“Parasite morality of the greek political elite” and the “parisian rulers”

Because Greece can no longer be thrown out of the Eurozone, Germany must leave, demands finance professor Markus C. Kerber

According to his guest article for the Handelsblatt online, the Berlin finance professor wants to "wants to swim powerfully against the current of published opinion" to "to the new shores of a stability union" to get.

In fact, competent new solutions for the Eurozone crisis were currently in demand as never before. Unfortunately, the professor of public finance and economic policy at the Technical University of Berlin only makes the kind of dull accusations that are usually heard from right-wing populist agitators. At the same time, however, he completely dispenses with arguments that could provide technical support for his proposals, which are in fact worth considering.

In any case, in his contribution he demands "in response to Greece’s policy of expropriation, the" the "Exit of countries with structural trade surplus, i.e. besides Germany, the Netherlands, Austria, Finland also Luxembourg" from the Eurozone. In this respect "the demonstrators in Athens for their protest against the EU dictatorship" and the Greek opposition leader for "resistance to the introduction of a functioning tax administration" be grateful, the professor explains.

As a justification simply claims that there had been "the EU grandees under the intellectual leadership of the Parisian rulers, Trichet in Frankfurt, Barroso and Barnier in Brussels, and at that time Strauss-Kahn in Washington, set the rules of the game – beyond legal norms" unabashedly redefined, with "despite the illegality of this action" the Federal Constitutional Court "did not have the courage to submit it to the Court of Justice of the European Union". While for Kerber everything bad comes from France, he forgets to mention that Germany has also broken the stability criteria without need and with impunity, and in this respect there can be at most a gradual difference with France.

After all, he is probably right in saying that it is too late for simple solutions now anyway. And had he only been careful earlier! Because according to the professor "in the light of the fraudulent state bankruptcy of Greece" still possible in 2010 "to regulate withdrawal and exclusion with the available means of power, in order to set an example and prevent further traps of the Greek pathology". Kerber had thus kicked the Greeks out of the eurozone immediately after the irregularities surfaced, after which Portugal and Ireland had finally come to their senses and boldly addressed their problems.

Now – despite all the imponderables – Greece’s expulsion would certainly have been followed by a sovereign default, and that would have ensured that private creditors would have shared in the costs. How the systemic shock would have passed through the banking system can only be speculated on. Presumably, however, the markets had hardly given Ireland and Portugal, at least, the chance to reorganize themselves ironcladly, but had excluded them from all financial market financing for the moment. Depending on where and how deep and painful the rift through the Eurozone would then have been, Kerber’s patentlessness might even have developed the power to end European unification in reality.

In the meantime, according to Kerber, the "The imbalance of the EMU could no longer be solved by the exit of individual countries – irrespective of the problem of the calculated old debts". This was due to the bail-outs of Ireland and Portugal that had occurred in the meantime "impose such high fiscal exit burdens on the remaining eurozone countries that they probably had no interest in doing so". Since the Euros borrowed in the meantime would not be returned by a bailout, the remaining eurozone countries would be left to "countries with a structural trade balance surplus to leave the euro zone".

Perhaps the professor has taken an example from his Munich colleague Sinn, who had already put his eurozone competence up for international discussion a month ago and had thereby explained his lack of knowledge of monetary policy mechanisms to English-speaking experts. The latter was quite shocked in view of this ignorance, as the countries with structural "In this situation, it is not helpful for people respected by the public to make inflammatory claims about how the system is supposed to work and to propose solutions that would only lead to chaos if implemented", as Karl Whelan, professor of economics at University College Dublin, made clear on the same platform on which Sinn had published his thoughts.

No less chaos could certainly be foreseen in the event of Germany’s exit from the euro zone, but in this case at least it would be ensured that the German export miracle would come to an end for good. There is hardly a scenario in which the new deutschmark would not appreciate massively, at least against the euro, but presumably also against the dollar and the yen. Consequently, German foreign assets denominated in these currencies were devalued, which also affected the entire portfolio of eurozone bonds held by Germans.

Perhaps Kerber imagines that the debtors will voluntarily convert their outstanding bonds into Deutschmarks or that other positive consequences will outweigh the foreseeable disadvantages, but we don’t know. Kerber leaves us in the dark about exactly how he envisions his solution, how the transition is to be shaped and what is to result from it. However, like Sinn, he did not expose himself to the risk of stumbling over a stupid factual error from the outset, and in his Handelsblatt commentary he dispensed with anything resembling an argument.

At least it is clear what he means: The lazy Sudlander had thus lived beyond their means and even defrauded Greece, which was only possible because France allowed this to happen to itself and thus to the other Club Med countries, too, and thus to Greece "the intellectual-political conditions for the de facto suspension of" of the Stability Pact. So it’s the fault of "Parasite morality of the Greek political elite", who, together with the Parisian rulers, had taken net contributors like Germany hostage, thus serving at the same time two long-standing prejudices.

Kerber, on the other hand, does not seem to be interested in the extent to which false economic incentives, from which Germany in particular benefited, contributed to the crisis. For example, that the euro interest rates were so low for years only because Germany had reformed itself into the world export champion at the expense of domestic wages and demand. While Germany, thanks to the Eurozone, did not suffer any currency devaluation, the European competitiveness of the PIGS was simply ruined by interest rates that were far too low for them. Not to mention the fact that the corruption of political mores also helped German exporters to win highly profitable contracts in exchange for baksheesh.

From a professor of finance one should expect, if not a differentiated opinion, then at least a somehow well-founded one. But maybe Kerber just wanted to excuse himself for the fact that the Federal Constitutional Court did not invite Europolis, the group of plaintiffs led by Kerber, to the hearing on the alleged unlawfulness of Germany’s participation in the euro bailout and the aid to Greece, which was also protested against. If, however, one could draw a direct conclusion from Kerber’s essay about his professional competence, then it would be understandable why, despite all the murmurs, the judges did not allow him to make this appearance.

Leave a Reply

Your email address will not be published. Required fields are marked *