Economy

End-Of-Growth Radicalism And The Perils Of Merkel’s “Protestant” Economics

Op-Ed: German Chancellor Angela Merkel, daughter of a Lutheran pastor, thinks Europe should save its way out of the current crisis. What the continent should do instead is grow its way to prosperity, even if that means passing along some debt to the next

Alan Posener

BERLIN -- There is more than just a kernel of hostility to consumption and growth in the fiscal radicalism of Angela Merkel, a vicar's daughter. Her policy takes one back to the early days of green fundamentalists. Who doesn't have unpleasant memories of their sermons urging repentance, their preaching about polluting the Earth if you used electricity, killing trees if you drove a car, and abetting trash dumps and climate change if you weren't against industry?

For these doomsday prophets, the Club of Rome's 1972 "The Limits to Growth" serves as a type of Holy Scripture. The hair-shirt crowd responsible for the text seemed to take a perverse pleasure in painting the end of a world that "we just have on loan from our kids." The mostly well-heeled wearers of home-knit socks thought asceticism would heal the planet.

But now -- by phasing out nuclear reactors in what has turned out to be a very comfortable here and now, thank you – Angela Merkel has actually managed to outdo the greens. And she's applying her end-of-growth ideology to budget policy via her European austerity measures. Europe shouldn't grow out of a crisis that is primarily a crisis of productivity, says Merkel. It should save itself out of it.

And Europe should do so, furthermore, under German supervision.

This all makes about as much sense as trying to heal the planet by renouncing progress. Yet the chancellor has a following of commentators singing the old hymns. Earlier they served to appease the earth goddess Gaia. Now they're supposed to satisfy the gods of the financial markets.

Gone the unbearable lightness of being of early retirement in Mediterranean countries! Gone the low taxes of those Irish show-offs! The fun and games are over. Even that old chestnut about the kind of world we're passing on to our children has been pressed back into service, only this time it's egotistical consumers who shouldn't be passing down debts to future generations.

A policy without alternatives is not a policy

There is something very German, more exactly Protestant, about this dour rigidity. It's no accident that Protestantism came out of Germany in the first place, or that Mrs. Merkel is a Protestant minister's daughter. In Merkel-speak, Luther's "Here I stand, I can do no other…" reads: "There are no alternatives to my policy." But anything without alternatives is regrettable – and a policy without alternatives is not a policy. That's what computers are for.

By comparison to the new fiscal radicalism, the old eco-radicalism actually had a rational core. Treeless forests, oceans empty of fish, poisoned coastlines, extinct species, a changed climate: those are pretty irrevocable. Debts on the other hand are basically book-keeping, even if creditors wouldn't be particularly happy to hear that.

No, you can't eat money, as the radical ecologists sneer. But you can manipulate it. And of course you can leave some debt for later generations. Germany paid the last reparation payments from World War I on Oct. 3, 2010 – that's today's living paying for the craziness of long-dead politicians and military leaders. Compared to that, future generations should be glad to pay debt accumulated by a government that shelled out for unemployment benefits, pensions to mothers, health costs for the poor or college educations – even if it was a little dilatory about tax collection.

That Europe – which remains the biggest economy on the planet – "is living above its means' by promising basic security to its citizens is a myth of the new prophets of doom. Europe is working on avoiding future debt crises in a number of ways, not least the fiscal pact for stricter budget discipline and the European Stability Mechanism (ESM).

Just as the eco-radicals called for an end to growth because they couldn't imagine how growth and environmental protection could work in tandem, Merkel and the fiscal radicals are calling for a stop to growth by sticking rigidly to their austerity plans. Future generations will be paying the bill for that. The 40% youth unemployment afflicting Spain amounts to a lost generation. Not everybody owns an apartment in Madrid or Barcelona that they can rent out to help finance a new life in Berlin. The situation hardly looks much better in other southern European countries.

Resistance starting to build across Europe

Meanwhile, even the head of the IMF delegation in Greece, Denmark's Poul Thomsen, has warned against "excessive fiscal consolidation." Small wonder, because the social democratic Pasok party charged with implementing the austerity measures has, according to polls, lost support to the Communists and other far left parties.

Resistance to the Protestant in the chancellor's office is forming all over Europe. And the resistance is unpleasant: anti-German, anti-European, nationalist, socialist. That's why Polish Minister of Finance Jacek Rostowski is saying that while his country will have fulfilled all the requirements to enter the euro zone by 2015, it will not introduce the currency as long as it poses a threat to countries that use it.

Of course Europe needs reforms. Of course Europe needs fewer debts – not least Germany, whose debts amount to 80% of the gross domestic product as opposed to the 60% allowed by the Maastricht Treaty. But the key is not savings. It's growth. The green-Protestant, post-democratic austerity regime could end up destroying Europe.

Read the original story in German

Photo - European People's Party

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Economy

Air Next: How A Crypto Scam Collapsed On A Single Spelling Mistake

It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money but the simplest of errors exposed the scam and limited the damage to investors.

Sky is the crypto limit

Laurence Boisseau

PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.

Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.


Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.

Share capital of one billion 

The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).

The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.

Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.

While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.

screenshot of the typo that revealed the Air Next scam

The infamous typo that brought the Air Next scam down

compta online

Raising Initial Coin Offering 

Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.

For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."

What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".

Finding culprits 

Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.

Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.

Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.

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