Archive for category France

An Ugly Legacy

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Memorial at the site of the old Jewish synagogue in Vienna, destroyed in 1420-21

A travel course on German political history inevitably confronts the holocaust.   Of the 11 million humans killed, six million were Jews and the rest were Slavic, gay, gypsi (Roma and Sinti), pacifist, socialist or otherwise “ungerman.”  Yet its very easy to fall for caricatures.   To believe that the Germans were somehow seduced into a kind of unique evil, undertaking an unbelievably heinous crime while delivering Europe into the most destructive war in human history.   Or that Hitler was an inhuman pathological monster with super human seductive skills, and Germans were driven by racial bigotry and anger at the Versailles treaty!

Alas, history is not so simple.  Germany wasn’t that much different than other states in Europe, and anti-semitism has a long history full of pogroms and extermination efforts.   Hitler wasn’t that much different than other people; indeed, it’s dangerous to think such people must have been obvious monsters, that would prevent us from recognizing them in our midst today!  The technology of the past wasn’t sufficient to create the kind of holocaust experienced in the 20th Century (not to mention Stalin’s purges and various other mass killings/genocides of the last century), but in a real way WWII and the holocaust was a culmination of hundreds of years of European history.

We visited the Freud museum, located where he lived in Vienna until finally leaving in 1938.  We discussed his experiences as well as the impact of his theories on psychology and politics.

We visited the Freud museum, located where Sigmund Freud, who was Jewish, lived in Vienna until finally leaving in 1938. We discussed his experiences as well as the impact of his theories on psychology and politics.

That’s why we visited the museum and memorial at Judenplatz in the old Jewish section of Vienna, ordered destroyed in the so called Vienna Geserah of 1420-21.   Up until the first crusade in 1096 Jews had lived relatively normal lives in Europe despite real anti-semitism.  They performed services that Christians could not, and thus were protected by nobility.   As the Catholic church gained power and reach after the embrace of Aristotle in the 13th Century, Jews soon became a convenient scapegoat.

Hapsburg Duke Albrecht V, accusing Jews of colluding with the enemy in a war, ordered the elimination of the Jewish population in Vienna.  While many Jews escaped down the Danube, others were tortured, killed and their property confiscated.  Albrecht decreed that no Jews should ever live in Vienna again.   They did come back, but that event was for all intents and purposes a holocaust.  The technology and reach was not as far, but the goal and brutality was much like that of the Nazi SS 520 years later.

Sans Souci - the summer palace of Prussia's atheist, gay, military genius enlightenment King, who expanded the rights of Jews

Sans Souci – the summer palace of Prussia’s atheist, gay, military genius enlightenment King Friedrich the Great (1712-86), who expanded the rights of Jews

The history of Jews in Europe is complex.   Which country seems more anti-Semitic:  France during the Dreyfuss affair from 1894 to 1906, when Alfred Dreyfuss was falsely accused of treason, in part because of he was Jewish, or Germany in 1898 when the Kaiser paid a state visit to Jews living in Palestine?   Indeed, one reason that Hitler could arouse passion is that Germany let Jews achieve higher positions than in many other parts of Europe – though contrary to claims by Nazi propaganda on average they did no better than the rest of the German population.

Even after the Nazis came to power they got support from people like American flying ace Charles Lindbergh, who praised the unity of purpose of the German people, and dismissed the virulent anti-semitism as a mere annoyance.   The British sent ships filled with Jewish refugees back to Germany when they attempted to go to Palestine.    The US rejected Jewish refugees as well – antisemitism is part of the western cultural tradition.

At one point these grounds at Dachau, the first concentration camp, had rows and rows of barracks for the prisoners.

At one point these grounds at Dachau, the first concentration camp, had rows and rows of barracks for the prisoners.

Walking around Dachau near Munich it’s easy to forget that the first victims of Nazism weren’t Jews, but rather political opponents of Hitler’s who were round up and sent to concentration camps which were created because of the mass increase in people incarcerated.  Hitler’s first opponents were the socialists, democrats, internationalists and pacifists.   Later, outside of Germany actual extermination camps were created to do on a broader scale what Albrecht V did in Vienna in 1420-21.

One wants to believe that this centuries long on again off again persecution of Jews is over, that the holocaust was a wake up call to the world.   Indeed, right wing radicals in Europe tend to rail against Africans, Arabs and more prevalent minorities, though anti-semitism remains a part of their perverse nationalism.

If history teaches us anything, it’s that cultural baggage persists.   Despite the racist ideologies popular throughout Europe and the US in the early 20th Century, something like National Socialism would only be embraced when people were really desperate.  In 1928 the Nazis got only 3% of the vote and Hitler was a joke.   Then came the great depression, massive poverty, unemployment at near 40%, and a country riddled with internal conflicts and a dysfunctional government.

On the day before our Dachau visit, the European Union had EU Parliamentary elections.  These elections are viewed as rather meaningless by Europeans who often use EP elections to register protest votes.  Marine Le Pen’s racist National Front got nearly 25% of the vote, the first time it came in first in a French election.  Right wing radicals made gains in Denmark and Austria – but got only 1% of the vote in Germany.

Though she tries to sound less shrill, Marine Le Pen's National Front is built on the same kind of thinking that created National Socialism.

Though she tries to sound less shrill, Marine Le Pen’s National Front is built on the same kind of thinking that created National Socialism.

Now, throughout the West, we have to stay alert to racism and bigotry, be it against Latinos, gays, blacks, Jews, or any group signaled out because of their identity.  It may seem to be a harmless fringe, but given the right circumstance a harmless fringe can become a virulent cancer, destroying a society from within.  Unfortunately racism, anti-semitism, and bigotry remain part of the culture heritage of the West.   We should not tolerate it.

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More Europe for the Euro

The duo to not only save but also strengthen the Euro

The European Union has a history of turning crisis into opportunity.    At many times during its existence people thought that the project went too far, and that sovereignty would trump interdependence.   There was the ’empty chair’ crisis in 1966 when De Gaulle threatened to leave the EEC (then a group of six states) if they didn’t agree that all decisions have to be unanimous.

It was for many proof that sovereignty would always win.   Yet while they did let DeGaulle have his way on the issue he was angry about, the Luxembourg compromise that brought France back did not embrace DeGaulle’s principle of sovereignty first.   He accepted that because he was facing a revolt from below – the French people and French business thought DeGaulle was endangering France with his brinksmanship.   Already the eight year old organization had altered national interest.

Giscard and Schmidt ignited the “Franco-German engine” of European integration

In the seventies it appeared that the loss of the Bretton Woods system fixed exchange rates doomed the EC (now 9 states) to having no coherent monetary cooperation.   That could undermine the whole project, it was argued.   However, right when so-called Eurosclerosis was at its worst two people turned the situation around completely.   Former Finance Ministers and now leaders Helmut Schmidt of Germany and Valery Giscard d’Estaing of France developed the European Monetary System, the precursor to the common monetary policy.   Then when the Cold War ended many people thought the EC had run its course, that Germany would look eastward, and the organization might perish.

Instead German Chancellor Helmut Kohl and French President Francois Mitterrand forged the treaties that created the European Union, introducing a common currency and ultimately embracing rather than fearing the states of eastern Europe.    Now the EU has 27 members, 17 of them part of the Eurozone (states using the Euro as their currency).

In that backdrop the current crisis should be seen as a precursor to another step forward in bringing Europe together.   However, commentators in the US and Great Britain seem eager to declare the Euro dead or something that should have never been tried.   They are wrong.

The current crisis is serious, and shows some fundamental problems with Eurozone policy up until this point.   When it was originally planned, leaders knew that states could only support a common currency if they had similar fiscal policies.   That led to strict criteria demanding convergence on interest rates, inflation rates, budget deficits and total debt to GDP ratios.  If those criteria had been strictly enforced, there would be no crisis today.    Unfortunately, those criteria were loosened, often for political grounds.   In order to speed the spread of the Euro, economic dangers were discarded.

The problems began when the cost of unifying Germany turned out to be immense, causing Germany to violate the original criteria.    France also had an economic slowdown leading to a similar loosening of the rules.    They were the ones who needed to enforce discipline, and once they broke the rules it was hard to keep others in line.

They might have tried, but the bubble economy of the first decade of the 20th Century created an illusion that all was well.    Debt may be high, but the world economy was growing and investments were yielding considerable profit.  In that deluded atmosphere countries like Greece, Italy, Ireland, Spain and Portugal ignored the warning signs — and their problems were ignored by those in the EU who should have known better.

Even if France and Germany lead, Greece may not follow. Populist Alexis Tsipras could lead Greece a different direction should he emerge victorious on the 17th – but even he has to understand the consequences.

The southern states bring to the EU a different ethos than the northern European states.    Greece is a prime example.   The level of corruption and public sector employment is immense while the actual productive economy is small.   Getting into government is a way to make money and gain perks.   As their public sector boomed, it was funded via debt and risky investment schemes.    When the bubble burst in 2008, the problems were laid bare.

Yet its not just a problem for the south.   Someone had to finance that massive debt, after all — and those someones were predominately northern European banks and investors.     So a default on debt or economic collapse in the south would quickly spread all through the EU, bringing down German banks as quickly as Spanish ones.   The economic contraction could yield a depression that might spread far beyond Europe.   In short, the bubble delusion led northern Europeans to finance the southern European excesses, making them just as vulnerable.

The map is slightly out of date – Estonia joined the Eurozone last year (2011)

The problem is that the creators of the Euro were right at the start:  you can’t have monetary union without strict rules forcing fiscal policy coordination.   They were wrong that just setting criteria would be enough — criteria can be ditched, after all.

The solution is clear:  1)  Find ways to eliminate and/or pool the debt from the southern European states.   While this is often correctly decried in countries like Germany as a bailout of states with incompetent economic policies, not doing so could also bring down the financial sector of the big, rich, northern states.    Therefore, Germany and others have to bite the bullet and help pay for the corrupt folly from the south.   However, that also leads to 2) there needs to be a tighter set of rules and institutions to force rational fiscal policies on the southern European states.    Often decried as an ‘austerity’ that simply deepens the recession in the south, it’s a necessary step to a sustainable economy.   Adding to debt and spending more without restructuring those economies will simply make the problem worse.

So if Germany and states in the north have to pay more, states in the south have to give up a kind of easy money life style that allowed them to live excessively beyond their means for so long.  Tax evasion, early retirements, massively large public sectors and the like will have to give way to an economy built on productivity and work.

If it works, the restructuring will be good for everyone.   Southern states will start to have real rather than faux prosperity and develop their productive capacity.   Not only will this save banks in the north from massive loses due to defaults, but will also be an engine of eurozone growth.

The poor/corrupt/unproductive south is unsustainable in a 21st Century European Union.    The difficult but necessary transition they’re going through will ultimately end the rich/poor dichotomy between northern and southern Europe.    The Euro will emerge stronger, and a Europe with much better coordinated fiscal and banking policies (overseen by real institutions not just vague rules) would be a far better bet than leaving the national economies to follow their own idiosyncratic paths.

Merkel and Hollande know the stakes.   They know that they can join past Franco-German duos in turning a crisis that many thing will tear the EU apart to one that strengthens it and brings it together.   The negotiations won’t be easy, but given the history of the EU and the recognition that the era of fully sovereign independent states is over in Europe, I’m confident they will be able to accomplish the task and make the EU a model of how political economy in the era of globalizationn can be structured.

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A Good Election for France and the EU

Socialist François Hollande defeated conservative Nicolas Sarkozy 52% to 48% to bring the Socialists back into the Presidency for the first time since François Mitterrand left office in 1995.   Angela Merkel’s partnership with Sarkozy – Merkozy, as it was called, had defined the plans to save the Euro and prevent the financial crisis from escalating.  Now that is in doubt.

Meanwhile in Greece elections look to show the two main parties, PASOK and New Democracy, could well fall short of having the capacity to build a coalition.  They are the only parties supportive of the bailout plan for Greece.   The rise of the far left and far right against the plan suggests that Greece could face a future without the Euro, especially if Hollande scuttles the “Merkozy” plans.   Financial markets in Europe are gripped with uncertainty as the Euro falls in value from about $1.33 to $1.29.   What does this mean?

The Greeks suspect that the severe cost of “austerity alone” simply means they’re paying to protect the big banks.

Americans and Brits tend to look at the EU with a jaundiced eye.   Americans especially don’t get it.   They don’t see how countries can link their destinies like that.   Others don’t like the EU and want it to fail so they hyperventilate over every crisis or bit of bad news.   That’s been going on for nearly 55 years and so far the EU has managed to grow and expand rather than fail.   Talk of the EU collapsing or even the Euro disappearing are way overblown.   The EU is not in danger, and the worst I can imagine for the Euro is that the number of participants could decrease by one or two.

What this means is that the Europeans will shift from an austerity focused German led recovery effort to one that is more nuanced and willing to challenge financial markets and big banks.   Austerity hasn’t been working out too well anyway.   Germany’s been the healthiest but Great Britain’s austerity has caused a second dip into recession and Greece is enduring a downward spiral.    The German economy is fundamentally healthier than others in Europe (and arguably our own), so they’ve avoided that kind of pain.

David Cameron ponders “what next” after his budget cutting helped push Great Britain into a double dip recession

Ultimately, a shift away from a Germanocentric policy is good for the EU.   German led austerity is not sustainable.   It will lead to resentment of the Germans, anger at the politicians, and the rise of the far right and far left.   Hollande will force Merkel into a partnership of the right and the left, and that’s always been good for Europe.

Consider:  Social Democrat Helmut Schmidt and conservative Valery Giscard D’estaing helped put aside the crises of the 70s and forge a stronger community.    Conservative Helmut Kohl and Socialist François Mitterrand were the forces behind the creation of the Euro and the expansion of the EU.    Europe does best when its Franco-German engine powers a vehicle with a wheel on the right side and one on the left.   Both wheels on one side make it unstable.

François Hollande is not a raging ideologue.   His first moves after the election was to contact Merkel, assure financial markets, and receive an invitation from President Obama to visit the US.    As President Obama learned, it’s easy to rail against the system when you’re on the outside; once you have power there are many subtleties of policy that have to be considered.

Expect Hollande to fortify the resolve of those who want to reject austerity as the primary policy for the EU.   It’s not that there isn’t a debt problem; Hollande notes openly that at 80% of debt to GDP, France has a debt problem.   Rather, solving that and getting out of this crisis by focusing on austerity and budget cuts alone is economic foolishness.

Merkel and the Germans are very influenced by economic theories that emphasize avoiding debt and accepting recession as “necessary medicine” to correct economic imbalances.   To them high debt precipitated this crisis and it will not end until debt is reduced and a proper balance is restored to the economy.

Celebrating Hollande’s victory

Hollande and others argue that a country in recession could be unable to get out of it if there isn’t something to stimulate economic growth.    One can imagine setting budget priorities to stimulate growth but cut unproductive spending.

This is not in direct opposition to Merkel.   Germany’s success has focused on stimulating job creation in other ways and restructuring the German economy.   She has never proposed austerity along as a solution; rather, budget cuts and debt reduction have to be part of a broad range of plans.   This means there are plenty of areas for Hollande and Merkel to find common ground.

Moreover, Hollande’s approach requires international cooperation.  No one state alone can handle this, the EU and even cooperation between the EU and the US is more important than ever.   The problem is to assure currency stability despite high debts and the messy process of economic rebalancing.   For Hollande would throw a grenade into the works of the EU would be self-defeating and he knows that.

Hollande was not Merkel’s choice, but they will be forced to work together

On top of that, Merkel faces an election in 2013, and her party has been hurt in recent state wide elections in Germany.   The political reality within Germany suggests that she needs to take into account the need to take seriously the negative implications of budget cutting alone.    Germany’s economy has been the envy of the industrialized world since the crisis started in 2008, but austerity within the EU would drive down demand for German exports and could cause a contagion recession for Germany.

Up until now the EU has had an unsustainable plan to handle the impact of the financial crisis.  It’s relied on German money and German leadership but hasn’t addressed the need for countries who have had inferior economic policies to rejuvenate growth as part of the solution.   The focus has been too much on debt reduction and too little on the costs of austerity.   With Cameron’s UK sinking into a double dip recession, his “debt reduction first” model is in severe doubt.

François Hollande is in a position to help nudge Merkel and the EU into a more broadly accepted path forward.  If the Greeks don’t want to participate, fine — let them have the drachma back.    At this point European banks are better prepared for a Greek default than they were a year ago, the system can handle it.    If that happens, the inevitable disaster that will hit Greece will pressure other troubled states to avoid the Greek way.   That, plus a set of policies more sensitive to the dangers of austerity will make it an easier sell.   Contrary to conventional wisdom, Hollande’s election will aid EU efforts to handle this crisis, help stymie the rise of the far left and far right, and may push Merkel in a direction that will help her win re-election.

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What the French Election Means

We won’t know for sure the results from France until the second round of voting is completed on May 6, but Francois Hollande’s surprising win on the first round with 28.6% to 27.1% makes him the favorite on May 6th.

First, a bit about French Presidential elections.   They are held every five years and usually draw a variety of candidates. The election is only won on the first round if a candidate receives a majority of the vote: 50% plus 1.   Otherwise, the top two candidates hold a run off two weeks later.   Never has a sitting President actually not finished on top in the first ballot, though often with very low vote totals.   In 2002 an especially angry electorate gave the top candidate of the right, Jacques Chirac, only 19% of the vote and Socialist Lionel Jospin 16%.    The problem was that far right Jean-Marie LePen got 17%, thereby creating a meaningless run off.   The left couldn’t vote for a neo-fascist so they plugged their noses and voted for Chirac, who won with 83%.  Otherwise, the system has worked pretty well.

Marine LePen, daughter of Jean-Marie, focused on the traditional theme of the National Front: Fear.   Her combative tone against foreigners, Muslims, social change and France’s future helped her double the total for the neo-fascist party over her father’s 2007 numbers.  But National Front voters are fickle.   You might think that they’d go to Sarkozy, but historically about 40% stay with the conservative candidate, 30% sit out, and the rest go to the Socialist.   That’s because National Front voters hate foreigners but some have economic views more towards the left.

National Front leader Marine Le Pen

It’s possible that the large vote total for LePen will give Sarkozy a greater proportion than usual; if so, he could pull off a surprise.   It’s also possible that some people who prefer Sarkozy to Hollande might have voted for Hollande on the first round to send a message.   They also have two intense weeks of campaigning ahead.   Still, the odds now favor Hollande.

Sarkozy and his wife Carla Bruni-Sarkozy

In play is the very approach the EU takes to the Euro-crisis caused by weak economies in the south.    Led by German Chancellor Angela Merkel, the EU response has been to push for austerity from debt ridden countries.   The idea behind this is that debt is such a cancerous and pernicious force when it reaches levels over 100% of GDP, but no economy can be fixed without first reducing debt to GDP ratios and getting the budget under control.   Moreover, that’s the only way to protect the viability of the Euro.

It’s been a hard sell.   The economic impact of austerity has been profound in Greece, Spain and elsewhere; it’s led to an intensification of the recession.  That cuts revenues further and creates the danger of a downward spiral.

Enter Hollande.  He is of the school that says that when in recession austerity is not the proper approach.  The main goal is to get the economy growing again.   Austerity is how we responded to the Great Depression and it only made the depression deeper and longer.    He wants to revisit last year’s EU agreement and rethink the approach the EU is taking to dealing with the current crisis.

Hollande and his "companion" Valerie Trierweile - either way France will have an attractive "first lady"

Sarkozy’s camp is arguing that the Merkel-Sarkozy (Merkozy) agreement is necessary to save the Euro, and that a Hollande win will rattle capital markets and threaten another major crisis about the future of the Euro.  The hope is that while the French don’t like Sarkozy’s glitzy style and blame him for not finding a way out of the economic doldrums, they’ll fear Hollande will make things worse.

It gets complicated.   Many argue that Sarkozy and Merkel’s relationship is paramount, and that a Hollande victory would risk undercutting the Franco-German “engine” of the EU.   Others say that Sarkozy has given Germany the leadership role in Europe by bending to Merkel’s will and that Hollande would be a better heir to De Gaulle’s idea of grandeur and leadership for France.   He’d be a leftist foil to Merkel’s conservative economic bent.

Merkozy?

This isn’t just about Greece.  French debt is sitting at 90% of GDP and rising.   Many in France fear austerity to cut that debt will hinder growth.    Hollande does say debt must be cut, but also believes the economy needs to be stimulated.   His approach is less like Merkel’s and more like Obama’s — start with a stimulus, try to get the economy moving, and once growth has returned then cut.    But what if growth doesn’t return and you simply end up with more debt?

And for all the grumbling about Merkel’s austerity, the German economy has weathered this crisis better than most.   Indeed, northern Europe, particularly Scandinavia (if you drop Iceland) and Germany have fared better than others in the West.   German debt has also risen, they have an 80% debt to GDP ratio, but the Social Democrats on the left and Christian Democrats on the right agreed to a balanced budget amendment to their constitution and have focused on debt as the major problem.

Yet German success doesn’t prove that their approach is best.   They also did not cut regulations in the financial sector when so many others did, they kept their industrial base alive, and still have a strong current account surplus.   Germany’s fundamentals stayed strong, the French fundamentals are weaker, and Greece is fundamentally flawed.

So this election matters.   A Sarkozy re-election means continuing along the “Merkozy” path with the hope that her economic approach is right — cut debt, then rebuild growth with a stable Euro.   German leadership in the EU will continue, at least until this crisis passes.   If Hollande is elected there will be a vigorous debate about the German way on dealing with the crisis.   Countries like Greece and Italy will have hope that maybe their future isn’t a dramatic drop in their standard of living to pay back debt, but a looser approach designed to bring back growth.

No one knows what Hollande will really do or how Europe will react.  No one can be sure that Merkel’s approach is right, or if austerity is poison.    But this election will make a difference, and frankly, I’m not sure who I hope wins!   I like Merkel and think the German approach is pretty persausive.  But…if it’s wrong that could doom southern Europe and harm the EU overall…   Interesting times!

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