the Exchequer George Osborne argued on behalf of the “Weimaristas” that this (non existent) new fund had to ensure that “common resources [are] transferred from richer countries to poorer countries, [to show] that the whole eurozone stands behind the banks of the eurozone.”

    3) British vultures such as David Owen of Jefferies said that even this would not be enough, and that the (non-existent) ESM had to be licensed as a bank, so it could borrow endless squillions from the ECB, and give them to the banks. “Any bond purchases must be on a crushing scale to eliminate all doubts about EU willingness to take the risk of sovereign off the table entirely and permanently,” he said in flight of manic fancy.

    4) German officials, however, adamantly denied that any such agreement had been reached, imsisting that “there wasn’t any discussion about any such concrete initiative at Los Cabos,” according to Spain’s {ABC}.

    5) EU economic spokesman Amadeu Altafaj also denied an agreement had been reached: “there were no negotiations about this” during the summit.

    6) The Spanish government of Mariano Rajoy, meanwhile, has not even given the green light for {last} week’s 100 billion euro package, let alone the new one, which is larger by an order of magnitude. Rajoy told a press conference in Los Cabos that no one at the summit had “proposed that we ask for aid from the financial institutions,” while his Finance Minister, Cristobal Montoro, told Spain’s parliament that Spain would not ask for an international bailout, “because it does not need to be bailed out.”

  30. bonbon

    Germany : Adenauer Grandsons Denounce Euro Bailouts

    June 20, 2012 (EIRNS)–Stephan Werhahn (59), grandson of Germany’s postwar Chancellor Konrad Adenauer, denounced the present German Chancellor’s policy, saying that “the founding fathers of Europe like Robert Schuman, Alcide de Gasperi, and Konrad Adenauer wanted to build a strong and independent Europe, but now with the bailout funds and billions in rescues we are demolishing it.” The bailing out of struggling Eurozone states like Greece had “nothing to do with the European vision of the founding fathers,” he said, adding that he has quit his longtime membership in the CDU, the party which his grandfather founded, because the values that party’s chairwoman, Chancellor Angela Merkel, is now promoting, are not what the party was meant to stand for. Werhahn is manager of a finance company.

    Paul Bauwens-Adenauer, another of Adenauer’s grandsons, also denounced the bailouts and the ESM, which he said was “a complete disaster.” He made the remark in his opening speech at the Koenigswinter meeting, yesterday. On the sidelines of the event, he told an EIR representative that he is not against a return to the d-mark, but that he would prefer a euro as strong as the mark — which, however, it isn’t. He is rather skeptical as far as the future of the euro is concerned.

  31. joe hack

    Will Greece force Germany out of the Euro or will Germany force Greece out of the Euro?

    Tomorrows sports headlines – Germany forces the Greeks out of the Euro

  32. [...] papers. I’ll quote a few of his remarks, but you can read the whole column at this link: http://www.davidmcwilliams.ie/2012/06/19/hard-and-soft-options. It is short but a great [...]

  33. [...] papers. I’ll quote a few of his remarks, but you can read the whole column at this link: http://www.davidmcwilliams.ie/2012/06/19/hard-and-soft-options. It is short but a great [...]

  34. [...] papers. I’ll quote a few of his remarks, but you can read the whole column at this link: http://www.davidmcwilliams.ie/2012/06/19/hard-and-soft-options. It is short but a great [...]

  35. [...] The growing difference between what Angela Merkel says and what she does [...]

  36. [...] The growing difference between what Angela Merkel says and what she does — David McWilliams [...]

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