Saturday, December 13, 2008

European Fracas

German Chancellor Merkel, coming from Bush style conservative political ideology, has been showing her reluctance to Keynesian Stimulus for a while. From intellectual and pragmatic perspective, this is a loser’s game. But unusual to their international policy culture; Germany has been quite vocal in showing their opposition to such government led larger stimulus in very public and counter productive manner. That is reflected in the outburst of Merkel’s Finance Minister Steinbruck against British PM in an American magazine Newsweek.

This means time has come for intellectual heavy weight Keynesians across Atlantic to call Germany’s bluff here. This is the time for Larry Summer to simply demolish once and for all the stupidity going on in Berlin. Paul Krugman has been doing his bit here.

The real domestic reason for German naval grazing here is domestic reluctance in being bit generous to rest of the European economies. Germany being the largest economy on that continent; their large stimulus packages are likely to benefit many other countries on the continent and it is not clear whether Germany politicians are ready for such team play. True, Americans created the problem of Global Economic slowdown but so far Fed and Treasury have been quite a team member with economies across the globe and not mean spirited when American dollars needed to be lend to others and so on. Remarkably Bush has shown quite openness in this regard. Alas German Conservatism learns something from that.

This German behavior reminds another stupid German leader, Gerhard Schroeder, from past. It was not his Iraq war opposition per se; but unnecessary cozy relationship with Russia with the sole purpose of snubbing America and allies that created lasting damage to cross Atlantic relations. Looks like German leaders are on more such damaging exercise here. Not only this German behavior inconsistent with the coordinated global economic policy desired by USA, China, Japan, Australia and other countries; but it opens the schism between Britain and EU again. Quite a divisive foreign policy.

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