Merkel: Decision Time for Europe

German Chancellor Angela Merkel (my favorite conservative) continues to be, well, conservative, in the classic sense. She's reluctant to move from a solid course; she's not influenced by of-the-moment emotion. And she's being rock-solid clear: Europe's not getting out of this mess unless it seriously deals with its problems, focuses on growth, and curbs its spending appetite. She's right.

I saw The Iron Lady last week, and I thought it was pretty well done, albeit a very incomplete picture of the Thatcher agenda and the Thatcher years. But one thing that always bothered me about Margaret Thatcher was her willingness to appear cold and unfeeling toward the losers in British society.

Merkel is a conservative, but she's also the daughter of a Protestant Christian pastor. She is, like Thatcher, a scientist, though with better grades. And when she brought the free-market Free Democrats into her government after her reelection, she also curbed their more radical tendencies. She wasn't going to be the chancellor to cold-heartedly release the poor into a world of no help.

The press has treated her throughout this Euro mess as an obstacle. I won't pretend that she's done everything correctly, but she has been correct: The quick solutions (bail out Greece and Italy and Portugal and Ireland and Spain at any cost) would be expensive failures if those countries don't deal with their endemic corruption and uncompetitiveness.

She's right.

Time to Blame Helmut Kohl for Europe's Problems?

The German parliament in Berlin.

Recently, former German Chancellor Helmut Kohl took to task current Chancellor Angela Merkel for her handling of the European debt crisis. "She's destroying my Europe," Der Spiegel quotes him as complaining.

 Kohl later disowned some of the comments he'd made and clarified, "It is true that I -- like many people -- am worried about the development in Europe and of the euro. I also see it as urgently necessary that the supposed euro crisis isn't regarded and discussed as a structural crisis of the euro per se, but as what it is: The result of homemade mistakes and challenges for both sides -- Europe and the national states."

The British press in particular likes to display great impatience with the way the fiscally responsible states (led by Germany, but also including smaller northern European nations) have dealt with the – there's no kind way to put it – disastrously fiscally irresponsible states. (One of the more intelligent articles of this type ran in the Financial Times.) The answer seems to be that the responsible states should just take on the burdens created by the irresponsible ones, without forcing the bad apples to rectify the structural problems that led to this disaster in the first place. I think Merkel has been slow and, yes, unimaginative, but she has also been largely correct: She has staked her reputation and political future on saving the eurozone, but she is also dedicated to forcing Greece, Italy, and others to learn to live like adult countries and not like teenagers who've just scored their parents' credit card for the weekend.

But we are still left with the ungenerous conclusion that Kohl himself should shoulder much of the blame. He, with France's then-President Francois Mitterand, cooked up the euro scheme as a way of mollifying European nations (France among them) that were worried about German reunification. It wasn't all a matter of that, because the European Union had been growing and solidifying for years, extending a zone of prosperity and law across a continent that had been destroyed countless times by conflict. So a common currency was a likely development at some point. But it's early introduction was intended to tie Germany closely enough to its neighbors that it theoretically would not go off marauding through the neighborhood again.

As such, it wasn't a bad idea. An unnecessary one, perhaps; there is absolutely zero appetite in Germany for fighting wars. But still, an understandable idea nonetheless.

What is not understandable is how Mitterand and Kohl, two veteran politicians who supposedly learned from the mistakes of the past, could concoct a system that is structurally illogical. Economic union without some sort of political union to enforce it is a recipe for disaster. This disaster, in fact. It could lead to large countries forcing their policies down the throats of smaller countries, which is what Merkel is being accused of doing by trying to get the poor performers to reform their economies and politics to make themselves competitive; or it could lead to poor countries overspending and expecting the rich countries to bail them out, which is the situation that has happened and that Merkel is trying to rectify.

Merkel is trying to clean up the mess that Kohl created.

If the euro was the first price Kohl and Germany paid to get reunification, then Greece, Ireland, and Italy have just presented the official invoice.

The Short-Sighted Pressures Concerning the Greek Finance Mess

So after decades of financial mismanagement and irresponsible labor deals (such as, oh, retirements at the age of 55), Greece is on the rocks financially. As anyone knows who's been following world news lately, Europe has been furiously (in both senses of the word) trying to come to agreement on how to stop the threat to the entire eurozone that is caused by lenders and investors losing confidence in Greece.

Standing at the center of the storm is ... no, not Greece. It seems to be getting treated the way one treats a downtrodden member of society who did nothing to cause his or her own troubles. The center of the storm is Berlin, where Chancellor Angela Merkel has been pledging her support for a package for Greece while saying nothing would be signed until Greece comes up with a credible plan to fix the way it does business. If we can't support tough love in the midst of a global downturn, how will it ever be imposed when things are good and people's attention wanders to dreams of easy money again?

Unfortunately, the media -- especially the financial media, which seems to have learned nothing from the past 18 months -- is acting as if Merkel is selfishly pandering to conservative German public opinion, which overwhelmingly opposes any bailout.

Just one example is Christopher Noble at Rupert Murdoch's Marketwatch. In a recent column, Noble blames Merkel for almost single-handedly putting the entire eurozone at risk. Noble mixes in some History Channel-level understanding of history, complaining that Germany is driven to be tough on eurozone financial failures because Germany so wants to be normal again after World War II. (In one particularly ridiculous paragraph, he blames the 1990s' Balkan Wars on Germany.)

Noble might be a particularly ignoble example, but he's part of the majority of the news commentary on the Greek financial crisis that we're being fed in the U.S. Even my beloved Financial Times -- which I love because it generally doesn't drink the kool-aid -- has frequently attacked Germany for being hard-line about a Greek bailout.

Think about this: We are just now starting to realize some upside after this horrendous near-depression that most of the world was dragged into. What dragged us there? Lax lending standards, a dearth of transparency in economic transactions, corruption, weak or nonexistent regulation, a get-rich-now-worry-about-the-details-later attitude. You have heard about the NINJA loans in the subprime lending schemes? No income, no job, no assets. Yet such loans were given to people to buy homes during the housing bubble. It made the lender happy (he could book the loan, get the commission, then sell the loan to Wall Street where suckers were eager to buy it, even if the ratings agencies weren't properly rating the securitized loan packages) and it made the buyer happy (for stupidly thinking the home value would rise forever). Of course, when that house of cards collapsed, nearly everyone lost, even those of us who bought neither homes nor housing securities.

Well, Greece is the ultimate NINJA borrower. Financially irresponsible, refuses to take responsibility for the mess it made, yet it is (to mix American recession metaphors) too big to fail, so Europe has to take painful action.

I recently had a conversation with a Greek man who lives part of the year in Greece, part in the United States. He loves both countries dearly, and I think it pains him to see what's happening to Greece. Yet even he mixed his complaints about Germany with an acknowledgment that Greece has mismanaged its finances and labor market, and that it has little in the way of economic power. Tourism and some agriculture. That's it. There is a popular theme in Greece that says Germany should bail it out (to the tune of tens of billions of dollars) not with loans but with reparations for the bombing of Greece nearly 70 years ago in World War II. (At the risk of indelicateness, Germany bombed a hell of a lot of countries during that war, and the other countries have managed to build real economies in the time since; more important, Germany has ensconced itself in the European Union and eurozone -- and has spent billions to support the weaker members of those systems -- as a direct consequence of its shameful actions in WWII.)

There is reason for optimism.

As my Greek friend and I agreed, Greece will come out of this. I think they've got a good prime minister in Geórgios Papandréou, who assumed power just as the world financial crash was occurring. His irresponsible predecessors made his job even worse, but of course Greek government financial mismanagement goes back a long time and includes more than one party. He seems to understand what needs to be done; whether political realities in his country will allow him to do it remains to be seen

But Greece, if it's smart and makes the changes needed to become competitive (raising its retirement age to Western norms, for starters), will come out of this stronger than before. And they'll have Angela Merkel in part to thank for that. Though they won't.

Berlin to Lead Greece Rescue; How Tough Will the Love Be?

Markets in the United States and Europe rallied today on reports that German Chancellor Angela Merkel's government has finally accepted that it will have to lead a rescue of Greece, according to reports. Financial Times says Germany will seek to build a "firewall" around Greece, so that country's disastrous finances won't contaminate other weak EU states, such as Spain and Portugal. It is not known yet if the assistance will come bilaterally (directly from Berlin to Athens) or if it'll be an EU package.

My question is whether the firewall plan will come with enough strings attached to make Greece play by adult rules when it comes to government spending. In a separate report in yesterday's FT, "Halcyon no More," the paper gives a great in-depth look at how Greece has been a financial house of cards for decades, a disaster waiting to happen. And unlike in the United States, where our current troubles were brewed by private investment run amok, in Greece the culprit was successive governments that bought their popularity at the cost of future prosperity.

When you read reports that Greek public sector unions were going on strike against "austerity plans" that only would have frozen wages and hiring -- i.e., not reduced staffing, not reduced bloated benefits -- then one has to wonder why anyone would want to help them out until they come back to reality. After all, why should other EU citizens, who have had their wages cut or their jobs destroyed, pay to keep radical Greek unions from facing reality?

We'll know in a little while what Berlin plans. But now would be a good time to play to German stereotype and be very detail-oriented and specific in the changes required of Greece to pull its rear end out of the fire.

UPDATE: When I wrote the above, I was working with the knowledge I had gotten from earlier reports that the Greek government was planning freezes but not cuts. According to a report in the Los Angeles Times today, Greece does plan cuts. I think the criticism still stands, though; everyone else in Europe faces cuts, so why should Greece's overpaid unions be sacred? One union member tells the Times, "It can't be that civil servants pay for the mistakes of past governments." But in fact, yes the civil servants should, because if you'll read the "Halcyon" article linked above, you'll see that the civil servants and others on the Greek government gravy train have not been innocent bystanders but in fact were the root of the problem. They benefited. Now it's time to pay the piper. Sorry to sound like an unsympathetic hard-nose, but frankly I'm unsympathetic.

Angela Merkel at Copenhagen -- An Opportunity Missed

Of all the blather we heard in Copenhagen, German Chancellor Angela Merkel's were probably among the least hypocritical. A former environment minister and scientist (she is, after all, Dr. Merkel), she has been a strong proponent of pushing economies to use green policies. She knows her data, and she knows what it means. But Copenhagen collapsed nonetheless.

Berlin Wall -- Past and Present

The Brandenburg Gate, once the famous place for Western leaders to make anti-Wall speeches. (2001 photo by John Zipperer.)

In the former eastern sector of Berlin, there is a memorial known as the Mauerpark -- Mauer is the German word for wall. Though almost all of the communist-built wall that separated this city for 28 years has disappeared, this park serves as a reminder of several things: the wall itself, the communist regime that ran the former GDR, and the lasting scars of the horrible war started and lost in that capital city.

On August 4, 1961, just days before the Berlin Wall's construction would begin, UPI President Frank Bartholomew spoke to The Commonwealth Club about the dilemma Soviet leader Nikita Khrushchev faced with his post-war empire in Eastern Europe.

In Berlin this July, I was able to understand Khrushchev's attitude toward Berlin and why he created the crisis. From his viewpoint, it is completely logical. ... Berlin is cracking the Iron Curtain. It's a showplace of Western prosperity 124 miles inside the Communist zone, and it has become absolutely intolerable to him. ... The billboards in East Berlin extol the benefits of Communism as against the slavery of the West, but 40,000 East Berliners go West each day for their employment. ... The defections are depleting the population of East Germany. Three weeks ago, defections were 4,000 a week. Now reports say they have stepped up to 1,500 daily. ... Khrushchev faces 100 million enemies in the Iron Curtain countries and is making no progress at persuading them to the Russian way of thinking.

Today, Germany is hosting celebrations of the 20th anniversary of the fall of the Wall. Leaders from across the European Union -- nations that were locked in a fight to the death 65 years ago, and that were divided by a lethal iron curtain for about 45 years after that -- gathered to commemorate the event that, as German Chancellor Angela Merkel noted, was part of the continental struggle to lift off the repression of a number of communist regimes. Those leaders have been joined by some other significant leaders, including Russian President Medvedev, former Soviet leader Mikhail Gorbachev, U.S. Secretary of State Hillary Clinton, and former Polish President Lech Walesa, who arguably established the first crack in the Iron Curtain when he led the shipyard strikes against Poland's communist government almost a decade before the Wall fell. In her comments right before a re-enactment of the crossing of the border, Merkel noted the "incredible encouragement" East Germans got from Poland's Solidarity movement.

When Walesa spoke at The Commonwealth Club in 2004, after receiving The Club's Medallion award, he downplayed the role played by Gorbachev and suggested that it was the late Russian President Boris Yeltsin who really made the changes of 1989 stick:

The process could have been reversed, and at this point we were lucky to have Yeltsin - not Gorbachev, but Yeltsin. Because Gorbachev, when he realized what was happening, made this attempt to reform communism. Perestroika and glasnost are nothing but a reform of communism. .... This is precisely what he admitted in the presence of President George Bush Sr., [German] Chancellor Kohl, [Czech] President Havel and others. But that was a time when Yeltsin was antagonistic with Gorbachev. As you may remember, the majority of you supported Gorbachev at that time; however, this antagonism allowed Yeltsin to prepare Russia and then withdraw her from the Soviet Union, which he actually did. I'm not sure whether he did it when sober or when drunk, but he did it. Had he not done it, I am sure that I myself, and Chancellor Kohl, would be rebuilding the Berlin Wall even faster than we had pulled it down sometime before, with strong encouragement from the United States. [Listen to complete Walesa audio.]

Yeltsin, of course, is unable to attend today's festivities, but Walesa's views do not seem to have moderated in the last five years. He recently told German newsweekly Der Spiegel that "the first wall to fall was pushed over in 1980 in the Polish shipyards. Later, other symbolic walls came down, and the Germans, of course, tore down the literal wall in Berlin. The fall of the Berlin Wall makes for nice pictures. But it all started in the shipyards."

In his own speech to The Commonwealth Club on the 15th anniversary of the fall of the Berlin Wall, Czech President Vaclav Klaus noted that the revolutionary events of the end of communism in eastern Europe had given way to a changed landscape that required continued -- but not revolutionary -- change: "The Czech Republic has become already -- structurally -- a standard, which means normal, European country, and as a result of this it has typical European problems, if not to say European diseases. They cannot be solved by means of another revolution, because we are already in the middle of the process of a spontaneous evolution of basic social structures. This evolutionary era, of course, is less radical, less dramatic, less headlines-creating, but -- paradoxically -- more controversial and even more ideological." [Listen to Klaus event audio.]

Tear Down This Wall

Another important figure who was not able to make it to this year's celebrations is the late U.S. President Ronald Reagan, who famously sparred with the Soviets during his first term in office, only to forge a partnership with Gorbachev. Reagan is often quoted for his challenge to Gorbachev, delivered at the Brandenburg Gate along the Wall, to "tear down this wall."

The writer of that speech, Peter Robinson, told The Club in 2004 that he had a conversation with President Reagan before the speech, in which Robinson tried to get feedback from the president that would help him formulate a strong speech.

I said, "Mr. President, I learned when I was in Berlin that they'll be able to hear the speech on the other side of the Wall, by radio – and if the weather conditions are just right, I was told, they'll be able to pick up the speech as far east as Moscow itself. Is there anything in particular that you'd like to say to people on the other side of the Wall?" And Ronald Reagan thought for a moment and then said, "Well, there's that passage [in the draft of the speech] about tearing down the Wall – that's what I'd like to say to them: that wall has to come down." [Listen to complete Robinson audio.]

Today, "Berlin Wall" is a "trending topic" on Twitter, which means that it's one of the phrases used most often on that social media service. Thousands of "tweets" are noting the anniversary, sharing memories, and pointing to news stories on the celebrations in Berlin. One person tweeted the question, "What would it have been like if Twitter had existed when the Berlin Wall fell?" Probably not much different would have happened, but it might have given an answer to the other person -- a teenager, judging from his profile photo -- who tweeted, "Who cares about the Berlin Wall?"

The crowds who accompanied Merkel, Walesa, and Gorbachev across the bridge in their re-enactment of the first East German crowds to surge across the border in 1989 care, that's who. And they are making another point about how what people on the ground can do to make history, or at least to push their leaders in the direction they want to go. The New York Times reports that, as Merkel noted the large crowd that turned out for the crossing today, despite rainfall, she appreciated the milieu:

“It’s perhaps as chaotic as it was in 1989,” Mrs. Merkel said of the crowd thronging around the leaders so that it was sometimes barely possible to distinguish the politicians from the people. “I’m very happy that so many people turned up. ... Everyone who is present here today has a story to tell,” she said. “They are part of freedom.”

[I originally posted this article here.]

Merkel Wins in Germany; Now a Gay German Foreign Minister?

Angela Merkel's conservative bloc has pulled off re-election in the German federal elections today, which makes her the first (and so far only) world leader to be re-elected during this economic panic.

One interesting tidbit: Guido Westerwelle, the leader of the FDP, the liberal (i.e., libertarian/free market) party, is likely to be foreign minister or some other very high-level official in her government. Why's that interesting? After all, the foreign ministership is practically a safe position for the FDP. But Herr Westerwelle is openly gay.

Change I can believe in.