Hopes for a successful European Union summit this weekend in Brussels faded today. Germany’s Chancellor Angela Merkel cancelled a planned speech tomorrow in which she was expected to outline for the German parliament solid proposals to ease the EU sovereign debt crisis.
Apparently, the Germans and their French counterparts are still deeply divided over how to expand the EU bailout fund, the European Financial Stability Facility, or EFSF. The issues over the EFSF are complex, but according to a German official close to Merkel it gets down to this when it comes to bailing out Greece and other heavily indebted EU nations: “The French want more money from Germany than we are prepared to shoulder.”
Chancellor Merkel is in a tough position. She publicly and without reservation has said she supports both efforts to save Greece and the preservation of the single currency Eurozone. But back home, her citizenry disagrees; 80 percent of Germans polled oppose aid to Greece. Only 17 percent say they “trust the Euro.”
Today we spoke to economic consultant – and the man behind the blog The Street Light – Kash Mansori. He says Germans don’t seem to understand that it’s in their own self interest to save Greece because of the potential for contagion: if Greece is not rescued further because of Germany’s unwillingness to cough up the money, then investors and the like will assume that Germany will not save Portugal, Ireland or – even more importantly – Spain and Italy. This could lead to default on their debts.
Because so much of this sovereign debt is owed to Europe’s banks, national defaults would threaten the continental bank system with collapse. And that would take down Germany along with everyone else.
But Mansori sympathizes with the German public, just as he sympathizes with the American public’s anger over this country’s bank-bailout three years ago. He says that banks are at once absolutely crucial to the economy and the source of all our economic problems. So when they get in trouble, the banks have to be saved. Nobody likes it; the benefits are difficult to perceive. That’s what Germans are faced with; the same anger and frustration that Americans felt after it’s multi-billion dollar bailout program, TARP.
But Mansori also says that Germans seem to believe several myths about the Greeks that don’t hold up to the data. The German media has fed the public on a diet of stories about Greece’s “laziness.” The idea is that this whole problem is the fault of the Greeks and their refusal to work hard or pay taxes. But Mansori points out that Germans work on average 1,400 hours a year where Greeks work 2,000 hours a year, which doesn’t fit the stereotype.
Mansori says that these baseless cultural biases have to be taken into account when it comes to European integration for the simple reason that people believe them. And he says it’s an example of how Europe culturally was more divided than had been advertised when the Eurozone was created. He says when the Eurozone was humming along enjoying good economic times, these cultural differences weren’t an issue. But in a Eurozone threatened by a financial crisis, the biases and stereotypes that come with finger-pointing start to be a problem.
Still when it comes to understanding Germany’s position toward bailing out Greece, it may be helpful to ask yourself, how did you feel when the U.S. government bailed out American banks to the tune of $700 billion ?
Also on the show today, Fortune magazine released its annual 40 under 40 list of “the hottest young stars in business across the globe.” Unfortunately, only six of them are women, and the top 19 are male, making us question whether the glass ceiling in corporate America has really shattered. The fact that women are so underrepresented in Fortune‘s hot business stars list has weakened the Marketplace Daily Pulse today.
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