Cyprus and the German elections

Here are the most important arguments I made in the Phileleftheros newspaper interview which I gave to Xenia Tourki, translated into English. (I have collected all the empirical data needed to support these arguments, but I will not supply the links here. Should you want to see them, I will happily send them to you, but most of them are already supplied in my previous blogposts):

1) Cyprus was a victim of the pre-election campaign in Germany. Money-laundering and “tax-havens” are always a favourite elections theme of German newspapers, and especially of Der Spiegel, as these topics form an important pillar of SPD’s election program. During the previous elections (2009) it was Switzerland, Malta, and Luxembourg that were in the spotlight. This time it was Cyprus, as it also coincided with the application of Cyprus to the troika, the bail-out mechanism of the Eurozone. Merkel, by being particularly hard on Cyprus, managed to partially “incorporate” SPD’s political campaign against “tax-havens”, thus annulling this topic as an “exclusive characteristic” of the SPD’s political logos. This means that the SPD can no longer accuse Merkel of tolerance towards these tax-havens and play this card against her.

2) In this context, the German media has been very unfair and propagandist against Cyprus. They got the facts wrong and they recreated the idea that in Cyprus there is a lot of Russian black money and money-laundering. Untrue. The situation is similar as in Frankfurt, London, Malta, Luxembourg etc. Yet, the average German newspaper reader was already convinced.

3) I also tried to show to the Cypriot readers that Cyprus and the rest of the Southern Europeans should not take “strictly personally” what is being published against them nowadays in the German press, but contextualize it and filter it properly. Der Spiegel wrote recently that the Southern Europeans are “hiding” their wealth, and that the Germans are poorer than the S. Europeans (as some statistics of the European Central Bank show). It is election period in Germany: the Spiegel wanted to use those statistical findings in order to apply pressure to Merkel concerning the bail-outs of southern countries and the state of internal German wealth, where there is a big disparity in the distribution of wealth. But the Spiegel messed it up and gave a bad interpretation and a very bad front title: “How the Southern Europeans hide their wealth”.

Merkel responded the very next day through the populist newspaper “Bild” [the German equivalent of the English “Sun”] and set things straight, explaining the problems of those statistical findings and basically pointing out that it is the German wealth that is being hidden in that statistic (by not counting properly the social welfare benefits etc). Here there has been a reversal of roles that is extremely telling: normally, it is the Spiegel that is very careful with their analyses and language, and more “objective”, whereas “Bild” is normally the one writing the xenophobic titles and articles. In this case we had a complete reversal of roles and I take this reversal to be indicative of the fact that all current rhetoric in Germany is attached to their elections and is autistically focused for internal consumption.

4) On interpreting the recent election polls: The CDU seems to be going for an easy re-election. But perhaps their current partners, the FDP, may not make it into the Bundestag (the limit is 5%). Also, there is a new party called AFD (Alternative für Deutschland) that was created just a month ago and whose programme is for the dismantling of the Eurozone and which is quickly gaining momentum (already polls show it to get a 5%). So the question posed to me was: can Merkel be stopped? And what if the FDP does not manage to enter the Bundestag? Whom will CDU make an alliance with? My response to this question was: I don’t know if Merkel can be stopped. I think it is still too soon and there is a long way for Merkel to go for re-election because it’s still April and the elections are in September. Between now and then, everything can happen. But, if the FDP does not get into the Bundestag, I can easily imagine Merkel going ahead with an alliance with the SPD, as they have also done in the past. In order for Merkel to lose the elections two things might be able to do it: something that is outside of the control of Germany, i.e. a rapid deterioration of the Eurozone by a country’s exit, or a move from France’s Hollande perhaps (? although this is more wishful thinking), or something strong from Italy and/or Spain. In addition, the SPD must rejuvenate its election rhetoric and programme so as to offer something different from Merkel and effectively manage to criticize her, because up to now they have not managed to do that effectively. For example, they could use the same statistics of the ECB and make a comparison between the mean and the median of the German household wealth and base their campaign around the disparity of distribution of wealth in Germany itself (instead of employing that bad interpretation that the Spiegel did by saying that the average German household is poorer than the average southern European and this means that the S. Europeans are “hiding their wealth”).

5) On the creation of the new party AFD: Why do they want to exit the Eurozone since Germany is clearly profiting out of this situation, and how come they’ve already got 5% of vote (in polls)? My answer: This party is capitalizing on a long frustration of the average German voter. This frustration is caused by many things: a) exiting the Eurozone has always been a taboo, due to Germany’s WWII past and this was psychologically oppressive for some Germans. The new party channels this frustration and allows for voters to visualize it as an alternative; b) Some rhetoric from the Southern Europeans annoys Germans: the parallelism of Merkel with Hitler etc. It makes them want to leave the Eurozone and let each country go back to their own currency; c) The average German household does not experience directly the benefits of the booming German exports and the respective bail-outs of the southern countries. Indeed, some interpretations do suggest that the German median (note: *not the mean*) household wealth is the lowest in Europe. This shows that most German households are not particularly rich, they still pay their huge taxes, and, being misinformed, they feel that their money is used in order to save those lazy/liars southern Europeans. The situation now is a vicious circle of constant bailouts and while Merkel keeps things as they are, by neither moving towards “more Europe” by, e.g., the creation of Eurobonds, in order to resolve these problems between the South and the North of Europe, she kind of sticks to the current status-quo, which is a kind of “limbo”. The other clear option for resolving the vicious circle of constant bail-outs (that is sustained by austerity) is the dismantling of the Eurozone, and this is precisely what this new party is offering. In effect, there are two alternatives to the vicious circle: either “More Europe” or “Less Europe”: this new Party goes for “less Europe”. [And there is another reason that ushers Germany towards a dismantling of the Eurozone, which is very important but I did not mention in the interview –> The current status quo includes systemic dangers for the German banks themselves. For example, the Deutsche Bank has a huge leverage ratio, currently at about 50% more than what the Lehman Brothers had when they collapsed! This means that the German banks themselves can also very easily fall].


About Christos Hadjioannou
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12 Responses to Cyprus and the German elections

  1. Philip Djaferis says:

    First line of para 4 you state: ‘The SPD seems to be going for an easy re-election. ‘ surely you mean CDU…

    Interesting analysis!

  2. Yes! Thanks for spotting the typo. Best, Christos

  3. Dieter says:

    In most countrys, politics and people don´t have the same opinion… german people are wondering often about the politicians

  4. Pingback: Has TROIKA been unfair to Cyprus? | My Banking Blog

  5. Pingback: Links 4/30/13 « naked capitalism

  6. Trisectangle says:

    “Indeed, the German median (note: *not the mean*) household income is the lowest in Europe. ”

    What sets of figures did you get the statistic from that Germany had the lowest median income in the EU? Has it sharply dropped over the last 6 or so years.

  7. Indeed! That is a mistake on my part. I shall amend it right away! Thanks for the feedback!

  8. Pingback: Has TROIKA been unfair to Cyprus? – Issues in Banking and Monetary Policy

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