The President's car-salesman abilities might be put to the test in trying to convince the G20 that they have to pump a bunch of stimulus Euros into their economies. Germany's chancellor is saying "nein" to any prospect of government intervention for Europe's largest economy. From CSM:
But Merkel, diplomats say, has combined a profound German instinct against debt – and its accompanying inflation – with a widely held sentiment here that the US and Wall Street are to blame for creating the global crisis. Ahead of German elections in September, the chancellor is also arguing that Europe's social safety net already constitutes enough of a stimulus and a higher percentage of debt than what's been offered by the US and Britain.Seeing how hyperinflation and overspending brought down the Weimar Republic and led to the rise of the Third Reich, which didn't work out so well, the German Chancellor seems knowledgeable of history repeating itself. But CSM notes that the Germans might be trying to sandbag their stimulus in the hopes that other countries do it and they can live off the exports. Since American TARP funds going to AIG payed off billions to German banks, I'd say the Germans have a pretty crafty strategy going.
"We were living beyond our means," Ms. Merkel said at a meeting March 28. "After the Asian crisis and after 9/11, governments encouraged risk taking in order to boost growth. We cannot repeat this mistake."
See what the others have said:
8 comments:
I'm thinking that President Obama should have taken Secretary Geithner with him on this trip...it's going to take more than charm to win these leaders over.
According to the IMF Germany will have spent 3.5 percent of its economic output on its stimulus package by next year: 1.5 percent for this year and 2 percent for 2010.
The Americans will spend 2 percent of their annual economic output on stimulus programs this year, and 1.8 percent next year. That's 0,3% more in two years.
In addition, Germany has an "automatic stabilizer" because of the social welfare state (Health care, unemployment benefits, etc.). Europe also has another demographic character, with less kids and thus a smaller next generation to pay for the acquired debt. The combination of those two differences means also that it takes much longer to pay government debt back so the view on government debt is different.
One of the major causes of the whole credit fiasco was the lack of regulation on banks. So getting better rules is a big priority for Europe, but the US doesn't want it. Why try to fix one of the causes if you can whine about others not helping to bail you out?
Although Obama is trying to get more stimulus abroad he's going to have his hands full.
Germany, France and other euro states are saying their national debts are too high to allow for greater spending right now.
And outside of Europe, only China and Saudi Arabia appear inclined to help the U.S. ratchet up demand.
He'll likely come out of these meetings with vague pledges of cooperation instead of firm stimulus commitments.
Dutch is right on about Europeans wanting more US regulatory overhaul before committing more stimulus. They'll like Obama's plan to oversee nonbank lenders and raise capital standards, but he probably won't be able to offer enough details for them.
One more thing. To put it in perspective the US, France, Germany and Canada all have a debt % of around 60% of their GDP. There's a reason the euro states are lukewarm to the stimulus they don't want more debt that will take forever to pay back.
Gawd, I hate the global economy. Is there anyway to unravel these intanglements we have?
Sorry, stupid question.
The French and Germans may also be seeing something that hasn't been available to them since the early 1900s - a good economy comparable to that of the US.
Through Obama's complete mis-management of the budget and stimulus, French and German economies are (I can't believe I'm writing this) looking to be good places for foreign capital.
Sarkozy and Merkel may reap a huge reward (remember the Celtic Tiger?) by holding the line on taxes and spending.
Obama's overspending will be to the benefit of France and Germany.
It's no surprise that China and Saudi Arabia are probably the only two countries outside of Europe willing to help Obama get demand up. China is a big exporter to the US and well Saudi Arabia benefits when we buy oil.
Compared to Japan, France and Germany look like very strong economies right now. And you're right they are comparable to the US.
Isn't it contradictionary to complain about AIG paying foreigners what they are due *and* about foreing investers looking at other countries to invest in? Most foreign investors want savety, hence their idea that triple A AIG was a good thing - but the current message is that in the States you are lucky if you got what you paid for and that might not happen again in the future.
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