Another way to tell is if the politician's lips aren't moving.
Chancellor Merkel and finance Minister Schäuble have said Germany will not agree to a transfer union. But what about mountains of unrepaid southern European debt held by public creditors?
By now, both Merkel and Schäuble know that debt cannot and will not be paid back. They also both know that German taxpayers will soon be on the hook.
But as a matter of political expediency, Schäuble keeps quiet on mounting cost to Germany of Europe’s woes.
When Mr Schäuble visited Athens last week, the leftist Greek newspaper Avgi welcomed him with the abrasive headline: “Hail Schäuble! We who are about to die salute you.”
Aware of the acrid political atmosphere in Athens, Mr Schäuble came bearing gifts: €100m in state-backed loans for small and medium-sized Greek businesses. But what Greece really needs, to kindle a flame of hope in its future, is another restructuring of its foreign debt.
Conventional wisdom holds that it would be suicidal for Mr Schäuble, or any German politician, to speak this unpalatable truth to voters before Germany’s September 22 national election. Unlike the Greek debt haircut of March 2012, which clipped private sector lenders, any future restructuring would shear the locks of official creditors, including Germany, which now hold over 90 per cent of Greece’s debt.
So far, the bailouts of Greece, Ireland, Portugal, the Spanish financial sector and Cyprus have cost German taxpayers much in loans and guarantees, but not one cent in hard, unrecoverable cash. Indeed, the €110bn EU-International Monetary Fund rescue of Greece in May 2010 was as much about protecting German banks, which had lent recklessly across southern Europe, as it was about restoring Greece’s financial health.
A second Greek debt restructuring would not shock German taxpayers and destabilise the political scene, although legal hurdles might need to be jumped at the nation’s constitutional court.
More dangerous, for its impact on German political and public opinion, would be the dropping of a different penny: the growing possibility that debt write-offs, or extra financial aid, will have to be made available not just to Greece but to Portugal and Cyprus. Spain’s banks are not wholly out of the woods, either.
As for Cyprus, the duration and intensity of its economic and social collapse are unmeasurable.
The question, then, that threatens to dominate German public debate is: “Greece, Portugal, Cyprus . . . Where will we Germans draw the line?” The only certainty is that no answer will come before September 22.
Certainties
- Chancellor Merkel and finance Minister Schäuble will continue to lie, before, during, and after the election.
- German taxpayers will be on the hook for bailouts in Greece, Cyprus, Spain, and Portugal.
- The entire mess will unravel soon.
The major uncertainty is the trigger country is not yet known. It could be Greece, Portugal, Spain, Italy, or even Germany (the latter if Germans come to their senses and vote for AfD in a huge way).
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
