Merkel is continuing advising the aggressive austerity medicine with regards to Spain. Apparently Krugman, Soros and others have all misunderstood the European Union, as their views diverge from Merkel’s. German banks helped fuel the Spanish property boom, and now they will probably end up buying cheap assets at fire sale prices as Spain falls further into the abyss. From Bloomberg.
“It’s partly about still being able to shape our own future,” Merkel said late yesterday at a rally in the city of Muenster in North Rhine-Westphalia. Countries in Europe that have run up debt “are so tightly in the hands of the financial markets that they can’t make independent decisions anymore. We have to watch out that high interest rates on our debt don’t lead to the point where we can’t decide and shape anything anymore” in Germany.
Merkel’s comments underscore a focus on her government’s record of tackling debt and deficits as a core campaign theme as her Christian Democratic Union fights elections in two German states next month. The ballots will offer a snapshot of her crisis handling as the turmoil resurfaces in Spain.
Her message was reinforced by Finance Minister Wolfgang Schaeuble, who said separately that any amount of bailout funds and financial firewalls “won’t solve the problem” without a commitment to reduce debt and raise competitiveness, the root causes of the crisis.
“That’s why the countries with too high debt, Germany included, have to reduce debt,” Schaeuble said in an interview with SWR television in Berlin as Merkel spoke in Muenster. “And the countries with insufficient competitiveness have to become more competitive. Then you need a common finance policy in Europe — that’s the fiscal pact. And if you need anything else, then you build the firewall. If you only build the firewall, you can take 10 trillion and it’s not going to solve the problem.”
Full article here.