09 November 2012

Carlo Bastasin: If the contagion goes through Berlin

With the next federal election 10 months away, German Chancellor Angela Merkel must find a way to explain to her voters why Europe should be protected, writes Bastasin in an article for Il Sole 24 Ore.

The first argument she thought of is the fact that, with the advancement of emerging countries, individual isolated European ones will not count as much. The second is that Germany benefits more from the euro than many other countries do. The third is that the cost of a common currency’s failure would be catastrophic. The fourth requires the rediscovery of the anti-nationalist spirit Germany had in the postwar period.

None of these explanations is a knockout hit. Some of them are actually not even credible after years of contrary propaganda. The chancellor should explain that the analysis of the crisis has been wrong from the beginning and that Berlin has, in this sense, more responsibility than others. But she won’t. This argument will, in fact, be used by Merkel’s opponent, Social Democrat Peer Steinbruck, who, by the way, “co-authored” such mistakes in 2008.

The prospect of a possible recession hitting Germany at the end of the year does not make matters easier. We should not feel complacency (or Schadenfreude, as the Germans say) and hope that a common evil will help chase away mutual suspicion and recrimination and will convince the Bundesbank and its political arms to abandon sabotage and uncertainty. Unfortunately, it is more likely that in the German debate Europe and the euro will be used as targets—exactly as they have been in the last few years.

But what will happen in six months, with further drops in export and with a (restrictive) public budget in surplus? At that point we will be very close to federal elections. Angela Merkel definitely has solid nerves and a special capacity to drag negotiations to five minutes past midnight. But this time the game will be played against herself.

The chance to change things comes from Greece, for which the possibility of remaining in the euro must be decided shortly. However, to do so, it would be necessary to tell a story of the Greek crisis that is indeed different from those we have heard so far. We are speaking of a country that under the “troika’s” guidance has approved 248 laws in 24 months (one every three days, on average); that witnessed all international organisms making wrong forecasts on the recessive impact of reforms; that saw investments plunge to zero as its permanence in the euro was in doubt. This is a country where even the judges go on strike, although the constitution on which they swore does not allow them, and where the fiscal system should be totally reset and rebuilt, even at the cost of not collecting taxes for six months. This is a country where reformists are disappearing from parliament, an extreme left party with 37 per cent in the polls is wiping out Social Democrats, and the third largest party is now a violent right-wing nationalist one with 14 per cent of the country’s votes.

All the arguments to explain to Germans the reasons why they should stop delaying a solution to the crisis—from the anti-nationalist spirit of the postwar to the catastrophic scenario of the end of the euro—would finally find meaning when, and if, told by sincerely explaining the Greek drama with that sense of a common European fate that Konrad Adenauer and Helmut Kohl used to call “commonality of destinies”. Or else, one day, while discussing the risks of inflation, we will discover that the contagion from economic forces has become political.

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