Merkel’s Short-Lived Victory

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ON Thursday, the German Parliament (Bundestag) voted by 523 to 85 to increase the funds available to the European Financial Stability Facility (EFSF) from 250 billion euros to 440 billion (£382 billion).

This vote also pushed up the amount guaranteed by Germany from 123 to 211 billion euros.

The EFSF is the fund that is dedicated to bailing out the collapsing economies of Europe, most immediately the bankrupt Greek economy.

In the run-up to this vote it was widely predicted that the German chancellor, Angela Merkel, faced the very real possibility of defeat as members of her own party, the CDU, and those of her coalition partners, FDP, were threatening to vote against any increase.

What drove them to opposition was the huge groundswell of opposition amongst the German working class to the proposal that their money would be used to bail out not Greece but the entire European banking system, which faces the imminent threat of collapse in the event of a Greek default.

Polls showed that 80% of German workers opposed the agreement which they see as ushering in another ‘Weimar’, the time when the German currency collapsed and was used to paper walls in the late 1920’s, preparing the way for the rise of Hitler.

It was only the realisation that a vote against would bring down Merkel – and unleash the popular hostility to rescuing the banks at the expense of the people, creating a revolutionary situation in Germany – that secured the agreement for the coalition government, to try and put a lid on the erupting crisis.

This will be, however, a very short-lived victory.

Almost immediately, officials from the European Union and the EU Bank started demanding even more money be poured into the bottomless pit of the bail-out fund for the European banks.

What is giving the EU Central Bank nightmares is the fact that the vote in the Bundestag decisively rejected any further increase to the amount of euros Germany would guarantee to the EFSF, meaning that the issue will have to be returned to again and again.

While the EFSF may just get away with avoiding an immediate default by Greece, putting it off for a week or two at most, there is no way that it can bail out the larger economies of Italy and Spain.

This means that the EU Central Bank will be called upon to step in and rescue the banks from collapse again and again.

How much would be required to perform the feat of rescuing Italy and Spain has not been even guessed at,  but it is certainly a figure that would be in many trillions of euros rather than billions.

The banks are also having nightmares at the suggestion being floated by Eurozone governments that the losses they incur as their contribution to the bail-out should be nearer 50% rather than the 21% they reluctantly agreed to recently.

Meanwhile, to inflame the crisis even further, it is now becoming obvious to everyone that the French economy – second only to the German in Europe – is teetering on the brink of collapse, with the largest banks having suffered a mighty 50% fall in share prices in the past three months: a direct result of their exposure to the Greek sovereign debt crisis.

The German banks are in exactly the same position, with the German economy (once the ‘powerhouse of Europe’), with its reliance on manufacturing exports, achieving a virtual zero rate of growth this year as the foreign markets collapse under the weight of debt.

With unemployment rising and wages for over two million German workers being less than the legal minimum wage in the UK, the powerful German working class is becoming increasingly hostile to Merkel and her plans to thrust the debt burden  of Europe upon their shoulders.

What in truth is emerging, behind the facade of the grand plans of the capitalists to bail out the bankrupt bankers, is the German revolution, a mighty explosion of working class anger that will seal the fate of capitalism.