Western European News Digest
Standard & Poor's Demands Austerity for Germany
According to the Sept. 21 edition of the Financial Times, the rating agency Standard & Poor's put out a statement on Sept. 20, saying that Germany's political crisis threatens to put its credit rating at risk. It stated, "To secure Germany's creditworthiness, any new government needs to quickly address the most pressing stabilization and reform needs faced by the federal republic." S&P in particular urged fiscal reform and changes to the welfare system, in essence, the austerity program of the Merkel-led Christian Democrats. It warned that Germany's public debt would reach 67.6% of gross domestic product this year, the highest level among triple-A rated governments.
Campaign Against Schroeder Is Getting Dirtier
With the CDU Chancellor candidate Angela Merkel's own options narrowing, with the possibility she would not even be part of a Grand Coalition, a massive media campaign to neutralize Gerhard Schroeder has begun. His claim to remain as Chancellor, is a burden for a future Grand Coalition, it is "not compatible with democracy," the propagandists claim.
In particular, the front-page lead in the Frankfurter Allgemeine daily Sept. 23, likened Schroeder to Putin, speaking of the "Putinization" of Schroeder. And Germany's mass-circulation populist daily Bildzeitung had a front-page story, depicting Schroeder as dressed in a Roman toga, with the banner headline: "Gerhard Julius Caesar."
Apart from the fact that this kind of propaganda implies there is a Brutus somewhere in the SPD that would help to oust Schroeder, the propaganda drive is, naturally, covering up the fact that Merkel's days may be numbered, and that there are plenty of Brutuses in her own CDU just waiting for the chance to get rid of her.
Italy Feels the Effects of the German Vote
The first effects of the German vote against Angela Merkel and her radically monetarist neo-con program are clearly visible in the Italian political situation. The crisis already in progressa consequence of the collapse-dynamic of the euro systemhas taken an unexpected turn, with the resignation of Finance Minister Domenico Siniscalco Sept. 21, and his replacement by Former Economics and Finance Minister Giulio Tremonti, who is thus making a spectacular comeback one year after he was forced to leave.
Siniscalco explained his resignation as motivated by the opposition to his budget-balancing program from within the government. Siniscalco is a pro-Maastricht technocrat and his resignation is the logical consequence of the fact that the Italian government has decided to blatantly ignore the Maastricht deficit constraint of 3% in the next months, leading to the general elections in spring 2006. The Italians have learned the German lesson: To push for Thatcherite policies in an election year means political suicide. This means that the Maastricht-euro system will further implode. The comeback of Tremonti, a well known "eurosceptic" and a supporter of "Colbertist," and even trade-protectionist measures, underscores that.
The other factor playing a role in the crisis is the scandal around the Bank of Italy: The central bank has in the past jealously defended the privileges of Italian private banks, which are also shareholders in the Banca d'Italia. For instance, in the case of major consumer frauds such as the Parmalat or Argentinian bond issues, central bank chief Antonio Fazio has prevented any reform which would reduce such privileges. At the same time, he has successfully prevented the system from being "colonized" by foreign banks.
However, another faction in the Italian system, which is in favor of radical globalization, has allied with foreign banks for a takeover of the Italian system. As the effort to takeover Antonveneta, a regional bank, through the Dutch conglomerate ABN-Amro, was defeated by Fazio, Fazio's adversaries decided to destroy him with irregular-warfare weapons, i.e., a judicial investigation. Independent from the judicial aspects of the question, the scandal around Fazio has forced the issue of the extra-constitutionality of the Bank of Italy, whose governor can neither be appointed nor fired by government or Parliament. So far, the government was split on the issue of a reform.
Siniscalco's resignation and Tremonti's comeback mean that Fazio's enemies have been defeated, but Fazio's allies have not won either. It was Tremonti, in fact, who pushed for a reform of the Bank of Italy in 2004, in the aftermath of the Parmalat scandal. Expect more turbulence and non-linear developments in the next months.