Friday, April 12, 2013

Failing Cyprus

Cyprus has not been rescued. Our latest attempt at kicking the can failed. We missed, fell over, broke our wrist. But we are unable to admit that, so we will get up and pretend nothing happened. The island is now supposed to find some additional € 5.5 billion. The most likely source will be imposing even higher losses on deposits, but with only 40 % left it probably won't be enough. Other ideas, like privatisation, seem ridiculous, since it would be stupid to assume that any one will invest in a country that is about to face a depression.

Meanwhile, the German Bundestag has become a amateur re-enactment of the Brüning government in the early 1930s.

The election on September 14th 1930 made it impossible for Brünings Zentrum (which has now become CDU/CSU) to form a coalition with a majority in the Reichstag. He started to govern through emergency decrees. But his destructive austerity policy would have been impossible without the SPD. The gutless party tolerated the Zentrum led government, by voting against attempts (by an unholy coalition of NSDAP and the communists) to repeal the emergency decrees.The horrible policies lead to an unemployment rate of 37 % in Germany, and it is safe to assume that without the austerity measures Hitler would have likely not have had a chance become dictator.

The vote on the second Greece rescue package on February 27th 2012 showed that Merkel does not have a own majority ("Kanzlermehrheit") anymore when it comes to such decisions in the Bundestag. Therefore her destructive austerity policies forced on other countries would be impossible without the SPD and/or the Greens. The gutless parties vote for the the rescues, and only the communist left-wing Die Linke is against the austerity measures. The horrible policies have lead to an unemployment rate of over 25 % in both Spain and Greece, without the austerity measures a break up of the euro and the rise of the Hitler fanboys in Greece would not be likely.

Of course, there were outside factors neither Merkel nor Brüning could control. In both cases the crises in Europe started because of mistakes made in the USA. Brüning also had to accept the Young plan, the Creditanstalt (now owned by Deutsche Bank) failed and Merkel is not responsible for failed policies in Greece before the rescues or bank bankruptcies like Bankia or Laiki Bank. Still, nothing actually forced Merkel and Brüning into an austerity policy. The reparation payments were 12.4 % of the of the government budget, which is only a little higher than the 10.9 % of the federal budget that Germany has to pay in interst for its debt at the moment. Hoover's moratorium eliminated the reparation payments in 1931 (in 1932 the Young plan was given up altogether, too late for Brüning though) and Merkel could get additional 10 year Bunds at 1.3 % interest and she could at least stimulate the currently nonexistent growth in Germany. One just has to look at new orders to see, that our policy has failed, not only in other countries, but also here in Germany.

The Cyprus "rescue" - in my opinion - marks the beginning of the end of the euro. The few short weeks since the package have already shown, that it doesn't even come near the amount needed to actually safe Cyprus, even when one believes the optimistic assumptions of the European commission, which time and time again have been shown to overstate the confidence induced "growth". A sane opposition in Germany would force Merkel back to the drawing board and it would not agree to fantasy plans that don't even survive for a month.The SPD will instead most likely agree to the Cyprus "rescue" next week.

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