Economy

Upside To The Chaos? Papademos, Monti May Have The Right Stuff To Save Euro Zone

It is a showdown for the ages: Europe’s top economists (turned impromptu national leaders) and the European Central Bank vs. a panicking global investor pack.

Italy and Greece are at a crossroads that could determine the future of the euro zone
Italy and Greece are at a crossroads that could determine the future of the euro zone
Alexander Hagelüken

MUNICH - These days you might find yourself with the twisted thought that there may actually be an upside to all the turbulence surrounding the euro. After all, the crisis succeeded in doing something Italians couldn't for 17 years: getting rid of Silvio Berlusconi. The longest-serving post-War Italian prime minister leaves an atrocious legacy. If former EU Commissioner Mario Monti -- and not one of Berlusconi's protégés -- succeeds him, the country will get something it sorely lacks: an internationally respected economist who is incorruptible, both in the political positions he takes and in his personal moral standing.

Similarly, the nomination of Greek central banker Lucas Papademos as prime minister is also a step in the right direction. He understands better than other possible candidates what signals to send foreign creditors. However, Papademos is not entirely untouched by the sins of the past: he headed Greece's central bank when the country qualified for the euro zone based on manipulated budget data – and at the time he didn't denounce the tricks nearly as clearly as he later claimed he did. Still, Papademos is not a part of the incompetent political system that brought Greece to the abyss -- so in that sense he offers some hope for the country.

It may not be mere coincidence that independent economists seem slated to assume leadership in both crisis countries. For one thing, many believe they will be able to push back against the stunning power of the financial markets. It remains to be seen if they have enough perseverance and charisma to get both the politicians and citizens on board as they do what's needed to clean up the mess.

Yet as much as Europe supports and counts on Papademos and, one hopes, Monti , they alone will not be the determining factors in the fate of the euro. That much was clear from the frustrating reaction of investors when Berlusconi announced he was stepping down. Despite the apparent good news for markets, the financing costs of Italian bonds rose unsustainably beyond 7%. Confidence in the ability of the southern European countries to implement reforms is so great that investors are simply fleeing.

Unlike Greece, Italy at least has a semi-modern economy with internationally successful industries. And while Italy is incurring relatively little new debt, it's taking a beating from the markets – unlike the United States, which also has a frightening high pile of debt.

But Europe's governments don't have time to waste determing the banks' role in causing Italy's debts to explode: by next year, the third largest euro country has to replace 300 billion euros of old credit with new. Italy's problems have brought the currency union to a very clear fork in the road: either Europe supports the single currency with massive guarantees for member states, or it abandons the euro.

More power to finance

A guarantee would mean that in case of emergency, the European Central Bank (ECB) would buy up bonds even more than it has been doing. So far, the European Financial Stability Facility (EFSF) – set up specifically to deal with the euro zone's sovereign debt crisis – has failed to impress investors, and wouldn't have enough capacity to cover the crash of Italy. A central bank as a single institution possesses so much financial power that no investor pack is its equal. Transforming the ECB in this way would send the signal that Europe is not ready to sacrifice the euro to speculators.

This would obviously be a very serious move since it would mean the bank would be printing money and setting off inflation – which in its present configuration is not what it's meant to be doing. In making the move, Europe's risky bet would be that, with the ECB at the ready as credit giver, the guarantee would create so much confidence that investors would start buying bonds again, and the financing costs for Italy and others would remain feasible.

The bet goes against the German central bank model, which has long been in use in the United States. Over the next few months, the Federal Reserve will be buying U.S. bonds to the tune of several hundred billion dollars.

However, such ECB involvement would be acceptable under only one condition: states benefitting from it, like Italy or Greece, would have to accept that Europe imposes its savings and reform measures. That obviously restricts national sovereignty, but it's indispensable, and there would not be the political will without it.

The alternative to this admittedly risky plan is that Europe quite simply abandons the euro. The result would be a run on the banks as Greeks, Italians and others removed their money. Many banks would collapse. Because of such unprecedented forced debt forgiveness, it would be years -- as was the case with Argentina -- before the ailing countries saw any international credit. A strong deutschmark would make German exports significantly more expensive, and many jobs would be lost. Because of these and other unforeseeable horrors, Europe should support the euro: not at all costs, but certainly at the risk of involving the central bank.

Read the original article in German

Photo - Renegat

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Society

What It Means When The Jews Of Germany No Longer Feel Safe

A neo-Nazi has been buried in the former grave of a Jewish musicologist Max Friedlaender – not an oversight, but a deliberate provocation. This is just one more example of antisemitism on the rise in Germany, and society's inability to respond.

At a protest against antisemitism in Berlin

Eva Marie Kogel

-Essay-

BERLIN — If you want to check the state of your society, there's a simple test: as the U.S. High Commissioner for Germany, John Jay McCloy, said in 1949, the touchstone for a democracy is the well-being of Jews. This litmus test is still relevant today. And it seems Germany would not pass.


Incidents are piling up. Most recently, groups of neo-Nazis from across the country traveled to a church near Berlin for the funeral of a well-known far-right figure. He was buried in the former grave of Jewish musicologist Max Friedlaender, a gravesite chosen deliberately by the right-wing extremists.

The incident at the cemetery

They intentionally chose a Jewish grave as an act of provocation, trying to gain maximum publicity for this act of desecration. And the cemetery authorities at the graveyard in Stahnsdorf fell for it. The church issued an immediate apology, calling it a "terrible mistake" and saying they "must immediately see whether and what we can undo."

There are so many incidents that get little to no media attention.

It's unfathomable that this burial was allowed to take place at all, but now the cemetery authorities need to make a decision quickly about how to put things right. Otherwise, the grave may well become a pilgrimage site for Holocaust deniers and antisemites.

The incident has garnered attention in the international press and it will live long in the memory. Like the case of singer-songwriter Gil Ofarim, who recently claimed he was subjected to antisemitic abuse at a hotel in Leipzig. Details of the crime are still being investigated. But there are so many other incidents that get little to no media attention.

Photo of the grave of Jewish musicologist Max Friedlaender

The grave of Jewish musicologist Max Friedlaender

Jens Kalaene/dpa/ZUMA

Crimes against Jews are rising

Across all parts of society, antisemitism is on the rise. Until a few years ago, Jewish life was seen as an accepted part of German society. Since the attack on the synagogue in Halle in 2019, the picture has changed: it was a bitter reminder that right-wing terror against Jewish people has a long, unbroken history in Germany.

Stories have abounded about the coronavirus crisis being a Jewish conspiracy; meanwhile, Muslim antisemitism is becoming louder and more forceful. The anti-Israel boycott movement BDS rears its head in every debate on antisemitism, just as left-wing or post-colonial thinking are part of every discussion.

Jewish life needs to be allowed to step out of the shadows.

Since 2015, the number of antisemitic crimes recorded has risen by about a third, to 2,350. But victims only report around 20% of cases. Some choose not to because they've had bad experiences with the police, others because they're afraid of the perpetrators, and still others because they just want to put it behind them. Victims clearly hold out little hope of useful reaction from the state – so crimes go unreported.

And the reality of Jewish life in Germany is a dark one. Sociologists say that Jewish children are living out their "identity under siege." What impact does it have on them when they can only go to nursery under police protection? Or when they hear Holocaust jokes at school?

Germany needs to take its antisemitism seriously

This shows that the country of commemorative services and "stumbling blocks" placed in sidewalks as a memorial to victims of the Nazis has lost its moral compass. To make it point true north again, antisemitism needs to be documented from the perspective of those affected, making it visible to the non-Jewish population. And Jewish life needs to be allowed to step out of the shadows.

That is the first thing. The second is that we need to talk about specifically German forms of antisemitism. For example, the fact that in no other EU country are Jewish people so often confronted about the Israeli government's policies (according to a survey, 41% of German Jews have experienced this, while the EU average is 28%). Projecting the old antisemitism onto the state of Israel offers people a more comfortable target for their arguments.

Our society needs to have more conversations about antisemitism. The test of German democracy, as McCloy called it, starts with taking these concerns seriously and talking about them. We need to have these conversations because it affects all of us. It's about saving our democracy. Before it's too late.

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