Greece Continues to Divide Europe

German chancellor Angela Merkel met head on with the European Commission on the Greece question over the weekend. Chairman José Barroso is pushing European governments to commit to a Greek bailout this Thursday when member states convene in Brussels. Merkel is having none of it.

The chancellor declared on German radio on Sunday that no bailout is being considered. The Greeks themselves, after all, haven’t asked for help, she said. Barroso responded in today’s Handelsblatt, urging European states to find a solution, regardless of their internal politics. Read more “Greece Continues to Divide Europe”

Euro Resentment Demands New Rules

Euroskepticism is abound anew. Where previously economist Paul Krugman argued that Greece could have weathered its fiscal crisis if it had retained its own currency, Judy Dempsey reports that Germans are increasingly nostalgic for their Deutsche Mark.

“For Germans,” writes Dempsey, “the mark was more than just currency.” It represented the country’s postwar recovery, the Wirtschaftswunder that made Germany within mere decades the strongest economy of Europe.

Should they be forced to bail out an ailing eurozone neighbor as Greece, Spain, maybe Portugal, “resentment against Europe and the common currency” would certainly intensify among most Germans.

Chancellor Angela Merkel is in a tough spot. “She knows that the euro has been good for Germany, despite the resentment.” Stable exchange rates have encouraged trade and growth. “But bailing out Greece would be terribly unpopular.” Read more “Euro Resentment Demands New Rules”

Europe’s Egg Shortage

It’s difficult to get about some eggs in the eastern parts of the Netherlands these days. Supermarkets are experiencing serious shortages there because large supplies of eggs have been bought up by German wholesalers. The Netherlands has always been one of the world’s greatest exportors of eggs but usually not at a disadvantage to the country’s own market. So many more eggs are finding their way to Germany now because that country is set to ban battery hen cages next January 1 which has severaly damaged its own production already.

The European Parliament voted to ban battery cages in 1999 when so much as 93 percent of eggs in what was then the European Community came from battery hens. By 2012 all member states must have the battery system abolished but Germany has chosen to take the lead by outlawing the practice in 2010 already.

Of course, when parliament forced farmers to turn back the clock half a century it provided adequate protection against the import of cheap eggs from abroad by imposing extensive border and subsidy measures. To control imports and boost exports, the European Union uses sluice-gate prices, basic and variable import levies and export refunds on all shell eggs and products.

The sluice-gate price is a theoretical, calculated price at which poultry imports to Europe should be priced given world grain costs. The import levy is fixed at a level to protect European egg producers against imports from countries that benefit from market cereal prices considerably below the European average. The simple purpose of the measure is to prevent the import of eggs that are priced lower than their European counterparts.

A safeguard clause allows Brussels to suspend imports if the European market is threatened with serious disturbances such as a flood of low priced imports. Refunds are paid to European exporters from the Common Agricultural Policy budget to help them compete outside Europe where producer costs can be lower due to lower feed grain prices, for example.

Understandably, this is upsetting developing countries which are currently stalling negotiations within the World Trade Organization for one thing, precisely because the West, the European Union in particular, is increasingly protecting its own market, making it near impossible for Third World farmer to compete. Yet, with subsidies, European producers are able to penetrate their markets. (So next time you hear someone denounce “free trade” for destroying Third World agriculture, you know better than to nod in approval.)

The only ones not complaining right now are Dutch poultry farmers who are able to sell their eggs in Germany at prices unprecedented in recent history. Within the next two years however, they too will be forced to give up their battery cages. Inevitably, the supply of eggs will shrink throughout Europe, driving prices up only further.

Europe’s Uneven Recovery

Europe’s massive deficit spending is finally catching up with it. As Stefan Theil writes for Newsweek, markets reacted sharply this week “after rating agencies downgraded the public debt of Greece and warned about the outlook for several others.” With a deficit running at over 12 percent of GDP, Greece runs a serious risk of becoming the first developed country since the end of World War II to default on its debt.

Another South European country, Spain, is not much better off. We previously warned that its stubborn socialist policies are in fact hampering all of Europe; last week, Standard and Poor’s slapped a negative outlook on the country. Read more “Europe’s Uneven Recovery”

Merkel Government Under Pressure

Pressure is building on German chancellor Angela Merkel and her defense minister, Karl-Theodor zu Guttenberg, to account for the German-ordered NATO attack in Afghanistan last September that killed 142 people, many of them civilians.

Guttenberg, formerly minister for economics, took charge of the Defense Department last October as member of Chancellor Merkel’s second cabinet. The rising star of the German conservative party, Guttenberg outranked Merkel as the country’s most popular politician but he has come under siege from the Social Democrats, the former coalition partners, for changing his position on the Afghanistan attack.

Initially, Guttenberg called the bombings “appropriate” but three weeks ago, he claimed the opposite after assessing the incident in greater detail.

Germany’s previous defense minister already resigned over the affair and Guttenberg himself has discharged a top defense official and a state secretary for supposedly withholding information. Now, a parliamentary inquiry has been produced to study the bombings all the more thoroughly.

Although all but one of Germany’s political parties support the Afghan mission, there exists something of an obsession to wage a “clean” war there regardless of the changed circumstances. While the Taliban has gained ground, parliament’s mandate remains unchanged: German soldiers are to aid in the reconstruction of Afghanistan, not to be involved in any fighting.

The Social Democrats are leading the charge that seems specifically aimed at Karl-Theodor zu Guttenberg. He and the chancellor are to appear before committee next January. Yet the Social Democrats were the ones in power when the country decided to contribute to ISAF and they were still in power when the bombings occurred. Holding the man who has been defense minister for barely two months responsible seems utterly hypocritical and largely a political move before anything else.