Heiner Flassbeck — Thank god, it’s over. Eight years of Wolfgang Schäuble

Severe smackdown.

Flassbeck Economics
Thank god, it’s over. Eight years of Wolfgang Schäuble

Heiner Flassbeck

Bill Mitchell — Wolfgang Schäuble is gone but his disastrous legacy will continue

History is often made by single, very powerful individuals acting on their own mission according to their own calling. Many of these individuals are seemingly immune to the reality around them and try to recreate their own reality – sometimes succeeding to advance the well-being of those around them and beyond, but, usually, they just leave the main stage after creating havoc. I could name names. But only one name is relevant for today’s blog – Wolfgang Schäuble, the former CDU German Minister for Finance. Schäuble resigned that role after the recent German elections and is now being feted by the mainstream press as some sort of visionary who kept the Eurozone together through his disciplined thinking and his resistance to populist ideas that would have broken the discipline imposed on Member States by the European Finance Ministers. History tells us differently. He has overseen a disastrous period in European history where its major step towards political and economic integration in the 1990s has delivered dysfunctional and divergent outcomes for the Member States. Some countries (Greece) has been ruined by the policies he championed while others are in serious trouble. Further, despite him claiming the monetary union has been successful, the fact is that the Eurozone is still together only because the ECB has been effectively violating the no bailout articles of the Treaty of Lisbon via its various quantitative easing programs since May 2010. Should it stayed within the ‘law’ of the union, then several nations would have been forced into insolvency between 2010 and 2012. The problem is that while Schäuble is now gone from the political stage, his disastrous legacy will continue....

Bill Mitchell – billy blog
Wolfgang Schäuble is gone but his disastrous legacy will continue
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

RT — Europe must defend ‘liberal world order,’ limit Chinese & Russian influence – German minister

Europe should do more as a guardian of "liberal world order" because the US is starting to take a "skeptical" view of that role, German Finance Minister Wolfgang Schaeuble said, adding that China and Russia must be limited in their influence.

"If the United States is starting to take a skeptical view of its role as the guardian of global order – and we've already seen hints of this in recent years – then I would see this as a call to action directed at Europe, including Germany," Schaeuble said in a speech at the American Academy in Berlin, a think tank that promotes US-German ties.

He went on to state that China and Russia should not be allowed to step up to the plate when it comes to "filling the gaps left by the US."

“I doubt whether the United States truly believes that the world order would be equally sound if China or Russia were to fill the gaps left by the US, and if China and Russia were simply given a free hand to dominate the spheres of influence that they have defined for themselves,” Schaeuble said during the Tuesday speech.

“That would be the end of our liberal world order. This order is still the best of all possible worlds [and] it does not matter if you look at it from ethical, political or economic [points of view]. And we want this order to keep moving forward, or at least not see it weakened," he continued.

Russian President Vladimir Putin previously slammed Washington in 2015 for "attempts to create a unipolar world," implying that the US is attempting to dominate world affairs.

Are Western leaders gearing up for war to preserve the Western hegemony that has dominated the world beginning in 16th century? Or is the Wolfgang Schaüble talking out of the wrong hole again?

WTF gives the West the right to determine the world order? Is that liberal?

Another of the paradoxes of liberalism with paternalism masquerding as liberalism.

RT
Europe must defend ‘liberal world order,’ limit Chinese & Russian influence – German minister

Brett Arends — Opinion: Greece’s Varoufakis reveals the worst kept secret in Europe in his tell-all book

Forget all the claims and protestations about “families of nations” and a “new Europe” and “the European project.” The European Union, and especially the eurozone, is a German empire.

The new capital of Europe is not Brussels — let alone Strasbourg, the home of the European Parliament — but Berlin. The ultimate power of the EU is not the president of the European Commission, but the chancellor of Germany.…

And Germany is a pretty much a vassal of the US.

In other words, the Greeks had to be punished in order to terrify the rest of the continent. 

If you can think of any historical parallels for this German behavior in Europe, go right ahead.

Just German leaders being German leaders.

On the positive side, it surely means the euro is the deutsche mark in drag, and a harder currency than outsiders credit. Achtung, baby.

This is the point of the EZ in the eyes of Germany. The euro is the DM in disguise and Germany gets a discount on its currency.

The conclusion? The European project that manifested in the EU and the EZ only works if Germany leaves. But the point of the European project was to put a harness on Germany.

MarketWatch
Opinion: Greece’s Varoufakis reveals the worst kept secret in Europe in his tell-all book

Brett Arends

Alex Christoforou — More EU Trouble. Deutsche Bank Chief Economist Wants €150 Billion Bailout For EU Banks

Systemic risk.

Italy’s Prime Minister, Matteo Renzi, fired shots at Germany’s financial EU hegemony when, during a joint news conference with Swedish Prime Minister Stefan Lofven, said:

“If this non-performing loan problem is worth one, the question of derivatives at other banks, at big banks, is worth one hundred. This is the ratio: one to one hundred.”

Renzi was referring to the massive, trillions of derivatives Deutsche Bank is carrying on its books. According to Renzi, Italy may have issues, but “other” European banks have much bigger problems.…

The Duran
More EU Trouble. Deutsche Bank Chief Economist Wants €150 Billion Bailout For EU Banks
Alex Christoforou

John Helmer — HELLO RAPALLO! THE INEVITABILITY OF THE NEW GERMAN TREATY ON ECONOMIC COOPERATION WITH RUSSIA

Secret negotiations have been under way for some time between high German and Russian officials, to which Chancellor Angela Merkel has been excluded. Warned by US Assistant Secretary of State Victoria Nuland, and in a recent coded communication from outgoing President Barack Obama that she must act to save her authority, and enforce European Union sanctions against Russia, Merkel has also received an ultimatum from her cabinet and party. This was delivered in the form of a page torn out of an Old German bible in which a large black spot had been inked. Either she step aside in secret, Merkel understood the signal, or she will be forced to resign in public.

For more details of the meaning of the Black Spot, read this.

Hilarious. This is based on leaks, but Helmer is well-positioned in this regard. If true, the house of cards is collapsing unless the US tightens down the screws. But the outcome of US screw tightening would be uncertain, it seems.

The rumblings out of Deutschland recently give credence to this. German business has not been aboard with US sanctions for some time, and now the German foreign policy establishment is also balking at ratcheting up hostilities with Russia.

First Cameron, now Merkel? Her political popularity, hence political capital, has been sinking and even her own party is concerned with the direction she has been setting.

Dances with Bears
HELLO RAPALLO! THE INEVITABILITY OF THE NEW GERMAN TREATY ON ECONOMIC COOPERATION WITH RUSSIA
John Helmer

See also

THE BRITISH VOTE ISN’T AGAINST EUROPE – IT’S AGAINST THE WARS OF BARACK OBAMA, ANGELA MERKEL, AND EVERY SERIOUS NEWSPAPER IN THE WORLD AS WE USED TO KNOW IT

Spiegel International — Mario Bothers: Germany Takes Aim at the European Central Bank

There was a time when the German chancellor and the head of the European Central Bank had nice things to say about each other. Mario Draghi spoke of a "good working relationship," while Angela Merkel noted "broad agreement." Draghi, said Merkel, is extremely supportive "when it comes to European competitiveness."

These days, though, meetings between the two most powerful politicians in the euro zone are often no different than their face-to-face at the most recent summit in Brussels. She observed that his forced policy of cheap money is endangering the business model of Germany's Sparkassen savings banks and retirement insurance companies. He snarled back that the sectors would simply have to adapt, just as the American financial sector has.

The alienation between Germany and the ECB has reached a new level. Back in deutsche mark times, Europeans often joked that the Germans "may not believe in God, but they believe in the Bundesbank," as Germany's central bank is called. Today, though, when it comes to relations between the ECB and the German population, people are more likely to speak of "parallel universes."

ECB head Draghi doesn't understand why he is getting so much resistance from the country that has profited from the euro more than any other. Yet Germans blame Draghi for miniscule yields on savings accounts and life/retirement insurance policies. Frustration is growing.…

Spiegel International
Mario Bothers: Germany Takes Aim at the European Central Bank
Martin Hesse, Ralf Neukirch, René Pfister, Christian Reiermann and Michael Sauga

Yanis Varoufakis — Schäuble’s Gathering Storm

[French Economy Minister Emmanuel ] Macron is very different from [Italian Prime Minister Matteo] Renzi in both style and substance. A banker-turned-politician, he is President François Hollande’s only minister who combines a serious understanding of France’s and Europe’s macroeconomic challenges with a reputation in Germany as a reformer and skillful interlocutor. So when he speaks of an impending religious war in Europe, between the Calvinist German-dominated northeast and the largely Catholic periphery, it is time to take notice.…

Exasperated by Schäuble’s backtracking from his own plan for political union, Macron recently vented his frustration: “The Calvinists want to make others pay until the end of their life,” he complained. “They want reforms with no contributions toward any solidarity.”

Here we go again.

Replay of the Thirty Years War and Peace of Westphalia, which established the principle of national sovereignty as fundamental in international relations? (Russia and China are relying on Westphalia in their counter to unipolarism.)

If Yanis is correct, the euro is toast.

Nothing short of macroeconomically significant institutional reforms will stabilize Europe. And only a pan-European democratic alliance of citizens can generate the groundswell needed for such reforms to take root.

That's not in the offing given either current or foreseeable conditions. 

Project Syndicate
Schäuble’s Gathering Storm
Yanis Varoufakis, a former finance minister of Greece, is Professor of Economics at the University of Athens.

Mark Schieritz — Gut Instincts – The World According to Wolfgang Schäuble

Ordoliberalism.

Zeit Online
Gut Instincts – The World According to Wolfgang Schäuble
Mark Schieritz

Alexrpt — Varoufakis, ‘During my time working in the Eurozone, I encountered evil that would be impossible to make up’

Yanis on the warpath.

Red Pill Times
Varoufakis, ‘During my time working in the Eurozone, I encountered evil that would be impossible to make up’
Alexrpt

John Ward — If Cameron Says He Can Negotiate With A Triumphalist Germany, Then He Is A Liar

In just ten years, Europeans experienced total Soviet collapse, reunified Germany, accepted federalism, scoped out EMU, and launched the euro. Only recently have increasing numbers of EU and eurozone citizens really grasped the sloppiness, corruption and corner-cutting involved in this process. But still hardly anyone gets why German-led globalism and control freakery have turned the Union from fluffy dream to anarchic nightmare…and totally removed the potential for long term peace.…

The European Union, far from keeping the peace in Europe, has become a creator of tectonic tensions and social divisiveness which, after North Korea and the USA, represents the greatest threat to peace and prosperity in the contemporary world.

Why does any of this matter for Brexit?

It matters for one reason above all others. It matters for a reason that invites Leftist UK voters to take off their blinkers about the EU, and Rightist voters to do the same in relation to David Cameron.

The British Left needs to face facts: the EU is not a force for peace and harmony, it is a directionless seed blowing with the wind of neoliberalism. It is a born catalyst for social division, growing wealth divides, and yes – even civil war.

The British Right needs to face facts: David Cameron is not a brave and principled reformer out to do battle with the Horrid Hun and Beastly Brussels. The British Prime Minister is a convinced corporacrat in favour of multinational globalist banking and business, and therefore desperate to compete in that pigswill with all the other sociopathic hogs.

For all Britons regardless of political affiliation, there is an acid Troika of test questions that can be put to the occupant of Number Ten Downing Street:
Can you bring about EU reform that will bring key Sovereign powers back to the UK?
Can you get the EU to abandon federalism, and go back to being a purely economic community of nations?

Can you persuade Brussels, Berlin and Frankfurt to cut their losses on the euro, and stop blaming innocent European citizens for an ill-conceived and hubris-fuelled mistake?
If he can answer a straight ‘Yes’ to all three – and if he has succeeded by the time of the referendum – then we should all vote to stay in.

But if he can’t and they won’t, we should all vote to leave at the earliest opportunity.

The Slog

Saturday Essay Special: If Cameron Says He Can Negotiate With A Triumphalist Germany, Then He Is A Liar

John Ward

Yanis Varoufakis — Will the IMF throw the spanner in the works? – as I feared and Dr Schäuble hoped?

The key issue, of course, is not so much whether the IMF will be part of the deal – a typical fudge could, for instance, be concocted with the IMF providing ‘technical assistance’ to an ESM-only program.

The issue is whether the promised debt relief which, astonishingly will be discussed only after the new loan agreement is signed and sealed, will prove adequate – assuming it is granted at all. Or whether, as I very much fear, the debt relief will be too little while the austerity involved proves catastrophically large.

Yanis Varoufakis
Will the IMF throw the spanner in the works? – as I feared and Dr Schäuble hoped?

Dirk Ehnts — Schäuble supports European Treasury, which might fight recessions

The proposal of a Euro Treasury is a first ray of light that the euro zone’s policy makers have learned the lessons from 2010-14. However, it critically depends on the capability to deficit-spend, meaning that a Treasury that can use only taxes would be useless to fulfill its job of fighting recessions in the euro zone.

econoblog 101
Schäuble supports European Treasury, which might fight recessions
Dirk Ehnts | Berlin School for Economics and Law

Ambrose Evans-Pritchard — Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges

A secret cell at the Greek finance ministry hacked into the government computers and drew up elaborate plans for a system of parallel payments that could be switched from euros to the drachma at the "flick of a button" .
The revelations have caused a political storm in Greece and confirm just how close the country came to drastic measures before premier Alexis Tsipras gave in to demands from Europe's creditor powers, acknowledging that his own cabinet would not support such a dangerous confrontation.

Yanis Varoufakis, the former finance minister, told a group of investors in London that a five-man team under his control had been working for months on a contingency plan to create euro liquidity if the European Central Bank cut off emergency funding to the Greek financial system, as it in fact did after talks broke down and Syriza called a referendum.

The transcripts were leaked to the Greek newspaper Kathimerini. The telephone call took place a week after he stepped down as finance minister.…

You'll want to read the rest of this even though it is a nice Sunday and you have other things to do.

This looks like the true story from Yanis. International intrigue.

The Telegraph
Varoufakis reveals cloak and dagger 'Plan B' for Greece, awaits treason charges
Ambrose Evans-Pritchard

Also

This is more complete than the Telegraph article based on it.

Ekathimerini
Varoufakis claims had approval to plan parallel banking system
Xenia Kounalaki

Yanis Varoufakis — Europe’s Vindictive Privatization Plan for Greece

 How is this not naked looting? This isn't even a fig leaf.

On July 12, the summit of eurozone leaders dictated its terms of surrender to Greek Prime Minister Alexis Tsipras, who, terrified by the alternatives, accepted all of them. One of those terms concerned the disposition of Greece’s remaining public assets.

Eurozone leaders demanded that Greek public assets be transferred to a Treuhand-like fund – a fire-sale vehicle similar to the one used after the fall of the Berlin Wall to privatize quickly, at great financial loss, and with devastating effects on employment all of the vanishing East German state’s public property.

This Greek Treuhand would be based in – wait for it – Luxembourg, and would be run by an outfit overseen by Germany’s finance minister, Wolfgang Schäuble, the author of the scheme. It would complete the fire sales within three years. But, whereas the work of the original Treuhand was accompanied by massive West German investment in infrastructure and large-scale social transfers to the East German population, the people of Greece would receive no corresponding benefit of any sort….

Project Syndicate
Europe’s Vindictive Privatization Plan for Greece
Yanis Varoufakis, former finance minister of Greece, is Professor of Economics at the University of Athens

When questioned in parliament in 1999 about whether he had accepted a donation during a meeting with Schreiber, Schäuble disputed the question. But in a radio interview in January, he admitted he had met Schreiber at least once more. That created suspicion that a second donation had been made. Whatever the case, indignation within the ranks of the CDU and its Bavarian sister party, the Christian Social Union (CSU) toward Schäuble grew so much that he was forced to resign.

So how exactly did Merkel profit from the Schreiber incident? The former party secretary became aware that, in the face of an unexpected question in parliament, Schäuble had lied about taking cash from Schreiber. Merkel realized at the time that this secret would eventually come out and would inevitably lead to Schäuble's downfall. She also knew that, if she wasn't careful, she could go down with him. After all, it was only logical that the general secretary of a party would have the confidence of the head of that party.

And so she wrote about it -- in what was widely described as a "Dear John" letter addressed to Kohl and published in the Frankfurter Allgemeine Zeitung newspaper on Dec. 22, 1999. In the letter she was very critical of Kohl, saying that the new generation of politicians in the CDU needed to distance themselves from him, in the same way that teenagers must distance themselves from their parents if they are to become adults. Even though Merkel had only told Schäuble about plans to publish the open letter the night before, Kohl was convinced that the missive had been published with Schäuble's foreknowledge and approval.

Suddenly Kohl seemed to discover his old political boisterousness, attacking Schäuble ever more vigorously. Perhaps he wanted to secure a virtuous place in the national history as the "father of German unity" -- he had presided over the re-unification of East and West Germany -- rather than the infamous politician with the dirty donations. A war of words, via various interviews, ensued, the likes of which had not been seen before. The fight between the two former friends and allies escalated to the point that Kohl abdicated his seat as honorary chairman of the CDU and Schäuble resigned his position with the words: "The CDU finds itself in the most serious crisis in its history."

The scrap between Kohl and Schäuble, the pair that had formerly been bound with an invisible cord, toppled both of them off the pedestal on which they had formerly stood together. And there, waiting quietly in the wings, was Merkel.

Spiegel Online International (August 7, 2009)
Germany's Schreiber Affair: The Scandal that Helped Merkel Become Chancellor
Gerd Langguth

See also Jeff Sachs, Germany, Greece, and the Future of Europe

Lars P. Syll — Myths about the Eurozone crisis

Brief quote about what led to the EZ crisis, what did not, how to address recovery and how not to address it.

Lars P. Syll’s Blog
Myths about the Eurozone crisis
Lars P. Syll | Professor, Malmo University

Fabio Ghironi — Variable geometry bites back: Schäuble’s motives

Is Schäuble’s vision of the EZ a federated state consisting only of the North? History suggests this may be the case. 

This would involve a significant realignment, not only economically but also geopolitically.

Vox.eu
Variable geometry bites back: Schäuble’s motives
Fabio Ghironi | Castor Professor in Economics, University of Washington; Research Fellow, CEPR; Fellow, EABCN

ht Mark Thoma at Economist's View

Steve Keen — Wolfgang Schäuble, The Trust Troll

Schäuble was clearly the primary architect of the Troika’s dictat for Greece. One only has to compare its language to that used by Schäuble in his OpEd in the New York Times three months ago (“Wolfgang Schäuble on German Priorities and Eurozone Myths”, April 15 2015). There he stated that “My diagnosis of the crisis in Europe is that it was first and foremost a crisis of confidence, rooted in structural shortcomings”, and that the essential factor in ending the crisis was the restoration of trust:

The cure is targeted reforms to rebuild trust — in member states’ finances, in their economies and in the architecture of the European Union. Simply spending more public money would not have done the trick — nor can it now.

Compare this to the first line of the communique:

The Eurogroup stresses the crucial need to rebuild trust with the Greek authorities as a pre‐requisite for a possible future agreement on a new ESM programme.

The policies in the document match those in Schäuble’s OpEd as well. Schäuble called for:

more flexible labor markets; lowering barriers to competition in services; more robust tax collection; and similar measures.

The Troika’s document forces these measures upon Greece. These include “the broadening of the tax base to increase revenue”, “rigorous reviews of collective bargaining, industrial action and collective dismissals” and “ambitious product market reforms”

Build trust means take apart the welfare state and replace with a market state owned by foreign interests and a domestic oligarchy.

This cannot in any sense be seen as an economic document, since an economic document would have to assess the feasibility of its proposals. Instead it simply states Schäuble’s ideology: regardless of your economic circumstances, simply implement these (so-called) market-oriented reforms, restore trust, and your economy will grow.

This is in spite of the fact that even very conservative economist admit that under this plan the Greek economy won't grow. The plan is obvious aimed at something else and that appears to looting Greece unless it is Greek colonization. It's one or the other, or both.

The other possibility, which Keen prefers, is that Greece is being used to set an example and this economically inexplicable behavior is "punishment." There may be some of that involved, too. It plays well with the propaganda about lazy Greeks. Here they are getting their due and being taught a lesson.

But the fact remains that Greece is being looted by the usual suspects. Considering that to be an unintended consequence seems very farfetched to me, especially give the history, which Keen does not provide here.

Does Wolfgang Schäuble stand to profit from this himself?

Forbes
Wolfgang Schäuble, The Trust Troll
Steve Keen | Professor and Head Of School Of Economics, History & Politics, Kingston University, London

Spiegel on Tsipras, Schäuble

Spiegel Online

He'll have to implement tougher savings measures than any of his predecessors, despite his fight to end them. But Greek Prime Minister Alexis Tsipras could still come out of the euro crisis as the victor, leading his country for years to come.…

Translation: "Savings measures" means replacing the welfare state with market state.

At the moment it appears that Tsipras the pragmatist has knocked out Tsipras the ideologue. "He's finally putting his country before his party," one opposition politician said on Wednesday, expressing relief.

Translation: Tsipras sold out.

Victory in Defeat?: Alexis Tsipras Has Shown Greeks He Can Save Them

Schäuble: There is no German dominance. Germany is in a good position economically, that is undeniable. But in contrast to France and Great Britain, Germany is not a member of the United Nations Security Council. For that reason alone, you cannot talk about being in a position of political supremacy. Still, the balance in Europe has shifted since the fall of the Iron Curtain. Baltic countries, Slovakia and Slovenia also now speak up when they don't like the positions taken by others.…

It's about balance. At home, we were three brothers, and when we fought, my father always said that the stronger one should back down. And that's how it was in the Greece negotiations. The one in the better position must try to help the weaker one. I tried to do that.…

I wonder what it would have been like if he had been tough on them.

Schäuble: We are currently seeing that a currency union without political union cannot function without complications. So we have to move further toward establishing a political union, for example by strengthening the European Commission and the European Parliament. But that means that member states must give up even more sovereignty. They have already taken this step when it comes to monetary policy, but are they also prepared to transfer financial policy competencies, for example, to the European level? Many have a problem with that.

SPIEGEL: French President François Hollande has proposed installing a euro-zone finance minister and placing him or her under the supervision of a euro-zone parliamentary body.

Schäuble: I am also in favor of a euro-zone finance minister, but to install one, the European treaties must be amended first. I was pleased to hear from President Hollande that France is now prepared to do so.

SPIEGEL: Are you pleased that suddenly everyone in Europe is in favor of increased integration?

Schäuble: Of course, but I am also aware that the experiences of recent years have not made it easier to advocate for more Europe. Still, I'm not giving up. I am a realist, which is why I am unable to assert that we can only save the euro if we amend the treaties. We may have to do without. What is essential is that rules are followed and enforced. But when we do that, then we are accused of establishing a protectorate or abolishing democracy. That is all nonsense….

SPIEGEL Interview with Wolfgang Schäuble: 'There Is No German Dominance'

German Finance Minister Wolfgang Schäuble had a plan to push Greece out of the euro zone. Chancellor Merkel wasn't sure what to do about it. The result is widespread resentment of Germany and a damaged Franco-German relationship.

A Government Divided: Schäuble's Push for Grexit Puts Merkel on Defensive

Dirk Laabs — Why is Germany so tough on Greece? Look back 25 years

Every drama needs a great baddie, and in the latest act of the Greek crisis Wolfgang Schäuble, the 72-year-old German finance minister, has emerged as the standout villain: critics see him as a ruthless technocrat who strong-armed an entire country and now plans to strip it of its assets. One part of the bailout deal in particular has scandalised many Europeans: the proposed creation of a fund designated to cherrypick €50bn (£35bn) worth of Greek public assets and privatise them to pay the country’s debts. But the key to understanding Germany’s strategy is that for Schäuble there is nothing new about any of this.…

Wash, rinse, repeat.

The Guardian
Why is Germany so tough on Greece? Look back 25 years
Dirk Laabs

ht Random in the comments