Friday, June 8, 2012


The financial mess in Europe and, to a lesser degree, in the United States seems to be impervious to any therapy. The EU crisis is the more serious of the two because it is of a structural nature. The “institutions” are not working out as was expected and the fragility of a continent which was supposed to have found “closure” after the Bosnian conflict, looks as if it were tempted to reopen old wounds and prejudices. The American financial crisis looks more manageable in the long-term because the Americans are not mortgaged by ulterior motives.  The United States finds itself in a difficult situation but its future is not at stake. The EU is on life-support, almost.  However, I do not share in the fashionable pessimistic outlook, while at the same time recognizing the armada of icebergs which are threatening the EU Titanic. Obviously the ECB needs to be reformed and this can only be achieved by more Europe rather than less. Political wounds will need to be addressed, otherwise we risk finding ourselves with clusters rather than union. The United States has more technical problems and does suffer from denial with regard to a chronic overspending and a polarized political landscape. I doubt that the next president, be it Obama or Romney, will make that big of a difference. Too much is said in the campaigns which is dead on arrival once the candidate becomes the president. It is clear that the globalization which was cheered years ago and given a free ride needs some form of regulation both in the private and public sectors. Personal assets are hostage to hedging while public finances look dangerously exposed to the topsy-turviness of a banking sector often running amok. Notwithstanding, the Europeans seem to be making some progress toward the creation of Euro-bonds, a banking and fiscal union, allowing for a streamlined fiscal policy erga omnes. Spain and, above all, Greece might still be tempted to derail policies which are felt imposed rather than negotiated. Such an attitude would be unacceptable and lead to Athens’ inglorious exit.  Strangely, the Dutch do not support the President of the Council Herman Van Rompuy in his institutional “brainstorming.”  The finger should not solely be pointed at the Greeks.
Chancellor Angela Merkel has shown patience and creativity. She deserves credit for being forthcoming while others spend their energy trying to escape from underwritten responsibilities with regard to debt ratio or fiscal transparency.  Germany, rightly so, will not assume the role of European ambulance.  On the other hand, Berlin knows too well that the European “project” must be continued if there is still an ambition left to remain a political player in world affairs.  The immature Greek attitude could become a real danger if it were to mutate into similar situations in other countries. We should abstain from adding unpleasantness to difficulty.  Another problem is that within the EU there are too many cooks and bruised egos, which too often come up with half-baked solutions which only kick the cans down the road. The new French president seems convinced that the Franco-German partnership is essential for maintaining European relevance worldwide. He has not come up with the more old-fashioned ideas of the socialist textbook and seems to be eager to work with Germany. This can only benefit the therapy which must be imposed upon the mostly southern flank of the EU and which will certainly be a bitter pill to swallow.  Meanwhile, Wall Street struggles with bad bonds from, inter alia, Italy, Spain and Greece, besides living on borrowed (Chinese) time. The EU should send confidence-building signals to the American consumer. The latter is already penalized by the housing crisis and unemployment and needs to see the European crisis in a less “doomsday perspective.” Europe must no longer be seen as a virus, which could also affect the outcome of the presidential elections in the US.   In times like these, psychology plays a major role.  We need not be even more traumatized by events which can easily light a financial brushfire, such as a rush to the banks or a standstill in lending and consumer spending. The Fed for its part must not play the guessing-game. The Europeans should also realize that antiquated populism is no answer to a contemporary malfunction. Nobody wants some Tea Party player in this sophisticated bridge game, wherein familiarity with   “honors, rubbers and tricks” is not for the amateurs.

The euro should not be endangered. The EU has to reconnect with the citizen. The ECB is in need of a larger mandate. Paths to recovery there can only lead to improvements elsewhere. The same goes for the United States which finds itself hostage to political bickering from another age.  Obama is too philosophical to be as convincing as he should. Romney overstates his business savoir-faire in Staples or Bain as a model for finding a way out of the current crisis. Walt Disney was a genial businessman as well, but that did not make him necessarily fit to be the White House occupant.  Obama and Romney tend to exaggerate their exceptionalism (a chronic American ailment.)  Both are reasonable, intelligent individuals but are under pressure to play to the crowds and talk banalities at a time which requires a more visionary leadership. By the way, the same goes for Europe, which seems too often like an orphan looking for inspiration. The Brussels night meetings do not always seem to bring the best out of the participants. Angela Merkel, Herman Van Rompuy and Mario Draghi still stand out and deserve respect for their political clairvoyance.

We are still not in the land of the blind!

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