The battle of the euro – how much will Germany stomach?

Ever further union

Our European neighbours used to sneer at us Brits for our apparent obsession with World War Two. But the unfolding Eurozone crisis has shown that those same feelings have been always been present in continental Europeans, they just hid them behind a wall of rhetoric about shared futures and broad smiles at places like Maastricht. The question of wealth has shattered the façade.

Back during the wars that it’s now ok to mention again, the Germans used to worry about fighting on two fronts, quite rightly as it turned out. Now the struggle over the future of the euro is also settling down to a war on two fronts: the monetary and the fiscal. At the heart of the struggle is the question of whether, and if so, how German wealth can be transferred to heavily indebted PIIGS.

On the monetary front the Germans are trying to hold the line that the job of the European Central Bank is to fulfil its mandate of price stability.

On the other side of the hill are those – the PIIGS, most eurocrats (though few have the bottle to stick their head over the parapet), the Obama administration, and the British government – who think it should be focusing on employment or GDP growth. To accomplish this they want the ECB to print money which, the Germans believe, would be inflationary and scupper the ECB’s price stability mandate.

This is what lays behind the bond buying plan which the ECB announced recently.

When yields on Spanish or Italian bonds reach a given level the ECB will step in to buy these bonds with newly created euros in an attempt to drive these yields down. Crucially, the programme is, on paper at least, effectively unlimited. Under this programme the ECB can expand the monetary base of the eurozone as much as it likes as long as it is used to buy the sovereign debt of PIIG – something which isn’t in short supply.

The other front, the fiscal front, has also been far from all quiet lately. The German Constitutional Court recently ruledthat the European Stability Mechanism does not violate the country’s constitution. This gave the green light for a program which will see Germany liable to bail out stricken PIIGS directly. The German judges did leave one potential poison pill however; they ruled that any increase in German liabilities beyond €190 billion be subject to a vote in the Bundestag.

Both the ESM and unlimited bond buying represent ways by which German wealth can be moved to PIIGS. The ESM is a frontal assault while Mario Draghi’s bond buying is an oblique approach. Creating money does not create wealth, it only redistributes it. In this case debtors would benefit from having a devalued currency in which to pay back their creditors. In many cases the debtors are PIIGS and the creditors are German. Either way, the result is the same.

Last week the BBC broadcast a show about John Maynard Keynes. The host, Stephanie Flanders, attempted to draw parallels between the reparations imposed by the Allies upon Germany at Versailles at the end of World War One (which Keynes famously opposed) and the demands made by Germany now for fiscal restraint in PIIGS in return for their money.

This is a pretty inexact comparison. The war debts of the Allies were exogenous to the German economy; they were just dumped upon it in 1919. The debts of PIIGS, by contrast, were incurred by them quite consciously. Nothing the Germans did made the Greeks promise to pay pastry chefs and hairdressers to retire at 50 on 95 percent of their final salary.

A more exact comparison, in fact, in comparing the sudden requirement to pay exogenously incurred debt which Germany faced in 1919, is with Germany now. As at Versailles, Germans are being asked to foot the bill for the spending decisions of others.

Given the aggression of Wilhelmine Germany you could even argue that ‘reparations’ are less justified now. Germany’s invasion of Belgium in 1914 might have necessitated Britain’s war expenditures, but what German action could conceivably have necessitated the Irish tripling their welfare budget?

Germans seem to have some inkling of this. The court case against the ESM was brought after a petition was raised with 37,000 signatures. According to a recent poll, 49 percent of Germansnow see the EU as a hindrance.

Keynes wrote of Versailles that “If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp.” This is not to say we are about to see a rerun of 1933 in Germany, but it is worth reflecting how long Germans will continue to abide by the economic and political arrangements of the euro and EU that exist to redistribute its wealth to others.

This article originally appeared at The Commentator

Unhealthy Obesession


Dean Acheson famously said that Britain had “lost an Empire and has not yet found a role”. That was in 1962. In 2009 it seems we Brits have finally found one; looking down our noses at the Americans.

Russell Brand recently took time off from making offensive phone calls to old men to weigh into the debate on US healthcare, proudly announcing at the MTV Video Music Awards (a novel setting for a policy pronouncement) that in the UK , unlike the US , “instead of letting people die in the street we have free healthcare!”

You probably shouldn’t expect someone’s eyesight to be too sharp when they’re peering down their nose from astride their high horse but even so, Brand managed to fit two glaring errors into just 12 words.

First, the National Health Service is not free. Doctors and nurses aren’t volunteers and neither are the 2 administrators for every single bed in the system. The NHS consumes 18% of all government spending. That comes from taxes. Secondly, he is right that people rarely “die in the street”. In the UK you die of poor treatment or hygiene in the hospital.

That’s if you get in. As a centralised, socialised system the NHS is driven not by profit and loss in competition but by a deluge of ever changing targets and directives from central government. One target mandates the maximum amount of time a patient should wait after arriving at the hospital before receiving treatment. But targets invite fiddling and ambulances are kept waiting outside hospitals so as not to start the clock ticking. A letter obtained under the Freedom of Information Act from Chairman of the Ambulance Trust Graham Meldrum reveled 7,600 instances of this in October last year alone.

Once inside the NHS cannot even keep its premises clean. One result is Clostridium difficile, a bacterial infection. In England in 2007 C Diff was mentioned on 5,465 death certificates being listed as the main cause of death on 2,298 of them. By contrast, in the same year, 47 British soldiers died in Iraq . Then there is Methicillin-resistant Staphylococcus aureus, MRSA for short. In 2007 MRSA was mentioned in 1,593 death certificates being given as the cause of death in nearly 500. Again, in 2007, 42 British soldiers died in Afghanistan.

If the unsanitary conditions don’t get you the treatment, or lack of it, might. For example, for all cancers 66.3 % of American men and 63.9 % of women survive more than five years. In Europe just 47.3% of men and 55.8% of women survive that long. Breast cancer mortality is 88% higher and Prostate cancer mortality is 604% higher in the U.K. Neither do these treatments bankrupt poor families. Out-of-pocket expenses by American patients are 12.6% of national health spending, lower than in Germany, Japan, Canada and most of Europe.

These are the facts that get lost in the debate about ‘Obamacare’. The primary aim of ‘reform’ is not to improve the health of the people, though its supporters no doubt believe this would follow, but to introduce ‘equality’. These moral considerations are far less quantifiable.

Earlier this year Conservative MEP Daniel Hannan was interviewed about the NHS on Fox News and called it a “60 year mistake” which he “wouldn’t wish it on anyone”. For this saying this the Health Secretary of the UK government branded Hannan “unpatriotic”. He didn’t say he was wrong, and any attempt to debate the NHS in the UK invites the charge that you want to see poor people die. Its often said that in secular Britain faith in the NHS is the closest thing we have to a religion these days. Indeed, to see the venom directed at Hannan was to see something not a million miles from the denunciations of the medieval church. But blind faith, even in socialism, is no substitute for reason.

The same thing is being tried in the US in the current debate; the smearing of opponents of socialization as uncaring and elitist, or, as Jimmy Carter tried to put it recently, racist. That is why it is so vital to look at the statistics behind the socialists empty rhetoric.

Florida Congressman Alan Grayson said 44,000 Americans (out of a population of 300 million) die each year as a result of not having health insurance. But no system will be perfect. Leading oncologist Karol Sikora estimated 10,000 cancer deaths (out of a population of 60 million) in the UK every year because we have the NHS as opposed to another, more efficient system.

One of the most honest and insightful commentators on socialized medicine in the UK, James Batholomew put it this way; “I certainly do not hold up the USA as a model healthcare system. It is deeply flawed. But it is still much better at saving the lives of the greatest possible number than our, far more deeply flawed system. It depends what you want: a flawed system that saves more lives or a disastrous system that people feel is virtuous. This is a secular version of creationism. Many people in Britain love the NHS. They don’t care about evidence. They don’t care how many die. Believing in the NHS makes them feel good about themselves. I find it appalling that people are so self-indulgent and so uncaring about the reality.”

For more information on James Batholomew and his thoughts please refer to his book “The Welfare State We’re In” at http://www.amazon.co.uk/Welfare-State-Were-James-Bartholomew/dp/1842750631