Wikileaks intercepted and posted on the web a cable sent by the Berlin by the US ambassador to Germany, Philip Murphy, to the Treasury Department and the State Department, on February 12, 2010 citing a Chapter 11 for Eurozone countries
From Bob Wenzel, (bold emphasis mine)
In part the cable reads:
“A EUROZONE CHAPTER 11: DB [Deustche Bank] Chief Economist Thomas Mayer told Ambassador Murphy he was pessimistic Greece would take the difficult steps needed to put its house in order. A worst case scenario, says Mayer, could be that Germany pulls out of the Eurozone altogether in 20 years time. In 1990, Germany's Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an "inflationary zone," or 2) the German taxpayer became the Eurozone's "de facto bailout provider." Mayer proposes a "Chapter 11 for Eurozone countries," which would place troubled members under economic supervision until they put their house in order. Unfortunately, there is no serious discussion of this underway, he lamented.”
The cable outlines the concern German officials have with using German taxpayer money to bailout Greece and other financially weak Eurozone members. The cable in many ways explains Germany's recent foot dragging on getting a bailout deal done, since a completed deal will mean either funding by German taxpayers or European Central Bank money printing. Here's more from the cable:
“Chancellor Angela Merkel's government welcomed the decision taken at the EU's February 11 [2010] informal summit in Brussels not to provide financial assistance, for the moment, to cash-strapped Greece. German officials believe a bailout is not needed at this time, and that extending a lifeline to Greece would have carried too many risks. One major fear in Germany is that "saving" Greece would lead to other needy Eurozone members expecting the same treatment...Prior to the February 11 EU Summit in Brussels, there was much hair pulling in Berlin over the wisdom of participating in some sort of Greek rescue. No one savored the idea of explaining to German taxpayers, already concerned about Germany's record deficit, that they would be footing the bill for the irresponsible behavior of another country. A Finance Ministry official explained to us that many Germans felt disgusted by the situation in Greece: "While Germans have spent the past decade tightening their belts and improving their competitiveness, Greek civil servants still earn 14 months' salary per year." A recent editorial in the German daily Frankfurter Allgemeine Zeitung (FAZ) asked rhetorically whether Germans would need to work until age 69 just to finance early retirement for Greek workers. With important upcoming elections in the state of North Rhine-Westphalia, bailing out Greece would not be a vote winner...The German government was, in fact, "relieved" that the European Council meeting on February 11 decided not to put concrete assistance on the table at this time...”
But here's more from the cable, which explains why Germany even cares what happens to Greece
“Chancellor Merkel is clearly relieved she does not, for now, have to explain to the public why the German government is running up its own deficit to bail out debt-laden Greece. Still, the German government appears prepared to step in as a last resort if needed and is cognizant that German banks (such as Hypo Real Estate and Deutsche Bank) and insurance companies (Allianz) have significant exposure to Greek sovereign debt.”
In other words, it's all about the damn banksters.
Read the rest here
Incidentally, Deutsche Bank Chief Economist Thomas Mayer who proposed “Chapter 11 for Eurozone countries” or the Eurozone’s bankruptcy option recently wrote about the revival of Austrian economics (bold original from my earlier post)
Therefore we need to dump the flat-earth theories promising that economic and financial outcomes can be planned with a high degree of certainty and need to look at other theories that accept the limits of our knowledge about the future. A revival of Austrian economics could be a good start for such a research programme.
Could it be that the influence of Austrian economics has begun to permeate into policymaking?
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