What to do we talk about when we talk about Merkel?

18 09 2012

Fuente: scene-stealers.com

The Pequod is cursed. All its crew except for one of them is meant to die in its transoceanic trips to hunt whales. Nevertheless, the reason for the Pequod to be cursed is not the ship itself. What can you expect when its captain trades with the Devil? Moby Dick is not the infernal element in Herman Melville’s famous novel, but Captain Ahab. Due to its image, the easy joke is to identify Angela Merkel with Moby Dick, but the truth is that she is the one prosecuting a white and dangerous animal through the Seven Seas. Then, if Merkel is Captain Ahab, who or what is meant to play Moby Dick’s role in the dark novel of the financial crisis?

To answer this question, we must go back to the beginning. In an article published in Stratfor Global Intelligence called “Financial Markets, Politics and the New Reality”, George Friedman analyses Germany’s role in the creation of the European Union and the adoption of the single currency. According to Friedman’s thesis, Germany needs the Free Trade area of the EU to help its exportation economy. Truth be told, Germany is Europe’s workshop, but at the same time, its population saves more than the media. The exceeding produce must be sold somewhere else, and in the beginning, that somewhere else meant Europe. Germany benefitted from the Free Trade area, first with France and the Benelux countries, and later on with the other 27 members.

Most measures adopted within the EU were intended to protect German, and to a lesser extent French, ambitions. A single currency like the euro would avoid member countries to inflate their debt in order to escape German creditors, it controlled inflation, and, at the same time, it was controlled by Germany. It is not a question of luck that the ECB is located in Frankfurt.

Therefore, we can see how the EU was created to benefit German economy, first, as a Free Trade area where they could sell their production without being affected by taxation, and second, having a single currency that they controlled to a big extent, and that was supposed to avert trading partners defaulting, depreciating their respective currencies, or using any other tricks to cheat German investors. The EU was necessary for Germany, and it still is. The breaking down of the Free Trade area would be negative for German trade, especially when we think that most European countries have negative trading balances with Germany: they export much more than they import.[1]

Now we have the whole story, but still, who is Moby Dick? Being simplistic, we could say that Moby Dick is the financial crisis, who is trying to destroy the fragile ship of the EU, and Angela Merkel is Captain Ahab, who is stubbornly decided to chase it, while followed by its doomed crew of European leaders. This would not only be simplistic. It is also false. Mrs Merkel is not chasing the white whale of the crisis. She is not even chasing the spectrum of a EU in decline.

The 7th of September, Mrs Merkel visited Spain with a group of German investors and experts and met Spanish Prime Minister Mariano Rajoy. However much impressed she was with Rajoy’s brave reforms (it isn’t difficult to impress Mrs Merkel apparently. She was already impressed with Zapatero’s reforms and she has been in a state of shock with Spanish cuts since 2010), the message, accorded with Draghi’s press conference, was short and clear: if Spain wants financial aid from the ECB, she must ask for a rescue.

Spain is the last prey of what speculators, right at the beginning of the crisis, called the “Gipsy” group: Greece, Ireland, Portugal, Spain and Italy. Not surprisingly, the first three of those countries have already been intervened. And Merkel was blunt enough to resemble a Panzer division: intervention or bankruptcy. Unless Spain asks for aid, the ECB would not intervene. But, why were speculators so accurate? Honestly, it sounds like a conspiracy theory, even though it isn’t.

This countries were growing in a dynamic way before the crisis started. Ireland was the ‘Celtic Tiger’, Spain was ahead of Italy in production and GDP for the first time, Portugal and Greece had no problems in financing their expensive governments. Is there any relation between sudden wealth and sudden decline? Yes, there is, and German economy is behind. At this point, it is better to use Friedman’s own words, without changing them:

“The truth was that the crisis [in those countries] was caused by Germany’s using the trading system to flood markets with its goods, its limiting competition through regulations, and that for every euro carelessly borrowed, a euro was carelessly lent.”[2]

Angela Merkel is not an European politician. She is a German politician. She is concerned with the well-being of the UE as long as it affects German well-being. The UE was a tool for German recovery. It also became a tool for German commercial expansion. She is playing the double role of a politician trapped between two fires: while it is highly unpopular in Germany to finance Spanish debt (approximately 27 or 20% of the rescue will be paid by Germany) and even though the Deutsche Bank has already opposed Merkel’s plans towards Spain, she still needs the euro not to collapse, Spain not to default, and the Free Trade area to stand untouched. If German prosperity meant to create artificial bubbles in the ‘Gipsy’ group countries, now she must press tough on them not to default, and to keep German public opinion relatively happy.

Melville’s novel is complete now. Mrs Merkel is Captain Ahab, eternally chasing the white whale of traditional German European policies, while followed by a crew of unwilling European countries that are attached to her by the impossibility to run away. The only thing we still need to discover is who plays Ishmael’s role.

Juan José Rivas


[1] According to the CIA’s The Wordl Factbook, Germany exported $1.408 trillion and it only imported $1.198 trillion, rated as the 4th country in export rates.


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27 10 2012
Merkel´s Odissey « GIN

[...] This article is a reply to What to do we talk about when we talk about Merkel? [...]

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