Stratfor’s Peter Zeihan pens a dynamite geopolitical intelligence report this week on Germany, the first of three key national reports. He starts out with the geographic and historic perspective: Germany lying between Russia and France wanted economic and military dominance. Its strategy in 1871, 1914, and 1939 was to avoid a two front war by pre-emptively attacking France. After WWII the allies sought to reshape the regional dynamic so that Germany’s military policy would be subordinated to NATO and its economic policy subordinated to the European Community, eventually the European Union. Germany got what it needed economically so it didn’t seek it militarily; Europe got German capital and economic dynamism.
Stratfor points out that this money-over-sovereignty paradigm was best represented by the euro. But Stratfor always doubted that the euro would last. “Having the same currency and monetary policy for rich, technocratic, capital-intensive economies like Germany as for poor, agrarian/manufacturing economies like Spain always seemed like asking for problems. Countries like Germany tend to favor high interest rates to attract investment capital. They don’t mind a strong currency, since what they produce is so high up on the value-added scale that they can compete regardless. Countries like Spain, however, need a cheap currency, since there isn’t anything particularly value-added about most of their exports.” Stratfor anticipated the high inflation in the poorer states that gained access to capital they could not qualify for on their own merits. That access would also generate massive debts.
Both the inflation and the massive debts have come about as have the budgetary accounting tricks to hide the debt. As we have seen the rich nations are unwilling to bail out the spendthrifts. Stratfor “became even more convinced that such inconsistencies would eventually doom the currency union, and that the euro’s eventual dissolution would take the European Union with it. Now, we’re not so sure.”
What if Germany used the current crisis to re-wire the European Union and Euro to its own purpose? On March 13th German Finance Minister Wolfgang Schauble said that if the weak spendthrift nations could not right their finances they should be ejected from the eurozone! Germany is willing to publicly talk about the re-engineering of Europe. Schauble is a recognized powerful figure; he doesn’t make such statements lightly.
Stratfor displays the inflation in terms of labor costs to show Germany’s dominance and corresponding reluctance to support the freeloaders. Note that in the past 10 years Germany has gained about a 25% cost advantage over the “Club Med” spendthrifts:
Stratfor concludes: “The paradigm that created the European Union — that Germany would be harnessed and contained — is shifting. Germany now has not only found its voice, it is beginning to express, and hold to, its own national interest. A political consensus has emerged in Germany against bailing out Greece. Moreover, a political consensus has emerged in Germany that the rules of the eurozone are Germany’s to refashion.” In short, Germany is calling the shots, AND HAS EARNED THE RIGHT TO CALL THE SHOTS!
This report is paraphrased in part and republished republished in part with permission of STRATFOR. I highly recommend becoming a member.
Tom Motherway