German Austerity Push Shows No Signs of Letting Up
So here’s WaPo’s Anthony Faiola on where the Europeans are in dealing with their, which may soon be our, financial crisis:
The leaders of Germany, France, Italy and Spain were gathering in Rome Friday for crucial talks aimed at reaching a compromise on short- and long-term fixes for the region’s worsening financial crisis, ahead of a European Union summit in Brussels next week.
The meeting came as the fallout of Europe’s crisis was spreading beyond the borders of the 17-nation euro zone, with the Moody’s rating agency downgrading 15 global banks including Bank of America and Citigroup, as well as four of Britain’s largest financial institutions, citing worries about their exposure to now-volatile world markets…
The Rome talks were hinging on the ability of a trio of leaders — French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy — to convince the reluctant German Chancellor Angela Merkel to take a more aggressive stance in fighting the crisis.
So what’s Merkel up to? Ezra Klein suggests a very scary possibility today: The Germans and their northern European allies (no longer including France) are not really interested in helping Greece meet its obligations, despite all the happy talk about what would happen if the “right” people won the recent elections:
You might ask why they [the Germans and their allies] seem so intent on cracking Greece in half. One plausible story I’ve begun to hear is that an increasing number in the euro zone actually want to drive Greece out. The idea, basically, is that Greece is such an unsalvageable basket case, and its economy is so much weaker than anyone else’s, and its governments have been so much more dishonest and difficult to deal with, that solving Greece’s problems would mean rewarding irresponsibility while not solving them would mean an endless cycle of crisis. At some point, it’s better just to cut them off and cauterize the wound.
At that point, having shown how serious they are about punishing wayward members, the euro zone can extend more support to the remaining, and more responsible, countries in the currency union. Having made an example out of Greece, and forced everyone to stare into the abyss, they will both have more support for saving the rest of the periphery and less fear that other countries will think they can flout the rules without consequences.
But, of course, the euro zone can’t be seen to actually cut any countries off. All they can do is make it impossible for Greece to remain. Which appears to be what they’re doing. It almost goes without saying, of course, that if this is the plan, the chances for it to go awry and wreck the world economy as the euro zone collapses under a series of unmanageable runs are very, very high.
That’s comforting. Our own immediate economic future could be largely in the hands of people who are recklessly committed to austerity no matter what—austerity right up to and including the point it’s wrecking the European and global economies.
Let’s hope the French, Italians and Spaniards are very persuasive today. If not, I may spend the weekend watching bad World War II movies with villains from you-know-where.