Thursday, December 13, 2012

Chancellor Merkel plumps for the domino theory over the ballast theory

Merkel and dominoes ...
One of the fascinating things about high level crises like the eurozone one, is the role played by the men and women who have the power or lack the power to influence events.

And the key person in the past five years or so is a woman some nicknamed The Iron Lady – Chancellor Angela Merkel of Germany.

Der Spiegel has a fascinating article describing her practical approach to the eurozine crisis, which includes this:

For months, Merkel wavered over whether or not Greece should remain in the euro zone. As recently as summer, she couldn't decide whether to believe in the domino or the ballast theory, as she called the two alternatives. According to the first theory, a Greek bankruptcy could drag other threatened euro countries into the abyss. Proponents of the second theory, on the other hand, believe that Greece is the ballast that the euro zone has to jettison to recover.

It's difficult to say why Merkel eventually chose the domino theory. Perhaps it was partly the doing of Chinese fund managers who, during her visit to Beijing in the summer, bluntly described to her what they saw as the devastating consequences of ejecting Greece from the euro zone. If that happened, they said, China would no longer have any confidence in the euro and, as a result, would stop buying bonds issued by euro-zone member states.

Perhaps it was also the warnings coming from her counterparts in Europe. The Slovenian prime minister, for instance, told her that a Greek bankruptcy would result in a 5 percent shrinkage of his country's economy. That too made an impression on Merkel.

What don't tend to make an impression on Merkel are the protests against her. She is undoubtedly Europe's most-hated woman at the moment. When she traveled to Athens in October, her motorcade quickly swept through the empty streets of the Greek capital; it felt like the setting for one of those films that depicts a world devoid of human beings.

And it also includes her snorts of laughter about the Greek cancellation of a German-built submarine they had ordered (and could no longer afford):

The crisis has its comical sides, of course. Take, for example, the story with the submarine. Angela Merkel starts to giggle. It was lopsided. Suddenly she snorts with laughter, as tears run down her cheeks. She can't even talk anymore. Lopsided, she says, trying to pull herself together. But she can't. 

The chancellor of the Federal Republic of Germany has succumbed to an uncontrollable fit of laughter.

The story Merkel is having so much trouble relating goes like this: The Greeks ordered a state-of-the-art, class 214 submarine from the Howaldtswerken-Deutsche Werft shipyard in the northern port city of Kiel. But when the vessel was ready, they refused to pay. The Greek military experts who had traveled to Kiel explained that the Papanikolis listed even in slight swells, and they declined to take delivery of the vessel.

The Germans tested, measured and checked the sub, but found nothing amiss. The boat's lopsidedness is apparently something only Greeks, up to their eyeballs in debt, can detect -- an anecdote that still sends the chancellor into fits of laughter years later.

Europe's fate is in good hands with people like Merkel calling the shots.

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