Via the indispensable Eurointelligence, here is yet another astonishing statement by a senior German policymaker (in this case, Axel Weber):
“We have to put into the constitutions of member states a balanced budget rule of (sic) a deficit reduction rule, some way or another.”
Never were Tonto’s words so politically to the point.
41 replies on “What do you mean “we”, white man?”
“Policymaker”? Surely “civil servant”.
They seem to forget that German economic performance is fairly mediocre.
They are going through a boom at the moment with unemployment the lowest it has been in years. But their unemployment is still hovering around 7%, and their GDP per capita is mediocre by EU15 standards.
Germany (with Portugal) was the first country to break the Stability and Growth Pact (which they designed).
In Ireland we made a mess of things, but Netherlands, Austria and Denmark provide good role models, not Germany.
Pride comes before the fall.
The Germans are coming to a realisation that they are going to have to cut the peripherals a better deal. They need some kind of political “win” to sweeten this bitter pill. We should keep our heads down in public, argue strenuously in private and sign nothing in the meantime.
We also need a clear PR strategy with swift announcements after EU meetings. The Germans and French like to announce things and then say the announcement has made reversal untenable. In this regard, they are likely to interpret any failure to disagree as acquiscence. It is important that we get the story out first that there has been no agreeement on corporation tax or on constitutional amendments.
(One wonders if it was the German/French/ECB treatment of Ireland that inspired Cowen to try the same thing with the Greens on Cabinet positions!)
Should be “paleface” surely?
We need to understand that first Weber is a Central banker and at best a German second.
The Bundesbank hides under the cloak of conservative nationalism but its objectives like all central banks is the protection of its client banks.
This nationalist friction debate is a sideshow.
Such open forcefull statements from these bankers may indeed be a sign of weakness rather then strength.
“We should keep our heads down in public, argue strenuously in private and sign nothing in the meantime.”
Sound advice, but is anyone paying heed? It’s unfortunate that we’re in the midst of an election while the EU’s Grand Panjandrums are deliberating on our future – and represented by a Taoiseach who doesn’t even lead his own party. And all the factions are being pulled into a competition to declare how hard they’re going to stick it into the EU and the ECB on Ireland’s behalf. Perhaps they should heed Sean Lemass’s advice that all promises made during an election campaign should be buried on the night of the election.
And I don’t think Mr. Cowen needed any lesson in low politics from the EU’s Grand Panjandrums!
The reports of disagreements at the last meeting came out very fast. Also, Noonan and Lenihan seemed to be in total agreement on the strategy to take last night. Lenihan said he was making the case now and he would brief Noonan on hand-over. I think they all know that dropping the ball now is not an option in the national interest or in the individual’s personal interest.
The psychology of western central bankers is interesting – they seem to regard the general populace with some disdain which may or may not be justified.
With the exception of 2 world wars which were but a lovers tiff western peasants have buy and large lived on the hog
Because they have undervalued resourses via overvalued debt for 100 years or more they seem to think we owe them something.
The continental Asians are clearly not playing cricket so therefore we Baldric types have to take a few more bullets.
@ Keith Cunneen
That may be well and good, but Chancellor Merkel seems determined to ‘get a result’ that will provide her with some cover from both the beaks in Karlsruhe and her voters (she’ll be meeting them in 7 lander this year). Kevin O’Rourke is talking about the need to assert the primacy of politics, but this is exactly what we’re seeing – particularly in Germany. The unelected Eurocrats are being reined in by national governments because the grand designs they pushed through over voters’ heads are a major cause of these problems – coupled with peripheral lunacy.
It’s unfortunate that this assertion of the primacy of politics is running against Ireland’s immediate interests. I’ve recounted elsewhere the number of ingrained popular perceptions about Ireland held by many EZ voters (all with a germ of truth) that EZ politicians and the MSM are reinforcing. (We also need to remember that we have voted twice against EU treaties and then being asked to vote again – without any change in our system of governance. The Danes got caught once and since then have made sure their parliament keeps a firm rein on what their government agrees in the European Council.)
It will be a major challenge to turn this around. And relying on Dev’s response to Churchill about “being clubbed into insensibility” won’t cut the mustard.
I worked and lived in Germany for a coule of years and seen this social devide first hand 04-06 – Germany is not the cohesive unit some outsiders take for granted.
The Germans had their own ‘welfare to work’ program before the US – checking tickets on the U-Bahn etc. The looks and comments, frequently in english, those people took from some of the ‘well heeled’ banker/business types when asked for their ticket beggared belief.
The best of fun wishing them a ‘good morning’ with a stern look as they left the train !
But it was the silent complicity of the other passengers that really got me.
Still it’s a fantastic country and the ordinary people are great ‘craic’.
“We should keep our heads down in public, argue strenuously in private and sign nothing in the meantime.”
Well done! A nice summary of what really had better be going on.
While I’m no expert on domestic Germany politics, I do know that loud calls that we should default on the ECB are not gonna help us – or the Merkels of the world – bring this to any kind of sensible solution.
Maybe we should go-ahead and have a referendum as it would be mighty craic for the visiting foreign press!
The Dutch finance minister makes merkel seem like a fairy godmother; Finland and austria are also strong supporters of the German position.
Goodbody says that there is currently €21.5bn in unsecured, unguaranteed bank debt outstanding. Ireland cannot and should not unilaterally decide to restructure these debt holders, but the new Government should push this agenda at an EU level.
Governor Honohan surely would be key in trying to bring about change on this.
Can anyone outside of Ireland change the Irish constitution? If not, then I suggest to keep an eye on the people within Ireland who can change the Irish constitution.
That would of course mean to put some responsibility on Irish people & holding people in Ireland to account if things went badly.
It would be fun to see a politician both claiming to be responsible & at the same refusing to commit to strive for a balanced budget. The reason I see it as funny is that I see refusing to strive for a balanced budget as almost the definition of being irresponsible.
This isn’t going to happen anyway; France hasn’t had a balanced budget since 1975 and we had balanced budgets and went to hell in a handcart.
Perish that thought that Ireland would have a leader like Merkel; prudent in the use of public funds both policy wise and personally.
Our constitution isn’t a bin where we can dump legislation on various problems. In Spain they’ve thrown everything into their constitution, even employment legislation and most people consider it a mess.
The constitution should be reserved for the broad fundamental principles of how our state is run. It should include things like freedom of speech, freedom of association, how we elect people, various rights, the various checks and balances etc.
Whatever the benefits or drawbacks of balanced budgets, we have a legislature to legislate and a government to govern.
The constitution should not contain fiscal policy.
In principle you are correct, but if you are a governing politician in a well-governed northern European democracy and you’re looking at voters who have consistently elected clowns that have run a fiscal policy that encouraged huge private sector debts and imbalances and that has no ability to deal effectively with these imbalances without either causing serious damage to the EU project or requiring external support or both, you might be tempted to impose some shackles to prevent them from harming themselves and others in the future. And remember that opposition politicians were competing to spend the apparent largesse in 2007.
Core country voters and their politicians took it on trust that our legislature would legislate and our governments would govern responsibly within the framework of the EMU. That trust has been broken – and it is up to us to try to regain it. (Moaning about the failures of EU-wide bank supervision and financial regulation is neither here nor there; that is being, and will be, addressed at the EU level.)
And remember that opposition politicians were competing to spend the apparent largesse in 2007.
I do remember, but at the time we did have a balanced budget, so it wouldn’t have helped. We could put in something fairly nebulous like ‘structural deficit’, but then it would be the Supreme Court setting fiscal policy.
I’d much rather put some Freedom of Information type thing in the constitution. That can be seen as a core value, and I think it would be of more practical use than putting fiscal policy in the constitution, or meddling with the electoral system.
1. The Irish nation hereby affirms its inalienable, indefeasible, and sovereign right to choose its own form of Government, to determine its relations with other nations, and to develop its life, political, economic and cultural, in accordance with its own genius and traditions.
2. Axel Weber may rev on up and f*ck right off.
I would be very willing to vote for a constitutional prohibition on converting private-sector liabilities into government liabilities.
@ Kevin Donoghue
I’ll second that.
As the private sector owns the state they would need to concede that point before you get a chance to vote on such a issue.
I can see Herr Weber is getting the red card. I’m not supporting him – just trying to suss out what’s driving him. It may be that, because Germany has a constitutional prohibition on EZ bailouts, and something will have to give in the current situation, the line to the beaks in Karlsruhe (and the voters) might be: ‘we’re applying this once-off fix now; it’s not really a bailout, but we have a rock-solid guarantee we’ll never have to do anything like this again.’.
@Kevin Donoghue, Ordinary man
I think Artcle 3 is designed to protect property rights, and rightly interpreted should be sufficient IMO. Problem is those we depend on to interpret these matters are behaing more and more like characters out of Gullivers travels ..
“these judges are persons appointed to decide all controversies of property, as well as for the trial of criminals, and picked out from the most dexterous lawyers, who are grown old or lazy; and having been biassed all their lives against truth and equity, lie under such a fatal necessity of favouring fraud, perjury, and oppression, that I have known some of them refuse a large bribe from the side where justice lay, rather than injure the faculty, by doing any thing unbecoming their nature or their office.”
Maybe I am a bit harsh – but a few recent judgments which I won’t mention make me wonder.
Don’t be too hard on yourself.
I ran into a barrister ‘friend’ a week ago with my son. He is an ‘Old Boy’ of my sons school and after a brief chat he asked my son had he any interest in ‘the Law?’
My 14yrs old son asked him ‘What exactly do you do?’
His reply ‘I get the guilty off and the innocent money!’
My son asked ‘Why do you get the guilty off?’
‘Because they pay me and chances are I’ll get repeat business!’
Is it wise to introduce a minor to such a charlatan?
I thought Tonto put it slightly differently
Frankly, I think we’ll be getting off lightly if the insertion of a “debt break” clause into our constitution is the only price of a renegotiated deal (rather than surrender of control of corporation tax). The Germans are only Johnny-come-lately’s to this whole “debt break” idea, theirs isn’t even fully functional yet. All a bit experimental. They copied this idea from the Swiss, who wrote such a mechanism into their constitution (via citizens’ initiative) close to ten years ago (many Swiss cantons had similar mechanisms even before this). Seems to have worked well so far in Switzerland, after something of a rocky start. Ensured they almost completely avoided the excesses of the recent boom and bust. Galling to be lectured to by the Germans like this, and perhaps being humiliatingly strong armed in this direction. But on the upside, not so sure a “debt break” clause would be such a bad thing here in the long term.
But we should be open to reforms that constrain our government. When the next McCreevy, Ahern et al turn up we need to have mechanisms to contain the damage. If we have to accept them in a bilateral arrangement with Germany then so be it.
@all Worth a read …
German Central Bank Undercuts ‘Rumors’ Around President
FRANKFURT — The German Bundesbank undercut speculation Wednesday that its president, Axel Weber, would withdraw as a candidate to become head of the European Central Bank, but not before the reports had caused the euro to fall against the dollar.
Reuters, citing unidentified sources, had reported that Mr. Weber, who is considered the front-runner to succeed Jean-Claude Trichet as president of the E.C.B., would withdraw his candidacy on Wednesday. However, the Bundesbank quickly issued its own statement, in which it said that it “denies rumors of an imminent statement regarding the professional future of Bundesbank President Axel Weber.”
Mr. Weber’s public dissent, a violation of E.C.B. etiquette, raised questions whether he was temperamentally suited to be president, even if his monetary policy credentials are considered first rate. The president of the E.C.B. must achieve consensus among the 17 central bank heads who sit on the Governing Council, a task that requires sublime diplomatic skills.
………………………Mr. Weber is known as a hard liner on inflation who opposed plans to bail out over-indebted nations like Greece or Ireland. He also said that private bondholders should have to share the cost of any restructuring of the national debt of a euro member. That stance also put him at odds with Mr. Trichet.
@Finbar Lehane – “The Germans are only Johnny-come-lately’s to this whole “debt break” idea, theirs isn’t even fully functional yet.” you are wrong there. The only new and not fully operational bit is the debt break for federal states and local authorities.
@David O’Donnell – nevertheless the rumour persists. There is talk about Weber going to Deutsche Bank. The implication would be that Merkel will need a new candidate.
German financial discipline and constraints, e.g. between Federal levels and Lander have always been quite tight. But the “debt break” brings this to a new level. And this Schuldenbremse “debt break” provision was only written into the German basic law in June 2009. It fully becomes operational at federal level in 2016 and for the states in 2020. In contrast the Swiss “debt brake” came into operation in 2002, and was already existence in cantons before that.
Well, I’m in full agreement with Herr Weber on how to deal with ‘dodgy banks’ ….. and Herr Ackermann would do similar – & the FDP …. but political constraints etc ……….
Klaus Regling … peut etre? Could really do with a ‘grand coalition’ in Germany ….. think Europe badly needs it [Irish certainly do ……
In case anyone is interested, the recent paper http://www.forumfed.org/en/pubs/2009-10-26-feld.pdf by Feld and Baskaran contains a good discussion of the German (and also Swiss) debt break, problematic debt levels in some of the German Länder, and inadequacies with previous financial constraints.
@Finbar – we have been across this territory on this site before. The German constituion limits the federal government from running excessive deficits. This did not apply to the states or local authorties, many of which have serious debt problems and indeed some may be technically insolvent.
OK. Fair point. Most of the debt problems have been with the Länder. But nevertheless federal debt also has been on average consistently trending upwards for quite a long time (German reunification has been a factor, but is not wholly to blame). The federal debt/gdp ratio now is far larger than 30 or 40 years ago, even if it’s still pretty modest in European terms. So it’s right to focus mainly on debt problems on the Länder/local level. But one cannot wholly ignore the federal level either.
@David O’Donnell – there are quite a few who would love to be back in a grand coalition, but that is not an option right now and an election probably would not suit Merkel right now.
I have pointed out before that one needs to understand the German stance in the context of the domestic political situation. There is currently a big debate around social welfare payments (a single person receives €359 per month) – Merkel does not want to raise rates. There is also ongoing controversy about the wages paid to subcontract workers. In addition it should be borne in mind that there are no less than 9 scheduled elections this year, with a possibility of one unscheduled one.
I’m familiar with the fact of upcoming elections – and the ‘huge’ influence that this has on Dr. M. Still waiting for the FDP to implode …. which might trigger one …. couple of looney PDs still around – should we export them? (-;
and then he was gone ……………..
Got 17 to 1 with PaddyPower on The Governor – had to use a promissory note – guy longside me was gambling with a young calf that he lifted over the counter – bartering equivalents are now available online – the innovative economy is coming on ……..
Given who this post was about it might be of interest that following a short meeting with Angela Merke today, it was announced that Axel Weber will leave the Bundesbank in April. One can assume that he will not be the next head of the ECB!
May I take this opportunity to wish Herr Weber well.
Might I also remind him that there are alternatives in Frankfurt to the ECB if he manages to find some free time where Professor Habermas, Professor Honneth and others in The Frankfurt School will welcome him to tea – and discussions on the Kantian Philosophical Tradition from Marx, through Weber, Adorno, Horkheimer, critical modernist cosmopolitanism, the social democratic alternative, and so on. Much more fun than the day job … welcome to The European Lifeworlds.