Why Europe Keeps Failing........ merged with "EU Seizes Cypriot Bank Accounts"

[Kirkhill]

ERC - I feel that you have too much of Hobbes and not enough of Hutcheson in your diagnosis.

Yes, it is true that self-interest drives much of the problem.  But equally (or perhaps not equally but certainly a significant consideration) is the inability of people to stand back and watch babies and seniors die.  The problem arises when people that can't afford to do things for others themselves insist that something must be done - even when nothing can be done.

Or as Maggie put it, when they run out of other people's money.

People find that it is easier to suffer themselves than it is to watch others suffer.

 

[Edward Campbell]

People no longer believe that "it can happen here," here being Athens or Lisbon ~ but it did during the Great Depression and a national bankruptcy might look a whole lot like the "dirty thirties" all over again, maybe even worse.

We, all modern countries, have pretty sophisticated social safety nets, but we have, I suspect, forgotten how to manage very large scale private charity. What happens when hospitals run out of supplies? What happens when there is no more 'surplus' food for food banks? In short, what happens when the government's purse is empty? Who opens an infirmary? Or a soup kitchen? Churches? Political Parties? Will the Red Cross be ready to respond to that sort of crisis on a national scale?

 

[Rifleman62]

On FOX News yesterday, there is a huge run on Greek banks as citizens withdraw all their funds.

 

[57Chevy]

                                                  Shared with provisions of The Copyright Act

Papoulias announced this morning that almost $1.27 billion has been pulled from Greek banks in the last 10 days.

Bank runs in Greece as country spirals out of control
http://fellowshipofminds.wordpress.com/2012/05/16/bank-runs-in-greece-as-country-spirals-out-of-control/

 

[The Bread Guy]

Greek judge in charge to prep for ANOTHER election 17 Jun - highlights mine....

Greece put a senior judge in charge of an emergency government on Wednesday to lead the nation to new elections on June 17 and bankers tried to calm public fears after the president said political chaos risked causing panic and a run on deposits.

In a blow to confidence, the European Central Bank said it had halted liquidity operations with some Greek banks because their capital was too depleted. That means they can no longer offer assets to the ECB as collateral for loans, and would have to seek costlier emergency financing from the Bank of Greece.

It was not immediately clear which banks, or how many of them, were affected. One person familiar with the matter said the capital of four Greek banks was so low that they were operating with negative equity.

Greeks have withdrawn hundreds of millions of euros from banks in recent days as fears grow that the country might be forced out of the euro zone, although there has been no sign of a run on Athens bank branches.

Political leaders failed to form a coalition after an inconclusive election on May 6 when parties opposed to the austerity terms of Greece's international bailout did well. This raised the chance that the rescue funds could be halted, pushing the country towards bankruptcy and a departure from the euro.

ECB President Mario Draghi said that the EU treaty did not give his bank responsibility for the euro zone's composition.

"I want to state that our strong preference is that Greece will continue to stay in the euro zone," he said in Frankfurt. However, he added: "Since the treaty does not foresee anything on (an) exit, this is not a matter for the ECB to decide."

President Karolos Papoulias named supreme administrative court head Panagiotis Pikrammenos as caretaker prime minister.

Pikrammenos will have no power to take political decisions, only to lead Greece to the vote. The parliament that was elected on May 6 will convene on Thursday and be immediately dissolved, a presidency source said.

The interim leader, who was sworn in at a brief ceremony presided over by Archbishop Ieronimos on Athens on Wednesday, is little known. State television said he was born in 1945 and studied law in Athens and Paris ....

Reuters, 16 May 12

 

[Edward Campbell]

Two articles caught my attention today (it's raining in HK  :'(  ): one by Martin Wolf in The Financial Times and the other by Niall Ferguson in Newsweek. Both aim to explain what's happening in Europe but both, it seems to me are more prescriptive than explanatory and both appear to prescribe the same harsh remedy: union.

It seems to me that the EU has been, broadly, a runaway success story. The European civil wars that dominated 20th century history are over: Germany failed to unite Europe by force but, now, as Ferguson said, Germany risks losing all it has gained - and make no mistake Germany is the big winner in the EU - by being timid and isolationist. It is time to save the euro (€)  the EU itself by going the next step: a confederation. Some countries, notably the UK but, likely, also Denmark and Norway and Switzerland (which are not even in the EU) will not wish to join the new union but they will wish to revise the European Free Trade Area and secure a full free trade deal with the union.

But isn't the EU already a union? Yes, but not a full one; that's why it can even consider kicking Greece out of the Eurozone and that's why it cannot have sane, sensible economic policies. What else must they do? First they need to make themselves look a lot more like Canada: a very loose, highly decentralized federation but one in which a single, sovereign government sets economic (fiscal and monetary) policy, trade and foreign policy and even defence policy.

I would suggest that the new Union of European States (or whatever one wants to call it) should be even looser than Canada. The member states should have full control over their social policies and programmes - but they must be able to fund them through their own state taxes and through a system of transfer payments copied, in aim but but not in too much detail, from Canada. They must pay taxes to the new, federal superstate for areas of federal responsibility, which includes M. Hollande's call for growth because, right now, the EU/Eurozone cannot "do" growth - austerity is the only course open - because it has no resources of its own. Nations should retain their "own" armed forces but some fixed amount (say 75% of manning levels) must be assigned to be "under command" of the superstate's MOD. (It must be recognized that states have legitimate internal security requirements that requires state level "national guards," but hundreds of thousands of European men and women must be enlisted in national ships and units (flying squadrons and wings, regiments, brigades, divisions and even corps) which will serve under a combined command.) (NATO will have to die.) The superstate will be big, strong and rich and able to pursue a strategy comparable to, say, America's or China's.

Oh, and since the new superstate will set foreign and defence policy I am about 99.99% certain that the French nuclear forces are gone.

Thus, I see a three level structure for Europe:

1. European Free Trade Group: the new European superstate plus Britain, Denmark, Iceland, Ireland, Norway and Switzerland;

2. Independent states, which includes the new European superstate and all other states in Europe including the ones mentioned above plus Russia, Ukraine, Turkey, etc; and

3. "Member states" of the European superstate which still have "national" identities, are likely UN members, maybe even have "national" passports, but are no longer independent in economic, foreign or defence policies.

I'm pretty sure the Germans don't want it and French will hate it, but ...

 

[Brad Sallows]

The US tried that; the pressure to push power and money upward is hard to resist.  Brussels already looks too much like Washington, so Europeans will not enjoy 150 years or so of relative liberty during which the national capital is a place far away and of not much influence in most people's lives.

It is not immediately apparent why Greeks should suffer much more than Argentinians, so I do not foresee a great hand-wringing among charitable organizations.  Is there some reason Greeks need to fare better than Egyptians or Libyans?  They are all relatively close neighbours, after all, but I don't see hearts breaking over the well-being of people on the south side of that pond.

 

[a_majoor]

Previous attempts to impose some sort of order on Europe have been rather ill starred, generally the component areas were not willing to surrender sovereignty to the center, regardless if the "center" was the Vatican, the Holy Roman Emperor, the Hapsburgs or Napoleon (to use a few past examples). When it did work it was because the "center" could impose its will by force, which really wasn't that often.

The United States is exceptional since it is a nation essentially designed during the Enlightenment, so the political structures and underlying philosophies are far different than anything anywhere else. Of course the historical experience is also quite different (arguably the trend to centralize and empower the Federal government over the states really took flight during the Civil War, but reached its apex during the Cold War); don't forget prior to the Civil War the formulation was properly "These United States".

I would actually argue the direction of evolution is away from large, cumbersome bureaucracies, centralized States and all that goes with it; smaller, nimbler polities will have huge advantages by being able to react far more quickly and efficiently to crisis and opportunities. Overarching structures like NATO, the EU and so on still serve a purpose so long as they stay focused and avoid bloat and mission creep; the ability to form "Tiger teams during a crisis will be much more useful than any number of standing committees.

What this means for Europe might be some sort of loose steering committee for Northern Europe, with a larger trade union to encompass the rest of Europe much like Edward suggests, but without much of  the formal structure.

 

[a_majoor]

European voters and depositers are starting to vote with their feet, and could essentially unravel the "fixes" that Germany and the ECB have covvled together to keep the debt crisis from imploding the EU. Frankly, I suspect there is no stopping the process now; the only real solution to any debt crisis is to deleverage and there is no way this is going to happen under the current system. Investors may have to decise that a 60% haircut may be the best possible outcome, and trillions of dollars of "value" will be erased from the books. Don't think the US in in any better shape, the estimated $52 trillion stock of wealth is also largely based on real estate, which is overvalued by anything from 15 to 25% depending on what market you are in, and Canadians are highly overleveraged on a personal basis, hardly a happy situation.

http://blogs.the-american-interest.com/wrm/2012/05/19/ratcheting-up-the-crisis-in-europe/

Ratcheting Up The Crisis In Europe
WALTER RUSSELL MEAD

“Crisis in the eurozone” stories are getting boring and this is one two year old soap opera the world would just as soon see disappear. Nevertheless it grinds on; yesterday the German finance minister said it could go on for another two years.  Unfortunately, he’s right.
But while the news from Europe is complicated and inconclusive (they are always threatening to jump off the bridge but so far, no one has), this is still a story one has to watch. And after months and years when the crisis was mostly in the hands of elites — heads of government, central bankers and the like — in the last couple of weeks the public has been getting involved, and that makes the crisis more dangerous and harder to solve.

The Greek and French elections were the public’s first real chance to get a word in on how Europe is handling the crisis, and the word from the public is one of those expletives that we don’t allow at Via Meadia. The public not only doesn’t approve of the way Europe is handling its problems; it wants to hang, draw and quarter the people responsible. The Greeks and the French both voted for candidates who wanted to rip up the fragile agreements already negotiated; as more European countries hold elections we must expect that more European politicians will come to power with mandates to change Europe’s direction. Many like the new French President François Hollande will try to manage this artfully, but the Greeks are unlikely to be the only bull in Europe’s china shop by the time this is done.

The other way that public sentiment threatens to blow Europe sky high is swifter, less predictable and far more dramatic. As Greek savers and investors read the writing on the wall, they are pulling their money out of Greek banks. They know that if Greece pulls out of the euro, the government will do something funny to the banks; they aren’t sure what (nobody really is), but there is a strong suspicion that any money left in Greek bank vaults will be converted from euros to drachmas at the stroke of a pen (more likely, by the tap of a keyboard), and those drachmas will soon be worth much, much less than a euro.

Better to have your money in Swiss or German bank than in a Greek one, every sentient vertebrate in Greece has to understand; as a result, hundreds of billions of euros have been moving out of the Greek banking system. At one point last week, television networks were sending camera crews out onto the streets to look for panicky customers standing in line at ATMs or at bank counters; but then they realized that these days you can do it all on the net. We have entered the age of the invisible bank run and are waiting for the first virtual panic.

An invisible bank run is a hard thing to watch; not only is it less telegenic than the old-fashioned kind, one relies on numbers from official government agencies for statistics. How much money left the banking system today? How many banks need emergency liquidity to meet the tide of withdrawals? In the old days, reporters could and did watch lines form outside the banks and watch the armored trucks arrive with cash. These days it is happening anonymously and you only know what they tell you.

They are very unlikely to tell you the truth. Officials lie like rats in times of financial panic; they do it out of a sense of duty. They will insist that a given country will never leave the euro until the moment that it does; they will say that a deposit freeze is unthinkable until they announce that they’ve done it; they will tell you a bank is rock solid until the moment they padlock its doors. This is all for your own good, of course. They don’t want you to panic — and they want to make sure that your money is trapped when they take it away or turn it from gold into straw.

Bank runs, even virtual ones, are the method by which public fear can blow up the eurozone. A bank run, as hundreds of thousands of depositors decide to pull their money out of a bank or a banking system at the same time, is the financial equivalent of a dam break. Banks, even very well run ones, never have all the money that their customers have deposited in their vaults. They lend that money out to other people, and because they charge borrowers a higher rate on their loans than they pay savers on their deposits, they make money.
At least they make money as long as enough of the borrowers can pay back their loans.

When borrowers can’t repay their loans, the bank sooner or later has to “write down” the value of those loans. In bad economic times, when borrowers are going bankrupt and the collateral on their loans loses value, banks can make huge losses. This is how Ireland lost its shirt; the banking system collapsed as the Irish real estate bubble burst, making building contractors and home owners bankrupt all over Ireland, and making the real estate that served as collateral for their loans almost worthless at the same time. The government — to prevent a panic and bank runs — guaranteed the deposits held by Irish banks, and ended up assuming such a massive debt that the Republic of Ireland needed a bailout from Europe.

Since then, European bailouts have been the safety net for all the countries in the eurozone. When investors worry that countries like Spain, Portugal and Italy will have a Greek style financial meltdown and the interest rates on their bonds rise to reflect that risk, the ECB steps in to buy their bonds and the panic goes away — for a while. More, when individual banks are having trouble, the ECB has made huge amounts of money at extremely low interest rates available to them. Spanish banks, for example, can borrow cheap money from the ECB in order to buy Spanish government bonds at high interest rates. They pay one percent interest to the ECB and collect four percent interest from the Spanish government, and use the profit of three percent to offset their losses on their loans to private companies and consumers who are going belly up in Spain’s savage recession.

The success of this little merry-go-round is why Europe calmed down last December. The ECB in effect prints money which it gives to busted banks. The busted banks lend the money to insolvent governments at artificially low rates (but at rates that still allow the banks to make a profit). It was a neat little trick that kept the crisis quiet without forcing the Germans to admit openly that the ECB was in effect using German resources to bail out the rest of the zone.

Bank runs, even virtual bank runs, would blow this fragile arrangements to bits. As the prospect of Greece leaving the euro becomes more likely, savers in Portugal, Spain and Italy have to start wondering if their countries, too, will have to jump ship. Sophisticated investors have been moving their money out of those countries for some time; things may soon reach a pass in which ordinary, unsophisticated investors start to do the same thing. Again, why have your money in some gut-shot Spanish bank when you can transfer it to a German, Austrian or Dutch bank with a mouse click? And if you are worried about the whole eurozone, or that devious financial trolls will find a way to convert all deposits held by Spanish citizens in European banks to pesos when and if the change comes, put the money in Switzerland, the UK or even the US.

If a few thousands or a few tens of thousands do this in Portugal, Italy and Spain, no problem. But if hundreds of thousands or millions of people shift their money out of their home banking systems, then you have a new and very grave bank crisis that blows the December fix out of the water. Either the ECB would start creating trillions of euros to bail out the Club Med banks (and Club Med under some circumstances could stretch as far north as France), or banking systems start exploding like firecrackers across the southern tier. At the same time you would have a new panic on the bond markets; nobody is going to want to own Spanish or Italian debt under those circumstances.

This is one of those cases when what is good for one is bad for all. A good financial investor would probably be suggesting to anybody in Spain or even Italy that it is a good idea to separate the fate of your savings from the fate of your country’s currency or its banking system. The trivial costs of moving money into a safer banking system are well worth the protection you gain.

But if everyone gets and acts on this sound and prudent advice, the whole banking system and perhaps the whole eurozone comes down.
Europe’s stability now rests on the sloth and stupidity of European savers. As long as millions of retail investors think their money is OK, it will be sort of OK for a while. But while governments can and will lie, and while soothing official pronouncements can be printed up almost as fast as the ECB produces euros out of thin air, sooner or later people may start to put two and two together.

Voters are not nearly as scary as depositors right now from the standpoint of Europe. Elections in Greece can’t cause as much trouble as bank runs in Barcelona or Turin.

This isn’t an abstract or imaginary worry; on Thursday rumors of a bank run in Spain led to a fall of thirty percent in the value of Spanish bank shares; the government denied any run was taking place, and, this time, people believed the denials. The panic stopped and the next day the bank shares recovered most of the loss.

Bank panics are contagious; everyone who read last week’s stories about the banking problems in Greece and the rumored problems in Spain is suddenly aware that the safety of their money is something that they need to think about. Invisible runs can spread and spread fast; this is the specter at the feast of the G-8 leaders as they meet at Camp David.

 

[daftandbarmy]

Well done Boris:

Europe is driving full-tilt, foot on the pedal, into a brick wall

It’s unbelievable that we should be urging our neighbours to adopt a tighter fiscal union, argues Boris Johnson.

I see the G8 has a brilliant solution to the problems of the eurozone. President Obama says it’s time for “growth and jobs”. Jolly good. That’s the stuff. Let me show you how to create employment – the Brussels way.

Come with me through the streets of Athens, not far from Syntagma Square, and your mind will reel with the horrified realisation that history is not a one-way ratchet, that human progress is not guaranteed, and that a proud country can be reduced – by years of torture and bullying – to a state verging on total political, economic and moral collapse.

You will see businesses boarded up and windows smashed because no one has the money or the energy to fix them, and on almost every wall a riot of graffiti full of poisonous hatred for politicians. You will see people sitting on cardboard, heads down, hands out, or pushing trolleys full of scrap metal.

Not far from the town hall, I saw a man using the pavement as an operating theatre to eviscerate a mattress for its springs. In the eyes of every politician there is a glassy humiliation, a sense that the fate of the nation is no longer in their hands. Even worse than the humiliation is the dread that things will deteriorate further still. Thousands are now being fed by soup kitchens.

Unemployment is rising by the day, and among young people it now stands at a shameful 54 per cent. Yup, folks – those are the results of an EU plan to produce “growth and jobs”. It was called the euro, and it has been a catastrophe for Greece and pretty bad (with one notable exception) for the rest of the continent.

As far as I can understand the “strategy” of the EU, it is now to prepare for Greece to leave the single currency. Not that the Greeks themselves are anything like psychologically ready to quit: the politicians are punch-drunk, exhausted, and appalled at the loss of face and loss of security that would go with a sundering from “Europe”. Most voters choose pro-euro parties. But money is being withdrawn from banks; events are gathering momentum; and it is clear from their remarks that other EU leaders are getting ready for an outcome which until recently was held to be impolite to mention: the Grexit.

And then what? And then the strategy would appear to be to cauterise the amputation; to circle the wagons; to issue the most ringing and convincing proclamation to the markets that no more depredations will be tolerated; and to get the Germans to stump up, big time, to protect Spain and Portugal. We are told that the only solution now is a Fiscal Union (or FU). We must have “more Europe”, say our leaders, not less Europe – even though more Europe means more suffering, and a refusal to recognise what has gone wrong in Greece.

The euro has turned out to be a doomsday machine, a destroyer of jobs, a killer of growth, because it entrenches and exacerbates the fundamental and historic inability of some countries to compete with Germany in making high-quality goods with low-unit labour costs. Unable to devalue their way back into the game, these countries are forced to watch industry wilt under German imports, as the euro serves as a giant trebuchet to fire swish German saloon cars and machine tools across the rest of Europe.

Germany is almost alone in recording economic growth in the first part of 2012; Germany is doing well from the euro; and so the theory is that Germany should pay to keep the whole racket going by bailing out the improvident and the uncompetitive, just as London and the South East subsidise the rest of the UK.

Alas, it is not a strategy that is likely to work. As Angela Merkel has made clear, there is little political support – let alone popular support – in Germany. EU leaders may want a fiscal union, but it is deeply anti-democratic. We accept large fiscal transfers in this country because Britain has a single language and a single political consciousness in a way that Europe never will. Rather than creating an “economic government of Europe”, the project will lead to endless bitterness between the resentful donors and the humiliated recipients, as these diminished satrapies will be instructed to accept cuts and “reforms” – designed in Berlin and announced in Brussels – as the price of their dosh.

http://www.telegraph.co.uk/comment/columnists/borisjohnson/9278862/Europe-is-driving-full-tilt-foot-on-the-pedal-into-a-brick-wall.html

 

[DBA]

I would modify Sun Tzu's line of thought that defence everywhere is defence nowhere to apply to social safety nets: the larger the net the less it protects. Where entitlements have expanded to the point they aren't actually being paid for the vaunted "social safety net" is full of holes and will fail when it's needed the most. Same for government, the bigger it is the less actual governance it performs.

 

[a_majoor]

The same rules could apply for mismanaged economies anywhere (see Ontario, for example). Astute readers will recognize the prescription, JFK did it in the 60's, Ronald Reagan did it in the 80's along with Margaret  Thatcher and Mike Harris. I'm not quite as sure about the Monetary Stimulus idea, first off it sounds like something politicians can manipulate for their cronys, and more ominously, it is the prelude to a Hayekian "Boom and Bust" cycle by encouraging misallocation of resources. If anything, we have a cheap money environment now:

http://www.nationalreview.com/corner/300641/more-spending-wont-save-europe-veronique-de-rugy#

More Spending Won’t Save Europe
By Veronique de Rugy
May 21, 2012 8:26 P.M.

In the face of the problems in Europe, many have suggested that the solution is for Germany to provide the necessary stimulus (through, among other things, a boost of German domestic demand and/or an erosion of its current-account surplus) to help other countries fix their fiscal troubles. But that’s unlikely to work, says Amit Kara:

    Even if Germany manages to increase domestic demand, there is no guarantee that the additional spending will find its way into the peripheral euro-zone economies. A simple macroeconomic simulation suggests that a permanent increase in German government consumption equivalent to one percentage point of GDP would raise output in Ireland and Greece by 0.1% at most, and in larger countries, such as Spain and Italy, by much less than that.

    That should come as no surprise. After all, exports to Germany account for just 2.5% of the combined GDP of Italy, Ireland, Portugal, Spain and Greece. In order to make a difference, Germany would therefore have to embark on a fiscal expansion that is too big even for the largest economy in Europe.

    What about households and companies? German household saving is relatively high at 11%, in theory providing some scope for additional private spending. Here, too, however, there are difficulties. Designing a fiscally neutral set of measures that encouraged spending would be challenging because German households have, on average, less net wealth than their counterparts in France or Italy.

    There is also the possibility of faster wage growth in Germany, which would undoubtedly help stimulate consumption. But only a small portion of that additional spending would be directed toward the troubled countries. And Finance Minister Wolfgang Schäuble, while acknowledging the likelihood of more rapid German wage growth, also warned that the economy should not lose its focus on competitiveness, implying that there is a limit to how much wage growth German authorities will tolerate.

    What if German corporations spent more? That would help, but it is not clear how the German government can help channel that spending to the peripheral economies.

Then what? In this piece in the LA Times on Friday, I argued that European countries should stay away from the “balanced approach” to austerity, that is, some spending cuts coupled with counter-productive tax increases. Tax increases (private-sector austerity), especially in times of economic contractions, are never a good idea or a good way to promote growth. That’s true even in a Keynesian model. Yet, we aren’t hearing anti-austerity advocates complain loudly that Europeans are raising taxes. Where are the headlines saying, “Europe needs to stop raising taxes”? Instead, we read that spending, and the lack of it, is to blame for austerity. Maybe that’s because acknowledging that austerity through spending cuts and tax increases has produced terrible results in Europe makes it hard to continue calling for tax increases–even if only on the rich–in the the US’s weak economy.

Obviously, I disagree that stimulus through spending should be pursued in Europe. Instead, along with cutting taxes, failing European governments should cut government spending. This form of austerity accompanied by the “right policies” (according to Harvard’s Alesina that’s easy monetary policy, liberalization of goods and labor markets, and other structural reforms) is more likely associated with economic expansions rather than with recessions. As I explained before, this makes intuitive sense: Austerity based on spending cuts (austerity in government) signals that a country is serious about getting its fiscal house in order in a way that taxing and more spending does not.

That leads us to the role of monetary policy. For over three years, economist Scott Sumner has argued that monetary stimulus is the best way to go. He explains how to get austerity and growth:

    So let’s see, how do we get austerity and stimulus at the same time?  How about easy money and deficit spending?  No, that won’t work.  Tight money and budget surpluses?  No.  Tight money and big deficits?  Hell no, that’s what we’ve been doing.  That’s how we got into this mess.  How about easy money and budget surpluses?  Bingo.  That’s a growing NGDP and budget surpluses—the Swedish way.

Read also his post about the successful austerity measures implemented in Sweden and the lesson for England: no Keynesian stimulus, what may look like social-transfer spending cuts, and a 2009 monetary stimulus. Sumner writes:

    Readers of TheMoneyIllusion were the first to find out about the Swedish monetary stimulus back in 2009.  But that begs raises another question.  Isn’t Britain also outside the euro?  If monetary stimulus makes fiscal stimulus unnecessary (and it does), then why would Britain want to do fiscal stimulus?  Why not just do monetary stimulus, and avoid the big deficits?  After all, just the other day didn’t Krugman say that there’s no argument at all for fiscal stimulus when monetary stimulus is available?  Yes he did.  And now he’s (correctly) attributing Sweden’s relative success to monetary stimulus (it sure wasn’t deficit spending!)

The whole thing is here. In my view, monetary policy in Europe, or in the U.S. for that matter, would increase the effectiveness of spending cuts and structural reforms (kind of like the water you drink to help the medicine go down). There may even be a good case that it would be useful independently of other reforms. But it is mistake to oversell it and it certainly won’t achieve our long term goals without serious reductions is government spending.

For more nonsense from Europe, read this. It explains a lot of this.

(Thanks to Tyler Cowen for sending me the WSJ piece about Germany.)

 

[a_majoor]

Wealthy Frenchmen are bailing on  François Hollande and his "growth" program. This should be no surprise; wealthy Britons ducked out when David Cameron raised tax rates in the UK, and many American States have tried to implement "millionaire taxes", only to discover th4e millionaires went missing next tax season. McGuinty will be learning the same lesson next April when he looks at the tax receipts (especially if he goes along with the NDP's extra tax bites), but politicians live inside the event horizon of their own pocket universe, and never let evidence get in the way of their plans:

http://www.nytimes.com/2012/05/27/realestate/voting-with-their-wallets.html?pagewanted=2&_r=2&pagewanted=print

[/quote]
Voting With Their Wallets
By ALEXEI BARRIONUEVO

THE French aided the Americans in their revolution against their British oppressors. Now Benoît Pous-Bertran de Balanda, the descendant of a French general who fought for the Americans, is trying to help his wealthy countrymen escape what he calls the tyranny of a new Socialist government primed to severely tax the rich.

And France’s loss could be New York’s gain.

Mr. Pous-Bertran de Balanda, 30, is a broker for wealthy French clients looking to buy apartments in Manhattan. With the election of the Socialist François Hollande as president this month, the wealthy in France are suddenly scrambling for places to stash their money for a while.

Well-heeled French citizens are scouring real estate opportunities in neighboring countries like Britain and Switzerland. The United States — particularly New York and Miami — is also drawing French investors looking to pick up rental properties or pieds-à-terre, brokers say.

In recent months, as Mr. Hollande’s victory appeared more possible, the French stepped up their house-hunting visits to New York, several brokers said.

These are not billionaire Russian oligarchs with blank-check budgets on the hunt for trophy properties. The French buyers most active in recent months are generally looking at properties between $500,000 and $5 million, brokers say.

What the French are so concerned about is Mr. Hollande’s campaign vow to tax income over 1 million euros at a 75 percent rate. The Socialist government, trying to put a dent in France’s $1.3 trillion euro debt, has said it will also raise the tax rate on capital gains to the same level as the tax on ordinary income.

“So there would not be any kind of advantage to invest in something in France, in the stock market or real estate,” said Mr. Pous-Bertran de Balanda, who runs Black Tulip Capital, a New York-based real estate asset management company he started last August that helps clients find properties and manages them.

To Mr. Pous-Bertran de Balanda and other wealthy French people, the news feels like a rerun of 1981, when President François Mitterrand decided to nationalize several big companies and raised taxes (though both moves were later reversed). And after the tax policy flip-flops by President Nicolas Sarkozy over the past five years — he gave the wealthy tax breaks only to raise taxes two years later — many in France see their own market is too volatile, and are searching for a safe haven.

The flagging euro and the economic struggles in Greece, Italy and Spain have only further shaken their confidence in investing at home. Last month, a Parisian couple in their 50s decided to buy a $4 million waterfront house in Miami after first considering Cannes, said Christophe Bourreau, a French broker with Barnes International who is now based in New York.

“They feel like the new president is hunting the wealthy,” Mr. Bourreau said, “and that the sooner their money is out of France the better.” The window may close soon: Mr. Hollande has said he will look to put his tax plans in place this summer, after parliamentary elections next month.

Many in the new wave of French buyers who have descended on Manhattan are focused on finding something downtown and have been frustrated by the lack of inventory, said Edward Johnston, a broker with Brown Harris Stevens. Others are looking near Central Park and Columbus Circle, with buildings like the Sheffield, at 322 West 57th Street, and the Setai Fifth Avenue drawing multiple visits, brokers said.

Deborah Gimelson, another broker at Brown Harris Stevens, said that in the last two weeks she had shown three different French bankers a duplex town house in the East Village that she is co-listing for $2.95 million. One made an offer on the home but was outbid, she said.

She said she suspected that the property itself — with an enclosed porch that looks out on a garden that “feels like parts of Paris,” she said — had something to do with the visits. But they were the first French buyers she had seen in 10 years.

“Whether they are French, Italian or Greek,” she said, “people from Europe want to put their money here. We are seeing a lot more people come out of those countries than in a long time.”

Mr. Johnston says the city is seeing a “massive influx of people” from France. He has taken five groups on visits since the beginning of the year. “They are serious buyers,” he said, although “they are not quick to act.”

Mr. Pous-Bertran de Balanda said he had about 20 French clients looking for condo apartments to buy in New York. He has been suggesting that they consider the Trump SoHo, the hotel-condo property. It offers “fractional occupancy” to owners, who can use the apartment for up to 120 days a year and have it rented out as a hotel suite the rest of the year.

The French invasion is poised to give Trump SoHo a needed boost. The 46-story project has been a source of tension in SoHo. Some residents have grumbled that it is an out-of-place abomination, towering over the surrounding low-rise structures. Amy Williamson, the development’s vice president for sales, said Donald J. Trump had taken advantage of a zoning loophole that had not anticipated the “hybrid” between a commercial and a residential building, enabling it to be built to 46 stories.

Trump SoHo has done well as a hotel, Ms. Williamson said. But it has struggled as a condominium development. About a quarter of the 391 residences have been sold or are under contract since 2007, she said. Prices range from studios starting at $995,000 to penthouse suites starting at $2,966,250.

No French buyers have signed on the dotted line, but Ms. Williamson is confident that several purchases are imminent, particularly in view of the French election. “The people that were originally looking have now reaccelerated their interest,” she said.

Ms. Williamson is planning to travel with Mr. Pous-Bertran de Balanda in late June on a Trump SoHo road show to Geneva, Luxembourg and Paris.

He has been living in New York for only two years, yet Mr. Pous-Bertran de Balanda has deeper ties to North America than most Americans.

His ancestor François Bertran de Palmarolle served as a French general in the American Revolution. The general’s father, François-Charles Bertran de Palmarolle, died on the battlefield in Canada during the Seven Years’ War. The town of Palmarolle in Quebec was named after the Frenchman, who is buried there.

Of course, preserving the French noble family meant pulling out when the going got tough. When the revolution against Louis XVI started, Mr. Pous-Bertran de Balanda’s family emigrated to Spain for five years. Most of them returned when the nobility was reorganized under Napoleon, he said.

Some stayed behind in Spain for good. Now Mr. Pous-Bertran de Balanda, who met his French wife in New York, is considering becoming an American citizen and staying for the foreseeable future. In his circle, at least, he is not alone.

“I have met a lot of French expatriates who are considering the option to stay in the U.S. for at least five years,” he said. “They just want to wait, to wait and see what happens in France with taxes.”

Follow Alexei Barrionuevo on Twitter: @alexeinyt.
[/quote]

 

[Edward Campbell]

In the Globe and Mail's Report on Business, Michael Babad is reporting, in his Top Business Stories column that something like €100 Billion (yes, Billions with a big B) has "fled" Spain in the first quarter of this year ~ that's 10% of Spain's GDP! A country cannot sustain itself without capital. A country cannot "lose" 10% of its capital quarter after quarter without going bankrupt.

More on the link

 

[Edward Campbell]

The Globe and Mail reports that Ireland votes ‘yes’ to EU deficit-fighting treaty with about 60% of those who voted supporting the austerity measures.

I wouldn't want to read too much into the vote - a No vote "could have blocked Ireland from receiving new EU loans once its 2010 bailout money runs out next year" according to the article - but it might reinforce my contention that there is a North/South or Scandia-Saxon/Latin divide in Europe that counts as much as basic economic issues.

The article also notes that "the anti-treaty vote was strongest in urban working-class districts where anger over the crippling cost of Ireland’s bank-bailout program runs highest," which would make urban, working class Ireland rather like Greece and Spain.

 

[Kirkhill]

Ireland, like the rest of the UK is, in my opinion, much like a melting pot.  Or perhaps a refuge at the end of the world. 

Dublin was founded by Vikings as a slave trading post to supply good looking "Celts" to the rest of the world.  Over the years those Vikings became Normans who became Anglo-Normans (the Anglo-Saxons both being relatives of the Vikings) who became Anglo-Irish.

DeValera's mob, with the help of the same institutions extant in southern Europe, raised the Celts (minus the good looking ones) against their Viking overlords. 

The southern European institutions may have gone away in Ireland, but the mentality, the culture, which allowed them to flourish has not.  At least not completely. 

Also, Ireland has changed.  Not only because of the locals changing and swinging the balance more to the "Viking" side of the ledger, but also because its low tax regime (possible because of EU subsidies), has attracted more "Vikings" from all over the world to Ireland...

My guess is the Vikings won this round against a diminishing Southern European influence amongst the Celts.

At least that's my potted Sit Rep, for what it's worth. 

 

[Kirkhill]

In the Globe and Mail's Report on Business, Michael Babad is reporting, in his Top Business Stories column that something like €100 Billion (yes, Billions with a big B) has "fled" Spain in the first quarter of this year ~ that's 10% of Spain's GDP! A country cannot sustain itself without capital. A country cannot "lose" 10% of its capital quarter after quarter without going bankrupt.

More on the link

From today's BBC News (and you know it's dire when they are piling on the agony against Europe)

31 May 2012 Last updated at 19:00 ET

Why Spain's regions owe so much money

By Tom Burridge

BBC News, Madrid

Valencia's City of Arts and Sciences, which was built to impress, has become a symbol of excessive spending by Spain's regions

Three years ago the mayor of Alcorcon embarked on a hugely ambitious project.

Some 100m euros ($124m; £80m) was to be invested in a world-beating culture and arts centre, complete with nine buildings, three underground levels, and even a circus.

But it did not work out.

The area where the project was being built is now a sorry sight.

Inside, light fittings hang loose and the half-finished futuristic buildings are surrounded by a graffiti-covered corrugated iron fence.

A project that was meant to put the local area on the map has instead become an unsightly symbol of Spain's past unhealthy habit of regional overspending.

Many regions in the country owe billions of euros, partly because some local politicians built anything from airports to swimming pools to cultural projects during the boom times.

Backpackers visiting Spain these days are greeted by ultra-modern infrastructure
Some of those projects now lie unfinished, empty or inactive. Others were completed as planned.

But most of them have one thing in common: they have left big holes in local public finances.

Take Valencia's City of Arts and Sciences, which was opened back in 1998. The cultural initiative was finished, it is fully operating and very impressive.

But its budget deficit is still some 600m euros, with local media claiming that costs doubled to almost 1.3bn euros.

Black hole

Alcorcon, on the outskirts of Madrid, had a change of mayor a year ago.

David Perez Garcia is the new man in charge of the city, where some 180,000 people live.

He says legal fees and out-of-control costs have pushed the final price of the culture and arts centre to perhaps as much as 170m euros.

"It has eaten up all the town's resources," he says, pointing to how the city has been left with 612m euros of debts.

"Even the electricity bills aren't being paid. All the money has been sacrificed to this building."

Build now, pay later

According to Llatzer Moix, author of Miracle architecture, the success of Bilbao's Guggenheim Museum in the Basque Country, which attracts nearly a million visitors every year, gave other Spanish cities "cultural envy".

There was a mentality of "my neighbour has that wonderful new facility so I want another one like theirs, or probably even a better one", he says.

As well as large cultural projects, Spain's transport infrastructure grew exponentially during the boom years.

Work on a new airport, costing 150m euros in the autonomous community of Valencia in the east of Spain, finished in March last year.

But not a single plane has landed on its runway.

In the city of Ciudad Real, a short train journey south of Madrid, another empty, expensive airport lies empty.

"An airport in Ciudad Real, for what?" says Celestino Suero from CE Consulting, a nationwide Spanish consultancy firm. "No-one uses it."

Failing projects should simply be closed down, Mr Suero insists, calling for more central government control over Spanish regions' finances.

"Spain has become a country in which every region does what it wants," he says.

"Spain's problems will not be solved unless its autonomous communities are properly regulated."

Fixing the region's debt

A rise in Spain's budget deficit for this year, to 8.9% of GDP from 8.5% a year earlier, has been attributed to the indebted regions.

As a result, the central government in Madrid has set a tough 1.5% budget deficit target for all of the autonomous communities for this year.

The government has also said it will provide cheap loans for regional governments so they can pay off their debts.

The hope is that this will help mollify the European Commission, which earlier this week said it was ready to postpone Spain's 3% of GDP budget deficit target from 2013 to 2014 - though on the condition that the Spanish regions also get their public finances in order.

Much of the debt held by Spain's regional governments is owed to small, local businesses, which carried out work for local authorities and have still not been paid.

Enrique Martin, owns Distripaper, a printing and public relations company in Alcorcon.

The former administration at the town hall owed him 80,000 euros for work on a marketing campaign that he carried out on their behalf.

Because he was not paid, he had to let five of his 11 employees go.

He believes the idea of building a multimillion euro cultural centre in the town was flawed from the very beginning.

"It was too big for a town like ours," he says.

"The cost was far too high."

 

[Edward Campbell]

The Globe and Mail's Eric Reguly has an interesting perspective on the Greek crisis in an article in the Globe and Mail. He notes that while the crisis is very, very real for Greece it is, in fact, beneficial to Germany:

1. " The euro has gone from $1.60 (U.S.) to $1.24 – a 22-per-cent decline. The cheap currency triggered a surge in German exports and a fall in unemployment. On Friday, Germany’s jobless rate dropped again – to 5.4 per cent – taking it to less than half of the euro zone average;" and

2. "The flight to safety has pushed German borrowing costs to record lows; at last measure, the yield on 10-year bunds was a mere 1.2 per cent. That’s money for nothing for Germany, when you factor in inflation."

Reguly posits that these benefits may help explain why Chancellor Merkel is willing "to fiddle as the rest of the euro zone burns." But he cautions that Germany's strategy could backfire and could result in a financial crisis that will burn Germany as much as the PIGS (plus France).

 

[GAP]

Europe, pressed by Germany, mulls major step towards ‘fiscal union’
Noah Barkin and Daniel Flynn, Reuters  Jun 3, 2012
Article Link

PARIS/BERLIN — When Jean-Claude Trichet called last June for the creation of a European finance ministry with power over national budgets, the idea seemed fanciful, a distant dream that would take years or even decades to realise, if it ever came to be.

One year later, with the euro zone’s debt crisis threatening to tear the bloc apart, Germany is pushing its partners for precisely the kind of giant leap forward in fiscal integration that the now-departed European Central Bank president had in mind.

After falling short with her “fiscal compact” on budget discipline, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro area finances, and major new powers for the European Commission, European Parliament and European Court of Justice.

She is also seeking a coordinated European approach to reforming labour markets, social security systems and tax policies, German officials say.

Until states agree to these steps and the unprecedented loss of sovereignty they involve, the officials say Berlin will refuse to consider other initiatives like joint euro zone bonds or a “banking union” with cross-border deposit guarantees – steps Berlin says could only come in a second wave.

The goal is for EU leaders to agree to develop a road map to “fiscal union” at a June 28-29 EU summit, where top European officials including European Council President Herman Van Rompuy will present a set of initial proposals.

European countries would then put the meat on the bones of the plan in the second half of 2012, several European sources have told Reuters, including a timetable for overhauling EU treaties, a step Berlin sees as vital for setting closer integration in stone.

“The fundamental question is relatively simple. Do our partners really want more Europe, or do they just want more German money?” a government official in Berlin said.
More on link

 

[a_majoor]

Germany seems to recognize that the current situation is unstable, but are not quite sure how to stage a clean break (if that is even possible). VDH explains:

http://pjmedia.com/victordavishanson/the-limits-of-german-patience/?singlepage=true

The Limits of German Patience
Posted By Victor Davis Hanson On June 3, 2012 @ 12:48 pm In Uncategorized | 129 Comments

(Cologne, Germany)

I’m still in Germany, and keep noticing a predictable, but continually interesting, pattern in talking to Germans of all walks of life — tourists, hoteliers, guides, drivers, casual bystanders, or students. When Greece comes up (or rather is brought up by Americans), there is a noticeable tension. Brows tighten. German smiles momentarily vanish. A second later a forced recovery and grimace follow, accompanied by a sort of pained EU propaganda speech, along the lines of “Well, yes, we all have to get along” or “We Europeans of the Union must work something out.” Then after the platitudes, we are back to silence and a look to see whether their constructed optimism worked on you.

The Scratched Veneer

But then if you press with a polite question or two — something like an innocent (or perhaps not quite so innocent) “But is it really true that the Greeks find ways to retire in their fifties while you work to 67?” or “How did those deficits get so big without being detected?” — the façade crumbles. Your German friend takes a quick look to the side, to see whether anyone is listening. And then in a quiet, but soon to be louder and finally animated voice, he starts in on the “EU racket” and “How in the world is Germany supposed to pay for all these freeloaders?”

In minutes you begin to sense that the entire cohesion of the EU is predicated now on two dubious premises. One, of course, is 70-year-old war guilt [1]. I do not mean that in the logical sense as it pertains to the use of victimization by Mediterranean debtors (after all, how can once fascist neutrals like Spain and Portugal, or the successors of Mussolini’s Axis Italy, piggy-back onto Greece’s World War II suffering?). Rather, there is a larger guilt about the Holocaust, Hitler, and starting a war that ended up killing 50 million and, obviously, wrecking Germany (Germans like to point out the extent of the 8th Air Force’s and Bomber Command’s destruction along the Rhine, where 60-80% of some of the larger urban centers were destroyed.) War guilt, then, looms as the lever to pry out German cash, and after three generations the Germans are getting tired of it.

The second premise touches on a vaguer issue — the near admission that with a wink and a nod German companies and banks set up a sort of mercantilism, in which a Mercedes or Siemens found lucrative markets in Mediterranean Europe, got banks to back buying on time, and then sold things on credit to dubious government-sponsored entities and private corporations. After all, the Athenians had no business having one of the highest per capita rates of Mercedes ownership in Europe. Did Germans really think that siestas and 9 p.m. dinners led to prompt repayment of Audi and BMW loans?

No Players Left?

In other words, Germans seem to admit that they were playing poker with amateurs, that they knowingly took the players for a ride, and that they now find themselves with all the chips and no one anymore with the wherewithal to keep on playing. And yet they don’t think they can start over and divvy up the chips, not just because to do so would be to forfeit their winnings, but also because they suspect that the game would repeat itself identically every five or six years. They are right, which explains why the euro in its present manifestation is doomed, and why the Germans are exasperated for doing everything rightly that is now condemned as doing everything wrongly.

Worrywarts?

The EU crackup and the looming costs for Germany — are Germans to work until 70 or are they going to put off another bridge over the Rhine, or pass up building an autobahn? — seem to lead to other — how should I put it? — “exasperations. [2]“ The Muslim population in places like Berlin and Cologne is growing and not being assimilated. Meanwhile, the good-life, statist Germans are shrinking and aging with one of the most depressing fertility rates in Europe. The angst grows because the Germans themselves brought Muslims in, kept them as permanent second-class aliens, and now are quite confused over their proper status — both not wanting them to become full Germans (there is still a word, after all, Volk, in their language, which, like Raza, denotes a solidarity beyond mere shared citizenship), and yet resentful of their chauvinism and often militant Islamism. As one of my conversationalists put it, “Oh yes, the Turks — how can their sons somehow afford our BMWs?”

Indeed, the list of other exasperations is growing. The once beloved United Nations’ UNESCO bunch is likewise picking on poor Germany by “red listing” some of their tourist treasures. Must Germans really tear down their new super-modern aerial tram over the Rhine — an engineering marvel which resembles a designer kitchen as much as a cable lift — at Koblenz, or postpone building high-rise office towers and apartments in Cologne just to ensure UN World Heritage status for their Rhine gorge castles or the cathedral at Cologne (e.g., “So an Iran or Syria is to be judge of our heritage?”)?

Then there is Angela Merkel’s proposed shutdown [3] of Germany’s 17 nuclear power plants in the wake of panic about the Fukushima tsunami disaster. Once minor German concerns about geological fault lines and obsolete designs have now snowballed into a hyped-up nuclear terror (e.g., if the Toyota-building Japanese can have a disaster, then even the BMW-building Germans in theory could, too).

But from where comes the replacement electrical power? (The Ruhr today looks like Detroit and Cleveland should have.) There is still plenty of coal, but the green Germans pride themselves on being model globing warming alarmists [4]. The German countryside is dotted with enormous windmills, but they seem to the casual observer to turn slowly, if at all. I have enjoyed about three or four hours of sunshine every other day, so I don’t think solar is going to save Germans from blackouts. In other words, Germans seem again agitated over their dilemma: the greenest of Europeans cannot survive through wind and solar power; their coal is politically incorrect; they have little natural gas; and now nuclear, which used to be a non-carbon, non-heating approved energy, is discredited. What is a good pan-European to do? Perhaps buy nuclear-produced electricity from a cash-hungry France?

Be Careful About What You Wish For

Another grimace comes from mention of their beloved Barack Obama. He too seems lately to be adding to German angst. Make no mistake about it and let me be perfectly clear, Germans, could they vote in the U.S., would reelect Obama by a wide margin. I’ll spare you the reasons (Bush comes up in the conversation, of course). But they are edgy with him nonetheless: Is it really a good time to be drawing down NATO and redeploying Americans to “Asia”? (As in “who will pay for our defense or ensure NATO solidarity as the EU unravels?”)

Resentments, or so Germans fear, are building against Germany and Germans themselves sometimes sound as if they fear their inner demons as much as do the French in the Alsace. Does Obama — “Polish death camps,” [5] Austrian-speaking Austrians [6], Berlin Wall anniversary skipped [7], the old demand for speechifying at the Brandenburg Gate — appreciate the contours of Europe politics and the pretensions of the Atlantic Alliance? Germans assume that we Americans grasp their old postwar two-step that allows them to snicker about Americans (e.g., McDonald’s, Texas, George W. Bush, etc.) publicly and count on us privately. In sum, concerning Obama, there grows a flicker of realization that Germany proverbially should have been careful about what it wished for.

An Edgy Nation

Let me sum up. Germans are, just as the stereotypes go [8], thrifty, solvent, and an industrial people who played by all the postwar rules. To watch the Rhine is a dizzying experience as barges zoom by, as if on a three-lane highway, while rail cars roar in the background and the parallel autobahns are crammed, all beneath the steam stacks of the Ruhr plants. In comparison, California seems like it is in a slumber.

Germans rebuilt their country, renounced war and did not rearm, unified their bifurcated nation at their own cost, subsidized European development, were good EU and UN head nodders, are at the forefront of the green global warming cult, are rejecting nuclear power — and are terrified that they are unfairly not liked. I am not sure whether they are afraid that the world does not appreciate their efforts or that anytime the world does not appreciate German efforts, petulant Germans can become a bit scary [9] to Germans themselves as well as to their neighbors.

I would be very careful to support Germany as much as we can in accordance with U.S. national interests. I would not, like Obama, encourage French-socialist calls for “growth,” which is a euphemism for inflating and stimulating European economies without commensurate structural reform at the expense of Germany.

I would also be careful about downsizing and redirecting NATO at a time when Germany has an anemic military and a growing list of envious if not angry rivals and former friends. I would cut Germany some slack (and I have been guilty in the past in print of not doing this) about its hypocrisies and strained multicultural internationalism, given its own psychological uneasiness about its past proclivities. And finally, at some point, cannot some American flat out state that it was Germany that worked hard, saved, invested, and prospered, and that is to be admired rather than caricatured and condemned? Texas is not responsible for California any more than Germany is responsible for contemporary Greece. An envious Europe seems to look at Germany the way that Obama has trained us to disdain those above the $200,000 in annual income Mason-Dixon line.

Yes, we might prefer to vacation in Florence or Santorini, but only because we are able to — given that there are for a while longer more wealth-producing Germanys in the world than there are wealth-consuming Italys and Greeces.
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Article printed from Works and Days: http://pjmedia.com/victordavishanson

URL to article: http://pjmedia.com/victordavishanson/the-limits-of-german-patience/

URLs in this post:

[1] 70-year-old war guilt: http://cdn.pjmedia.com/eddriscoll/2011/11/02/greece-go-boom-soon/

[2] exasperations.: http://www.freerepublic.com/focus/f-news/1550345/posts

[3] Angela Merkel’s proposed shutdown: http://www.bbc.co.uk/news/world-europe-13592208

[4] model globing warming alarmists: http://cdn.pjmedia.com/eddriscoll/2010/09/26/springtime-for-algore/

[5] “Polish death camps,”: http://cdn.pjmedia.com/eddriscoll/2012/05/29/obamas-polish-death-camp-gaffe/

[6] Austrian-speaking Austrians: http://newsbusters.org/blogs/tom-blumer/2009/04/06/if-obama-believes-austrian-language-so-will-ap

[7] Berlin Wall anniversary skipped: http://www.foxnews.com/politics/2009/11/08/obama-draws-criticism-sitting-berlin-wall-anniversary/

[8] just as the stereotypes go: http://www.nationalreview.com/articles/301356/culture-still-matters-victor-davis-hanson

[9] petulant Germans can become a bit scary: http://www.nationalreview.com/articles/300149/let-sleeping-germans-lie-victor-davis-hanson