Angela Merkel

Bill Woodrow, Wilson's Phalarope (94_03), 1994
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By YANIS VAROUFAKIS*

The German leader is the cruelest paradox of her country and Europe

Angela Merkel's tenure will be remembered as Germany's and Europe's cruelest paradox. On the one hand, she has dominated mainland politics like no other peacetime leader – and is making the German government considerably more powerful than before. But the way it built that power has doomed Germany to secular decline and the European Union to stagnation.

Decline driven by wealth

There is no doubt that Germany is stronger politically and economically today than it was when Merkel became Prime Minister in 2005. However, the reasons why Germany is stronger are the same reasons why its decline is guaranteed in a Stagnant Europe.

Germany's power is the result of three surpluses: its trade surplus, the federal government's structural surplus, and the flows of other people's money to the Frankfurt banks, because of the euro crisis that continues to burn slowly and endlessly.

While Germany is rolling in cash, thanks to these three surpluses, that cash is mostly wasted. Instead of being directed towards the infrastructure of the future, public or private, it is exported (eg invested abroad) or used to buy unproductive assets inside Germany (eg Berlin apartments or Siemens shares).

Why can't German companies, or the federal government, invest this river of money productively in Germany? Because – and here lies part of the cruel paradox – the reason these surpluses exist is that they are not invested! In other words, under Merkel's reign, Germany made a Faustian bargain: by restricting investment, it acquired surpluses from the rest of Europe and the world, which it cannot invest without losing its future ability to extract more surpluses.

Looking deeper into their origin, the surpluses that gave power to Germany under Merkel are the natural result of having forced German and later European taxpayers to bail out the futile bankers of Frankfurt on condition that they engender a humanitarian crisis on the periphery of Germany. Europe (Greece in particular) – a means by which the Merkel government imposed unprecedented austerity on German and non-German workers (disproportionately, of course).

In short, low domestic investment, widespread austerity, and pitting proud European peoples against each other were the means by which successive Merkel governments transferred wealth and power to the German oligarchy. Unfortunately, these means have also led to a divided Germany that is now missing out on the next industrial revolution within a fractured European Union.

Three episodes offer insights about how Merkel wielded her power across Europe to build, step by step, the cruel paradox that will be her legacy.

Pan-European Socialism for Germany's Bankers

In 2008, as the banks on Wall Street and the City of London crumbled, Angela Merkel was still promoting her image as the conservative and financially prudent Iron Prime Minister. Pointing a moralizing finger at the profligate bankers of the Anglosphere, she made headlines in a speech in Stuttgart, where she suggested that US bankers should have consulted a German housewife, who would have taught them a few things about managing their finances.

Imagine his horror when, shortly afterwards, he received a barrage of phone calls from the Ministry of Finance, the Central Bank and his own economic advisers, all conveying an unfathomable message: Prime Minister, our banks are bankrupt too! To keep the ATMs running, we need an injection of €406 billion of these housewives' money – yesterday!

It was the definition of how to distil political poison. While world capitalism was having its spasm, Merkel and Peer Steinbrück, her social democratic finance minister, were announcing austerity for the German working class, upholding the standard, self-defeating mantra of tightening belts in the midst of a mighty recession. How could she now appear in front of her own members of parliament – ​​to whom she had lectured on the virtues of austerity when it came to hospitals, schools, infrastructure, social security and the environment – ​​to beg them to write a colossal check to bankers that even seconds before were swimming in rivers of money? Necessity being the mother of forced humility, Merkel took a deep breath, walked into the splendid Bundestag [German Congress] designed by Norman Foster, delivered the bad news to her astonished parliamentarians, and left with the signed check.

At least it's done, she must have thought. Except it wasn't. A few months later, another flurry of calls demanded a similar number of billions from the same banks. Why? The Greek government was on the verge of bankruptcy. If it did, the €102 billion it owed German banks would disappear and, soon after, the governments of Italy, Greece and Ireland would likely be in default on around half a trillion euros in loans to German banks. Between them, the leaders of France and Germany had a stake of around €1 trillion and would not allow the Greek government to speak the truth; that is, to confess your bankruptcy.

It was then that Angela Merkel's team sprang into action, finding a way to bail out Germany's bankers a second time without telling the Bundestag that this is what they were doing: They would portray the second bailout of their banks as an act of solidarity. with the “locusts of Europe”, the people of Greece. And make other Europeans, even the much poorer Slavs and Portuguese, pay back a loan that would go momentarily into the Greek government coffers before ending up in the accounts of German and French bankers.

Not knowing that they were actually paying for the mistakes of French and German bankers, the Slavs and Finns, like the Germans and the French, believed that they were having to shoulder the debts of another country. So, in the name of solidarity with the insufferable Greeks, Merkel sowed the seeds of hatred among the proud peoples of Europe.

pan-European austerity

When Lehman Brothers collapsed in September 2008, its last CEO begged the US government for a massive line of credit to keep his bank afloat. Suppose, in response, the President of the United States replied, "No bailout, and I'm also not allowing you to file for bankruptcy!" It would be totally absurd. And yet, that is exactly what Angela Merkel told the Greek Prime Minister in January 2010, when he desperately begged for help to avoid declaring the Greek state bankrupt. It was like saying to a person who was falling: I won't catch you, but you can't fall to the ground either.

What was the meaning of this double no [not] so absurd? Given that Merkel would always insist that Greece take out the biggest loan in history – as part of the second hidden bailout of German banks – the most plausible explanation is also the saddest: her double no, which lasted a few months, managed to instill such desperation in the Greek prime minister that he finally agreed to the most crushing austerity program in history. So two birds were killed with one rescue shot: Merkel sneakily bailed out the German banks a second time. And universal austerity began to spread across the continent, like a wildfire that started in Greece before spreading everywhere, including France and Germany.

Until the bitter end

The pandemic has offered Angela Merkel the last chance to unite Germany and Europe. A huge new public debt was inevitable, even in Germany, as governments sought to replace lost incomes during the lockdown. If ever there was a break with the past, this was it. It was time to call for the German surpluses to be invested in a Europe that, at the same time, democratized its decision-making processes. But Angela Merkel's last act was to make sure that moment didn't happen.

In March 2020, in a panic attack following our EU-wide lockdowns, thirteen EU heads of government, including France's President Emmanuel Macron, called on the EU to address the common debt issue (the so-called eurobond) that would help turn the rising national debt of weaker EU members away from massive Greek-style austerity in the post-pandemic years. Prime Minister Merkel, unsurprisingly, said one more no and offered them a consolation prize in the form of a recovery fund that does nothing to help shoulder the country's mounting public debts – or to help press Germany's accumulated surpluses into the long-term interests of German society.

In typical Merkel fashion, the purpose of the rescue fund was to appear to do the bare minimum of what is in the interests of most Europeans (including most Germans) – without actually doing it! Merkel's final act of sabotage had two dimensions.

First, the size of the recovery fund is intentionally macroeconomically insignificant; that is, too small to defend the EU's weakest people and communities from the austerity that will come when Berlin gives the green light to “fiscal consolidation” in order to rein in rising national debts.

Second, the recovery fund will, in effect, transfer wealth from poorer northerners (e.g. the Germans and Dutch) to southern European oligarchs (e.g. Greek and Italian contractors) or to German corporations that manage southern public services (eg Fraport, which now operates Greece's airports). Nothing could more effectively ensure the contamination of Europe's class war and North-South divide than Merkel's recovery fund - a final act to sabotage European economic and political unity.

a final lament

She casually engineered a humanitarian crisis in my country, Greece, to camouflage bailing out German bankers that border on criminality, while pitting proud European nations against each other.

She intentionally sabotaged every opportunity to gather Europeans.

It has cleverly conspired to undermine any genuine green transition in Germany or across Europe.

She worked tirelessly to emasculate democracy and prevent the democratization of a hopelessly undemocratic Europe.

And yet, watching the gaggle of boorish, bureaucratic politicians scrambling to replace her, I hope I don't have to miss Angela Merkel. Even if my assessment of her management remains analytically the same, I suspect that I will soon be thinking about her management more fondly.

*Yanis Varoufakis is a former finance minister of Greece. Author, among other books, of the global minotaur (Literary Autonomy).

Translation: Cauê Seignemartin Ameni for the website Jacobin Brazil.

 

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