Opinion

The Great Debate

from Ian Bremmer:

World Cup chants reveal true state of U.S.-German relations

 Germany's national soccer players acknowledge their fans after their win over the U.S. at the end of their 2014 World Cup Group G soccer match at the Pernambuco arena in Recife

As Germany basks in its World Cup victory, it’s easy to forget that one of the most telling geopolitical moments of the tournament came during the Germany-U.S. game. As American fans chanted “U-S-A! U-S-A! U-S-A!” the Germans countered with, “N-S-A! N-S-A! N-S-A!”

In the weeks since, relations have crumbled. After it learned that a German intelligence officer allegedly spied for the United States, Germany expelled the CIA station chief in Berlin -- a rare move by a close American ally.

This isn’t a sudden reversal in relations. The fallout from surveillance scandals has been sharp and steady over the past year. In 2013, Germans grew wary about the extent of U.S. espionage after Edward Snowden leaked documents showing that the United States had been monitoring German Chancellor Angela Merkel’s cell phone since 2002. A German parliamentary committee asked Snowden to provide testimony for an inquiry on foreign intelligence activities. The request, which Snowden rejected, was sure to rankle the United States, but Germany pushed forward anyway: One country’s traitor was another’s key witness.

It’s no surprise that of all foreign countries, President Barack Obama’s approval rating has fallen the most in Brazil and Germany, two countries with leaders monitored by the National Security Agency.

But all the “friendly spying” scandals are just one piece of the puzzle. There are even deeper fissures causing a lot of the bad blood -- and suggesting more of it to come.

from Breakingviews:

German soccer glory was predictable – with luck

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Brazil’s World Cup was first-rate entertainment thanks to its many surprising results. For its part Breakingviews, also somewhat surprisingly, predicted that Germany would win the competition as long ago as last Christmas.

Many media pundits, and some respected financial institutions such as investment bank Goldman Sachs or global accountant PricewaterhouseCoopers, also braved the World Cup prediction challenge. They deployed a dizzying variety of sporting and non-sporting criteria. The consensus was that Brazil, the host nation, would triumph.

U.S. spying on Germany: Making enemies out of allies, and for what?

German Chancellor Merkel attends a session of Bundestag in Berlin

What were they thinking?

In the wake of last fall’s revelation that the National Security Agency had wiretapped German Chancellor Angela Merkel’s cell phone, the report of U.S. intelligence’s involvement in two other likely cases of spying on Germany is mind-boggling.

Now the story has taken a dramatic new turn, with Germany expelling the CIA chief of station in Berlin — an almost unprecedented step by an ally. This unusual action reflects how seriously the Merkel government takes these spying allegations.

What could the CIA hope to gain by infiltrating the BND, the German Federal Intelligence Service, knowing there was a chance that the operation might be exposed? What was worth this risk?

No drama in Obama’s Ukraine policy

Many are asking: How can we stop Russian President Vladimir Putin from moving into Ukraine and seizing a large chunk of its territory in the east? The actions of forces that resemble the Russian special operations troops who created the conditions for annexation of Crimea suggest that other parts of Ukraine may also be in the Russian strongman’s sights.

The fact is, however, we cannot stop Putin. Or, to be more precise, we should not try to stop him physically. Doing so would require military threats or troop deployments to Ukraine. The stakes do not warrant such a step. It is not worth risking World War Three over this.

Ukraine is not a member of the North Atlantic Treaty Organization. It does not have a formal security treaty with the United States, and its strategic importance is not great enough to warrant such escalation. Though we can feel for Ukrainians — and reject what Putin is doing — this is a classic case of where the old axiom “We can’t be the world’s policeman” does apply.

from Nicholas Wapshott:

No, austerity did not work

There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.

Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.

Take Spain, which has just emerged from two years of recession by posting a third quarter growth rate of 0.1 percent. Technically the Spanish slump is over. But a glance at their job figures shows the country has a long way to go before it can genuinely say it has escaped the diminishing effects of austerity -- in the form of tight fiscal policies, public spending cuts and labor and entitlement reforms -- imposed indirectly by Germany through the European Union.

Will a minimum wage destroy German jobs?

Germany has once again become the world’s favorite whipping boy, roundly criticized over the past few days by the U.S. Treasury, a top International Monetary Fund official and the European Commission president, among others, for running record trade and current account surpluses that are supposedly detrimental to the European and global economy.

The arguments continue, with the Germans themselves saying that the surpluses are simply the happy result of the nation’s industrial competitiveness and don’t hurt anyone else. Lost in the debate, however, is what’s happening in Berlin right now. As Chancellor Angela Merkel seeks to form a new coalition government, she appears to be on the verge of throwing out some of the very policies that underpin the export boom of the past decade.

Most controversially, the new government to be formed is likely to introduce a minimum wage, a novelty for Germany, and a move that both symbolically and in reality would herald the end of the tough wage restraint that has characterized the past decade. A range of social policy changes, including a possible reduction in the retirement age, are also being discussed, as is higher government spending.

What Hollande can learn from Queen of Hearts

French President Francois Hollande’s predicament is, oddly enough, akin to one Alice faced in Lewis Carroll’s 19th century classic.

A year after taking power, Hollande is buffeted by the lowest popularity of any modern Gallic leader, a record number of jobless, a recession and shriveled business investment – while still needing to cut his budget deficit to hit European targets.

The protagonist of Alice in Wonderland, meanwhile, confused by her strange encounters down a rabbit hole, meets the Queen of Hearts, who tells her: “My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere, you must run twice as fast as that.”

from Nicholas Wapshott:

Austerity is a moral issue

Security worker opens the door of a government job center as people wait to enter in Marbella, Spain, December 2, 2011. REUTERS/Jon Nazca

In the nearly five years since the worst financial crash since the Great Depression, the remedy for the world’s economic doldrums has swung from full-on Keynesianism to unforgiving austerity and back.

The initial Keynesian response halted the collapse in economic activity. But it was soon met by borrowers’ remorse in the shape of paying down debt and raising taxes without delay. In the last year, full-throttle austerity has fallen out of favor with those charged with monitoring the world economy.

The dark flip side of European technocracy

How many countries will Germany need to bail out before it has erased the guilt of the Holocaust? That is the provocative question posed by Thilo Sarrazin, a publicity-hungry maverick whose 2010 book attacking immigration shattered Germany’s political consensus and sold more than 1 million copies. Last week he returned to the scene of the crime with a new book called Why Europe Doesn’t Need the Euro. In a much-quoted passage, he says supporters of eurobonds are driven “by that very German reflex according to which atonement for the holocaust and the world wars will never be complete until we have delivered our entire public interest, and even our money, into European hands.” This title has raced to the top of best-seller lists and sent jittery markets into panic. Sarrazin is a narcissist who is more interested in self-promotion than serious analysis. But his views on Europe – as well as the political class’s reaction to them – tell us a lot about how the euro’s political travails have come about, as well as how they are likely to unfold.

An opinion poll last week provides just the latest proof that Sarrazin has his finger on the national pulse: Over half of Germans think their country has suffered by joining the euro, while 79 percent reject eurobonds as a solution to the crisis. Sarrazin – a former regional politician and Bundesbank governor who was stripped of his official positions because of his views on immigration – is not a man to do things by halves. His book breaks not one but two German taboos by linking Holocaust guilt with questions about the sustainability of the euro. (It is designed to be a refutation of Angela Merkel’s argument that the breakup of the euro would lead to the breakup of the EU.) But although – or rather because – Sarrazin is so good at mirroring public opinion, the German political establishment is falling over itself to bury his arguments: Peer Steinbrueck, the former finance minister (and possible candidate for chancellor), described it as “bullshit”; while the current finance minister, Wolfgang Schaueble, described it as “appalling nonsense.”

The antics of Thilo Sarrazin are a product of the constrained, elitist nature of German politics where – after the experience of National Socialism – many topics are declared outside the realm of political competition. As a result, all mainstream parties are in favor of Europe, the euro and the Atlantic alliance, and against war, inflation and nationalism. The result is a restricted political sphere where politicians have often been able to act against public opinion without fear of challenge – including the decision to replace the über-popular Deutschmark with the strikingly unpopular euro. But those who dare cross the threshold of political correctness – as Sarrazin has repeatedly done – tap into a vast reservoir of pent-up popular frustration. And because the establishment cartel turns them into outcasts rather than arguing with their views, this reservoir continues to grow.

from Summit Notebook:

Does Germany need Europe?

Jim O'Neill, the new Goldman Sachs Asset Management chairman who is famous for coining the term BRICs for the world's new emerging economic giants, reckons he knows why Germany might not be rushing to bail out all the euro zone debt that is under pressure. Europe is not as important to Berlin as it was.

Speaking at the Reuters 2011 Investment Outlook Summit being held in London and New York, O'Neill pointed out that in the not very distant future Germany will have more trade with China than it does with France.

"It's a different global environment. That's why maybe Germany (ties)  itself to a rules-based game with the rest of Europe because economically it doesn't mean so much to them now. What goes on in China is more important than what goes on in France and that's puts a different economic (spin) on the situation for the Germans."

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