New German Gov't Threatened By Int'l Bankers on Austerity Program
by L. Wolfe
Nov. 25 (EIRNS)The Bundestagthe German Parliamenton Nov. 22 voted to confirm Christian Democrat Angela Merkel as Chancellor of the new "Grand Coalition" government. Merkel received the votes of 397 members of the three coalition partiesher own Christian Democrats (CDU), the Social Democrats (SPD) of outgoing Chancellor Gerhard Schroeder, and the Bavaria-based conservatives of the Christian Socialist Union (CSU); the number was 89 votes above a simple majority of 308.
Later that afternoon, the new Grand Coalition cabinet was sworn in and held its first meeting.
More than 51 members of the three coalition parties refused to vote for the Merkel Chancellorship, not a good omen for the Coalition's stability.
However, even before the Coalition formally took office, the international banking community had already delivered a stern warning that its compromise social and economic policy program, adopted two weeks ago after months of discussion, did not go far enough in imposing austerity on a population that is already suffering unemployment worse than at any time since the 1930s, in the period right before Hitler took power.
The Bankers Attack
On Nov. 18, Bundesbank Governor Axel Weber criticized the new government's emphasis on growth and job creation, saying it was sending out the "wrong signals to the markets." Later, in its monthly report, the Bundesbank virtually demanded that the European Union seek sancions and fines against Germany for the apparent failure of the government's program to reduce social spending to conform to the dictates of the EU's Maastricht austerity treaty, which imposes targets for spending on European Union member governments. The sanctions (whose imposition could lead to fines of up to 10 billion euros) are urgent, said the Bundesbank, if the government follows the course implied by its announced program, since that program would further erode support for Maastricht.
The Bundesbank statements followed a direct attack Nov. 17 on the new government by Standard & Poor's bond rating agency, which slammed the proposed economic program and its austerity targets as "insufficient." Implied in such statements was that Germany's "AAA" (highest) credit rating could be downgraded, increasing the country's borrowing costs.
Need a Real Recovery Program
The fact is that the object of these attacks, the social and economic program, is already heavily compromised in favor of Maastricht and the banks; and is therefore grossly inadequate to meet the needs of an economy in the throes of its worst economic problems since the Great Depression. It would appear that the mere indication that some of the coalition partners cannot swallow a faster-paced assault on social programsalready slashed under the SPD government's "Hartz IV" reformswas enough to send the international financial community into paroxysms.
Helga Zepp LaRouche, chairman of the BueSo Party, has called the programs inadequate, while recognizing that some positive steps were taken in rejecting the worse austerity of the Maastricht targets, and in proposing new infrastruction/jobs-creation programs. Zepp LaRouche said in a recent policy statement that Germany must assert its sovereignty over its own economic affairs, and repeated her call for the country to pull out of the euro-bloc and readopt the deutschemark as its national currency.
The BueSo chairwoman established the benchmark for a real recovery program as spending the equivalent of more than 100 billion euros on infrastructure building, including high-speed rail transportation, such as maglev, while joining with a hoped-for U.S.-led effort, under the leadership of her husband, Lyndon LaRouche, to create a fixed-exchange-rate-based New Bretton Woods monetary system.
Germany's new coalition government is clearly not willing to go this far. However, the commitment of some of its members to "growth," and at the same time "acceptable" levels of austrity, creates a paradox. That was shown in EIR magazine's exclusive interview with the new Minister for Agriculture, the CSU's Horst Seehofer. He said that while the level of investment spending in the proposed budget is not enough, and that some cuts in other spending will have to be made, the coalition talks had developed a clear consensus that the "ruling economic theory, that you have to make cuts in social security, in order to get economic growth, is finally finished. Instead, we say: 'We need to make reforms [cuts] in certain areas, but this has to be flanked by strong innovative and dynamic economic measures.' "
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