Over the past couple of months a certain optimism on the outcome of the Eurozone crisis has taken root. Ever since European Central Bank President Mario Draghi spoke the magical words that he will do everything needed to save the euro. and added “and believe me, it will be enough”, a soothing lull has come over the crisis. Markets seemed to be calmed, or so tired that they did not bother any more, and politicians all claimed credit for this calm without actually doing anything. OK, on the last European summit of the year they made a deal on the first step of a banking union, they agreed to setting up a single supervisory mechanism (SSM) for European banks, be it at the outset only for the big ones; although the outset is somewhere in early 2014, so don’t your breath yet.
There was - and still is - the dissident voice of Bundesbank President Jens Weidmann who says that “the enough” promised by Draghi is “a step too far” for him and other fiscally conservative central bankers. But there is also the potential promise, so think all, that once this nasty mess of the German elections - in September 2013 - is behind us, all will be revealed and all will be possible.
Haircuts for the official creditors of Greece (EU member states, the ECB) will be in the offing and once and for all the decisions will be taken that apparently can not be taken before elections for fear that the electorate might find out. It is sad that the state of our democracy is such in the EU that the electorate is to be feared, and cannot be trusted with the truth. As if an omnipresent Jack Nicholson tells everyone “you can't handle the truth” as he did in the film A Few Good Men. And thus elections are seen as a hindrance for progress in the euro crisis, as referendums are a hindrance for further European integration.
The idea now is, in the expectations of many insiders, that after the elections in Germany there will be a grand coalition, the CDU/CSU forming a coalition with the SPD and/or the Greens. And since these last two parties have made it known that they do favour further steps to alleviate the debt burden for Greece - including haircuts and euro-bonds at some stage - these two things will come within reach after the German elections, so is the reasoning. True, Angela Merkel says she prefers a continuing of the present coalition with the FDP, but the above mentioned insiders see her far more as a pragmatist than someone with actual convictions, so they happily dismiss this preference. Especially since polls put the FDP continuously below the 5% threshold needed to get into the Bundestag.
However, we may be in for a surprise here. First of all, Merkel might actually mean she prefers the smaller more more easily managed FDP over the ambitious SPD of Peer Steinbrück. Certainly her party, the CDU prefers this, and the CSU even more so. Furthermore the SPD and the Greens will have difficulty campaigning against a Chancellor whose euro policy they have supported over the past years. And here lies the chance for the FDP and the CSU. They will campaign on an anti-haircut and anti-solidarity platform (no eurobonds or other mutualisation of debt) and that may bring them surprisingly good results at the expense of partly the CDU but also of the Greens who have gained support in the middle class bourgeoisie. And then it may well be possible that there will be a workable majority for the present coalition. Only this time with a solemn electoral promise to not implicate German taxpayers’ money too much in any euro rescue policy. It might result in a German government hitting the brakes much much harder as it has done in recent times. Perhaps any euro crisis solution may only be possible before the German elections as an above mentioned result may well slam the door shut.
An interesting outlook for 2013. And this then shortly to be followed by the UK exit from the EU all together in 2014 and the disintegration of a few member states with breakaway regions after a series of those dreaded referendums. And this 100 years after the start of the first World War. Let us hope and pray that this time l'histoire ne se repète pas! Perhaps good old Winston Churchill's credo should be dusted off again and re-instated: “Democracy is all right, but why give it to the people?”