It’s the German way or the highway in the eurozone, according to the latest hot cable released by WikiLeaks. Sign-up for my 100% FREE Alerts!
U.S. ambassador to Germany, Philip Murphy (Goldman Sachs alumnus), issued cable 10BERLIN181 to Washington on Feb. 12, 2010, which essentially states that Germany leadership’s reluctance to backstop the PIIGS’s profligate spending of the past centers upon its sense that, in the end, Germany’s political and economic survival would be placed in jeopardy.
It appears Germany has no intentions of running a U.S.-style print-and-spend economy, nor does it want to hand over decades of productively earned savings to a bunch of layabouts from Club Med, either, especially those in Greece, where a Greek civil servant is able to retire at age 50, and, while employed, can take 14 months pay for 12 months work, for, presumably, spending-money during vacations.
Approximately 40% of the population of Greece works for the public sector. In comparison, nearly 20% of U.S. jobs come from U.S. tax dollars—a bloated number even by U.S. standards.
Gross inequity. That’s the predominate mood in Germany, according to German news organization Die Welt (translated to English), which published a poll revealing that 71% of Germans insist upon a referendum on further steps taken regarding German’s obligations under the euro currency block. Sixty-three percent of Germans want Greece to leave the euro.
One can only wonder about the rational of the other 29% and 37%, respectively, who agree to pay for early retirements and lucrative government jobs for so many Greeks.
Moreover, it’s no secret that Greeks don’t even want to pay for their own government’s spending habits.
CNN reported, “Greece is renowned for its history of tax evasion, estimated last year as worth 4% of GDP—$11 billion.” That amount equals to approximately $560 billion to the U.S. Treasury derived from a $14 trillion economy—per year. But the UK Telegraph suggests the amount of tax payments evaded is much higher. Greece loses €15bn ($20.5bn) a year to tax evasion, is the headline by the Telegraph. Now, we’re talking nearly 7% of Greece’s $304 billion GDP (World Bank statistic).
And the New Yorker Magazine writes, “Greeks . . . see fraud and corruption as ubiquitous in business, in the tax system, and even in sports.”
So Germans, who’ve prided themselves as the most productive workers of the most extraordinary products for centuries, are now asked to pay into a broken system that the Greek people, themselves, don’t have confidence in?
In all, the WikiLeak’ed cable doesn’t add much new to what is already known, but it’s an interesting note that Washington has been bantering around the German question for some time, and has probably added fuel to the fire in Europe, too, in the hopes Treasury can skate a little while longer with its dollar debasement program of scare tactics, herding fund managers into the ‘safety trade’ of the U.S. dollar—another grotesque excuse for a currency.
Little attention by the U.S. media has been paid to the U.S. dollar’s noticeably weak response to the circus-like atmosphere in Europe—with no qualms, either, from the rumor mill of the Financial Times of London, as the Anglo-American tag team place center stage each and every sideshow act, as well, though Berlusconi’s narcissistic behavior can be quite amusing and compelling to report.
If the outrageous situation between the Germans and Greeks isn’t enough to crash the euro experiment in a heap with the Ford Edsel, the best tidbit within the Murphy cable briefly outlines the most difficult bolder to roll in the effort to force Germany to bailout Europe (which it mathematically cannot anyway): the legal one.
“In 1990, Germany’s Constitutional Court ruled that the country could withdraw from the Euro if: 1) the currency union became an ‘inflationary zone,’ or 2) the German taxpayer became the Eurozone’s ‘de facto bailout provider,’” Murphy stated in the cable to Washington. “Mayer [Thomas Mayer is Chief Economist of Deutsche Bank Group] proposes a ‘Chapter 11 for Eurozone countries,’ which would place troubled members under economic supervision until they put their house in order.”
Under these bizarre circumstances, a blog entry by Pippa Malmgren, former economic adviser to President George Bush (George II), has been given some traction since her post about her thoughts on the euro, in September.
She believes that the Greeks will default, the euro will fall, the Germans will walk, and gold, oil as well as other commodities will soar.
She writes, “Greece defaults. . . The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.”
As a result, she add, “Gold, diamonds, agricultural assets, energy prices and mined asset prices will rise. Default reduces the debt burden and allows growth and inflation to return. If central banks (other than the ECB) throw huge liquidity out into the market because of this event then the liquidity is going to lean away from paper financial assets other than the most trusted and liquid (U.S. Treasuries), and lean toward hard assets.”
Anyone wondering how the U.S. Treasury intends to come up with $628 billion by Mar. 31, 2012, to keep the illusion of the U.S. dollar alive without herculean efforts by the Fed’s balance sheet may see the crisis in Europe as possible or partial answer. As German protects itself from another Weimar, the U.S. needs a solution to its own reichsmark. So far, the dying PIIGS have provided Treasury a temporary one.