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Maybe nein, maybe ja

by Robert Teitelman | Published May 30, 2012 at 1:14 PM

There is Donald Trump and his birther mania -- and there's the euro-zone crisis. Birtherism wins hands down in the U.S., which has the vaguest sense that there's this continent across the sea threatening to come apart. Over the past several weeks, Facebook won out over Greece, as Felix Salmon kindly pointed out in mid-May. Elsewhere, however, (yes, there is an elsewhere that's not an old TV show) Europe is a big story. It's always been a big story in the Financial Times and not surprisingly Martin Wolf, who's been rattling around America, weighs in this morning with a dose of the usual gloom and implacable rationality. (For those devotees of economists at lunch, check out Wolf's repast with Paul Krugman over the weekend in the FT. What did we learn? Krugman is very busy, writes faster than any journalist and knocked off a European column because he already had the subject worked up and "was overstretched." Wolf did not ask Krugman what the world really wants to know: How are relations with that guy Brooks who, from his perch across The New York Times op-ed page, lobs fiery missiles at Krugman, and vice versa?) His subject is Germany. What, he declares, in an attempt at self-control threatening to pop his buttons, are those Germans up to? Or as Wolf fulminates:

"Now turn to the second issue: how does Germany want the eurozone to be organised? This is how I understand the views of the German government and monetary authorities: no eurozone bonds; no increase in funds available to the European Stability Mechanism (currently €500bn); no common backing for the banking system; no deviation from fiscal austerity, including in Germany itself; no monetary financing of governments; no relaxation of eurozone monetary policy; and no powerful credit boom in Germany. The creditor country, in whose hands power in a crisis lies, is saying 'nein' at least seven times." Germany is thus to Wolf, what Wolf Blitzer (Germans and wolves everywhere) is to Trump. This Wolfian diatribe about German negativism is about as far as he can take this column. The rest is a series of similar hell-that-I-knows. "In brief, the eurozone is now on a journey towards break-up that Germany shows little will to alter." Or: "German leaders will have to choose between a shipwreck and a change of course. I do not know which Germany will choose."

Guess things are really bad.

Not everyone, however, is completely devoid of ideas. As they inch closer to kicking Greece off the SS Europe, a few solutions have surfaced like Jules Verne's narwhal. The Economist this week features a two-page leader offering its own federalization plan, a kind of sharing of the pain, but in a more limited way than seemingly utopian schemes for political integration. You know you're in trouble when The Economist takes a page to chew over a) whether the euro is worth saving (it is), b) the "newspaper's" earlier proposals, which failed to go far enough and c) what a mess a breakup would entail, even if things went well. The Economist, like Wolf, takes refuge in the image of two drunks (banks, governments) propping each other up. The newspaper-that-looks-like-a-magazine makes the reasonable assumption that Europe needs more sharing of the debt burden, but won't go for political integration that will mean surrendering some sovereignty. It also has as little idea of how the Germans will jump than Wolf. What The Economist grasps at is a twofold plan focusing strictly on finance: a continentwide "system of bank reorganization, recapitalization, deposit insurance and regulation" and "a limited mutualization of debt," say above 60% of GDP. True, Angela Merkel has rejected mutualization in the form of Eurobonds, and Germany would have to pony up to make it work, but at least the scheme gets around German law. And it's "limited in scope and time."

Lo and behold, others have also come up with what appears to be the very same idea, with a few twists. Take the British newspaper, The Telegraph, which put out a story Tuesday saying that a plan -- "known as the European Redemption Plan" (it has a name now!) -- has been drafted by the German Council of Economic Experts, known in Germany as the "Five Sages of the Economy" (hat tip: Wikipedia), and approved already by the Social Democrats and the Greens. Actually, the Five Sages put this plan out last year but failed to get traction with Merkel. The Telegraph then takes us through the plan, which mostly resembles The Economist proposal, with the small detail that the debt would have to be backed by collateral in the form of gold bullion countries have been piling up. This could be a problem, as the plausibility of a breakup increases. Why would a country like Italy or Spain ship its gold out if it were just going to be orphaned eventually anyway? To the paranoid among us -- and if I was European, I'd be paranoid -- giving up control of your gold in a crisis like this would make me very nervous. Maybe it's a conspiracy to get the gold, after all, like the vast cabal required to make Obama seem like he was born in Hawaii.

As The Economist says, "Even this more limited version of federalism is tricky." And it asks the large question that has hung over the euro project from the beginning: Who wants to give up sovereignty to become a European? Who even wants to help support those other deadbeats in their time of need? As The Economist asks plaintively: "One question remains: Will Germans, Austrians and the Dutch feel enough solidarity with Italians, Spaniards, Portuguese and Irish to pay up?" You'll notice that the magazine-pretending-to-be-a-newspaper just dropped the Greeks. You'll also notice that nearly every story about the European crisis ends on a question. Until that stops, the crisis will continue. - Robert Teitelman

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