As time passes, the rifts between the Bundesbank and the ECB grow wider. So do the rifts between what German citizens want and what German chancellor Angela Merkel is willing to do to “save the euro”.

Merkel increasingly (and as expected) does what she needs to do to preserve her legacy, consequences (and Germany) be damned.

Please consider Merkel tries to calm storms over Greece, ECB policy

Angela Merkel tried to calm a growing storm over euro zone crisis strategy on Sunday after the Bundesbank likened ECB bond-buying plans to a dangerous drug and a conservative ally of the German leader said Greece should leave the currency bloc by next year.

The comments, from central bank chief Jens Weidmann and a senior figure in the Bavarian Christian Social Union (CSU), Alexander Dobrindt, point to mounting unease in Germany with the policies being used to combat the three-year old debt crisis.

“We are in a very decisive phase in combating the euro debt crisis,” Merkel told public broadcaster ARD in an interview. “My plea is that everyone weigh their words very carefully.”

Dobrindt, whose party is preparing for a regional election in Bavaria and the federal vote next autumn, told top-selling German daily Bild he expected Greece to leave the euro zone in 2013. His comments drew a swift rebuke from Foreign Minister Guido Westerwelle who said “bullying” of euro members must stop.

But Weidmann, a former economic adviser to Merkel, said in a front-page interview in influential German magazine Der Spiegel that the bond buys could violate rules against the ECB providing outright financing to governments.

“Such a policy is for me close to state financing via the printing press,” Weidmann told Spiegel. “In democracies, it is parliaments and not central banks that should decide on such a comprehensive pooling of risks. We should not underestimate the risk that central bank financing can become addictive like a drug,” Weidmann said.

Dobrindt was more direct, saying Draghi risked passing into the history books as the “currency forger of Europe”.

Merkel’s Disingenuous Pledge of “Help”

I really do not know why Merkel is so revered, although feared I can certainly understand. She is a skilled politician, very adept at saying one thing and doing another, yet not getting challenged on it.

For example, Merkel Vows to Help Greeks Stay in Euro Zone

Read that article (or any other recent article on the subject) and tell me exactly what she is willing to do other than offer moral support. You will not find anything concrete because she is willing to do precisely nothing, right now.

She cannot give Greece more time or money because her coalition is likely to splinter if she does. However, her pledge of “help” will absolve her of blame when Greece does leave.

More importantly, she is willing to let Draghi do most anything because she recognizes that she must, to have a chance at keeping Spain and Italy in the fold.

Decisive Phase

When Merkel says “We are in a very decisive phase in combating the euro debt crisis” she is speaking as much about her own precarious position as the precarious position of the euro.

Merkel Achieves the Impossible Dream (For Now)

  • Merkel got away with promising Greece citizens help while doing nothing
  • Merkel got away with promising German citizens there will be no fiscal union until there is a political one, while simultaneity offering explicit support for the “Currency Forger of Europe”

Merkel is very adept at talking out of both sides of her mouth simultaneously, each saying a different thing, and getting away with it.

Reagan may have been the Teflon president, but Merkel is the Teflon chancellor.

Mike “Mish” Shedlock
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