Europe is haunted by austerity. Public sectors across the European Union (EU) have been cut back and working class gains from the post-war period seriously undermined. In this article, I will assess the causes of the crisis, its implications for workers and discuss the politics of labour in response to the Eurozone crisis.
The underlying dynamics of the Eurozone crisis
Current problems go right back to the global financial crisis starting in 2007 with the run on the Northern Rock bank in the United Kingdom (UK) and reaching a first high point with the bankruptcy of Lehman Brothers in 2008. Two major consequences of the crisis can be identified. First, states indebted themselves significantly as a result of bailing out failing banks and propping up the financial system. Second, against the background of high levels of uncertainty financial markets froze. Banks and financial institutions ceased lending to each other as well as industrial companies. Countries too found it increasingly difficult to re-finance their national debts. The Eurozone crisis, also known as the sovereign debt crisis, commenced.
Nevertheless, this analysis only scratches the surface of the causes of the crisis. The fundamental dynamics underlying the crisis have to be related to the uneven nature of the European political economy. On the one hand, Germany has experienced an export boom in recent years, with almost 60 per cent of its exports going to other European countries (Trading Economics, 10 May 2013). Germany’s trade surplus is even more heavily focused on Europe. 60 per cent are with other Euro countries and about 85 per cent are with all EU members together (de Nardis, 2 December 2010). However, such a growth strategy cannot be adopted by everybody. Some countries also have to absorb these exports, and this is what many of the peripheral countries which are now in trouble, such as Greece, Portugal, Spain and Ireland, have done. They, in turn, cannot compete in the free trade Internal Market of the EU due to lower productivity rates. Germany’s export boom has resulted in super profits, which then require new opportunities for profitable investment. State bonds of peripheral countries as well as construction markets in Ireland and Spain seemed to provide safe investment opportunities. In turn, these investments led to yet more exports from Germany to these countries and yet further super profits in search of investment opportunities.
Who is being rescued?
It is often argued in the media that citizens of richer countries would now have to pay for citizens of indebted countries. Cultural arguments of apparently ‘lazy Greek’ workers as the cause of the crisis are put forward. Nevertheless, this is clearly not the case. Greek workers are amongst those who work the longest hours in Europe (BBC, 26 February 2012). In any case, it is not the Greek, Portuguese, Irish or Cypriot citizens and their health and education systems, which are being rescued. It is banks, who organised the lending of super profits to peripheral countries, which are exposed to private and national debt in these countries. For example, German and French banks are heavily exposed to Greek debt, British banks to Irish debt (The Guardian, 17 June 2011).
What is the purpose of the bailout programmes?
Is the purpose of the bailout programmes to ensure the maintenance of essential public services in Europe’s periphery? Clearly not. On the contrary, the Troika consisting of the European Commission, European Central Bank and the International Monetary Fund (IMF) demands cuts in public finances precisely for services such as education and health care. Is the purpose to assist peripheral countries in re-gaining competitiveness? Again, this too is clearly not the objective. The bailout programmes do not include any industrial policy projects.
The true nature of the bailout programmes is visible in their conditionality, making support dependent on austerity policies including: (1) cuts in funding of essential public services; (2) cuts in public sector employment; (3) push towards privatisation of state assets; and (4) undermining of industrial relations and trade union rights through enforced cuts in minimum wages and a further liberalisation of labour markets. Hence, the real purpose of the bailout programmes is to restructure political economies and to open up the public sector as new investment opportunities for private finance. The balance of power is shifted further from labour to capital in this process. Employers, ultimately, use the crisis in order to strengthen their position vis-à-vis workers, facilitating exploitation.
Are German workers the winners due to the export boom?
In contrast to general assumptions, German workers have not benefitted from the current situation. German productivity increases have, to a significant extent, resulted from drastic downward pressure on wages and working related conditions.
“Germany has been unrelenting in squeezing its own workers throughout this period. During the last two decades, the most powerful economy of the eurozone has produced the lowest increases in nominal labour costs, while its workers have systematically lost share of output. EMU has been an ordeal for German workers” (Lapavitsas et al, 2012: 4).
The Agenda 2010 and here especially the so-called Hartz IV reform, implemented in the early 2000s, constitutes the largest cut in, and restructuring of, the German welfare system since the end of World War II. In other words, Germany was more successful than other Eurozone countries in cutting back labour costs. “The euro is a ‘beggar-thy-neighbour’ policy for Germany, on condition that it beggars its own workers first” (Lapavitsas et al, 2012: 30).
Hence, while the mainstream media regularly portray the crisis as a conflict between Germany and peripheral countries, the real conflict here is between capital and labour. And this conflict is taking place across the EU as the economic crisis is used across Europe to justify cuts. In the UK, although not in the position of countries such as Greece, Portugal or Ireland, people too are faced with constant further cuts and restructuring including privatisations in the health and education sectors as well as attacks on employment rights. In short, across the EU, employers abuse the crisis to cut back workers’ post-war gains. The crisis provides capital with the rationale to justify cuts, they would otherwise be unable to implement.
What possibilities for labour to resist restructuring?
Considering that austerity is a European-wide phenomenon, pushed by Brussels but equally individual national governments, it will remain important that trade unions combine resistance to neo-liberal restructuring at the European level with resistance at the national level. To declare solidarity with Greek workers is a good initiative by German and British unions, for example. Nevertheless, the more concrete support is resisting restructuring at home. Any defeat of austerity in one of the EU member states will assist similar struggles elsewhere.
When thinking about alternative responses to the crisis, short-term measures can be distinguished from medium- and long-term measures. Immediately, it will be important that German trade unions push for higher salary increases at home so that the German domestic market absorbs more goods, which are currently being exported. Along similar lines is the proposal by the Confederation of German Trade Unions (DGB) for an economic stimulus, investment and development programme for Europe. This new Marshall plan is designed as an investment and development programme over a 10-year period and consists of a mix of institutional measures, direct public sector investment, investment grants for companies and incentives for consumer spending (DGB 2013). Neo-Keynesian measures of this type will ease the immediate pressure on European economies. However, they will not question the power structures, underlying the European political economy.
A victorious outcome in the struggle against austerity ultimately depends on a change in the balance of power in society. The establishment of welfare states and fairer societies were based on the capacity of labour to balance the class power of capital (Wahl 2011). Overcoming austerity will, therefore, require a strengthening of labour vis-à-vis capital. As Lapavitsas notes, “a radical left strategy should offer a resolution of the crisis that alters the balance of social forces in favour of labour and pushes Europe in a socialist direction” (Lapavitsas 2011: 294). Hence, in the medium-term, it will be essential to intervene more directly in the financial sector. As part of bailouts, many private banks have been nationalised, as for example the Royal Bank of Scotland in the UK. However, they have been allowed to continue operating as if they were private banks. Little state direction has been imposed. It will be important to move beyond nationalisation towards the socialisation of banks to ensure that banks actually operate according to the needs of society. Such a step would contribute directly to changing the balance of power in society in favour of labour.
In the long run, however, even the change in power balance between capital and labour will not be enough. Capitalist exploitation is rooted in the way the social relations of production are set up around wage labour and the private ownership of the means of production. Exploitation, therefore, can only be overcome if the manner in which production is organised is being changed itself.
 This article was first published in Norwegian on radikalportal.no
 European Monetary Union
The NSA spying scandal shows that America’s pursuit of terrorists has turned into a mania. Spying on citizens is as monstrous and unlawful as Guantanamo Bay and drone warfare. The German government‘s response has been woefully weak.
America is sick. September 11 left it wounded and unsettled — that’s been obvious for nearly 12 years — but we are only now finding out just how grave the illness really is. The actions of the NSA exposed more than just the telephone conversations and digital lives of many millions of people. The global spying scandal shows that the US has become manic, that it is behaving pathologically, invasively. Its actions are entirely out of proportion to the danger.
Since 2005, an average of 23 Americans per year have been killed through terrorism, mostly outside of the US. “More Americans die of falling televisions and other appliances than from terrorism,” writes Nicholas Kristof in the New York Times, and “15 times as many die by falling off ladders.” The US has spent $8 trillion on the military and homeland security since 2001.
America has other threats. The true short-term danger is homegrown: More than 30,000 Americans are killed by firearms every year. An American child is 13 times more likely to be shot than a child in another industrialized country. When it comes to combating the problem, President Barack Obama and Congress are doing very little — or, to be fair, nothing at all. They talk about it every now and then, after every killing spree. The gun lobby, incurably ill, counters that the weapons are necessary for self-defense.
And when it comes to real long-term dangers, such as climate change, America, its prime perpetrator, does nothing — or, to be fair, too little too late.
As Monstrous as Guantanamo
Eleven and a half years later, Guantanamo Bay detention camp is still up and running.
All of this is not to say that terrorism doesn’t exist: 9/11 happened, and al Qaida is real. But spying on citizens and embassies, on businesses and allies, violates international law. It is as monstrous and as unlawful as Guantanamo Bay, where for 11 and a half years, men have been detained and force-fed, often without evidence against them, many of whom are still there to this day. It is as unlawful as the drones that are killing people, launched with a mere signature from Obama.
There has been virtually no political discussion about all of this. Attacks have been prevented through the spying program — Obama says it, German Chancellor Angela Merkel says it, and we have to believe them. Voters and citizens are akin to children, whose parents — the government — know what is best for them. But does the free America that should be defended even still exist, or has it abolished itself through its own defense?
An American government that gives its blessing to a program like Prism respects nothing and no one. It acts out its omnipotence, considers itself above international law — certainly on its own territory and even on foreign ground. The fact that it’s Obama behaving in such a way is bleak. If this were happening during the administration of George W. Bush, we could at least think, “It’s just Bush. He’s predictable. There is a better America.” Now we know: There is only one America. Did Obama, the Harvard Law student, even believe what he was saying in his speeches about the return of civil liberties? Can someone be so cynical that they promise to heal the world, then act in such a way all the while giving the xenophobic explanation that only foreigners would be monitored? Martin Luther King and Nelson Mandela are Obama’s role models. What would they say?
The Stasi Comparison Stands
The German government has shown devastating weakness. Merkel should say, “You are manic, and what you are doing is sick.” That’s what friends do. Instead she weighs every word to avoid annoying the Americans. She said that a comparison between the NSA and the Stasi is inappropriate, but she’s wrong. A comparison doesn’t require that two things be identical. The Stasi destroyed families, the NSA probably not. But the use of technology, the careful nurturing of the image of the enemy, the obsessive collection of data, the belief of being on the right side, the good side: Is there really no resemblance?
Angela Merkel promised to defend the German people from harm. To have your phone wiretapped and accept the fact that every one of your emails could be monitored — the violation of the private sphere — that qualifies as harm.
Every voter knows that realpolitik can be ugly, because politics require the balancing of many considerations. The decisive question is: What greater good justifies this breach of law by the US and the cooperation of German agencies? It is time for answers.
WHEN tapes of conversations between senior executives at the failed Anglo Irish Bank at the height of the financial crisis in 2008 were leaked in June, Irish credibility as a true penitent among the five bailed-out euro-zone countries took a knock. At last month’s European summit Angela Merkel, the German chancellor who calls the shots in the 17-state currency block, expressed her contempt for the bankers’ conduct, which included crass anti-German sentiment.
But any fears that this unwelcome reminder of past sins and sinners might upset Ireland’s path to exit from the rescue programme have been short-lived. This week’s review by the troika – the European Commission, the European Central Bank (ECB) and the IMF – concluded that Ireland should be able to leave on schedule by the end of 2013. That’s precisely three years after fiscal and banking woes forced the Irish to go cap in hand for €67 billion ($87 billion) of official loans from Europe and the IMF.
A punctual Irish exit has seemed likely for some time if only to show that the German-inspired programmes of austerity and structural reform can work. The worse things get in other bailed-out countries – Greece, Portugal, Cyprus and Spain (for its banks) – the more that Ireland is favoured. Thus Portugal’s recent political ructions, which has caused the planned inspection by the troika on July 15th to be postponed, have strengthened Ireland’s hand.
Moreover, Irish debt managers have deftly exploited chances to raise funds as Ireland’s fiscal credibility improved and its bond yields subsided. They have benefited along with the other crisis countries from the ECB’s commitment last September to make unlimited purchases of bonds in secondary markets under strict conditions – its “Outright Monetary Transactions” (OMT) programme, which has proved so successful a deterrent that it has not yet been used. Helped by the debt-management agency’s forays into the markets, the Irish government is now fully funded into early 2015.
That’s handy because on the economic front things haven’t been going so smoothly. Irish cheerleaders can no longer brag about their country being a bright spot in the recessionary gloom on the euro-zone southern and western periphery. In fact, GDP has shrunk for three consecutive quarters (the second half of last year and the first quarter of 2013) as exports have been hit first by a slowdown in global trade and secondly by the lapsing of patents on blockbuster drugs that have hurt pharmaceutical exports. The budget deficit remains high at 7.5% of GDP and public debt will reach 124% this year, a figure that underestimates the effective burden because a big chunk of Irish GDP is profits made by foreign multinationals which are lightly taxed.
The Irish government thus has good reasons to be nervous about having to fend for itself. That’s why Michael Noonan, the finance minister, is angling for a backstop to be available after the bail-out ends. But it is not just a credit line that the Irish are seeking: they want to be eligible for the ECB’s OMT programme.
That will be possible, however, only if the Irish apply to the European Stability Mechanism (ESM), the eurozone’s bail-out fund, for an “enhanced conditions” credit line. The Irish argue that there would be no need to comply with extra conditions, but whether the other euro-zone finance ministers who are on the board of the ESM will concur remains to be seen. Ireland may find that the best it can secure is a deal where it is still subject to intrusive monitoring.
If all goes to plan the Irish exit from its ignominious bail-out at the end of this year will be hailed as a big success. But the reality will be fuzzier. The official funding may end but the price of support remaining available if necessary is that Ireland will not secure full independence.
“The contempt shown by Anglo Irish Bank for the Irish people and for their welfare and their public institutions was probably not very different from the attitude taken up by some of the other banks. We just do not have first-hand aural evidence of the …
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In Ireland, transcripts of telephone conversations between employees from 2008 at Anglo Irish Bankhave caused a massive outrage. In the tapes, the workers make fun of the government’s decision to guarantee bank liabilities at the height of the …
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Irish PM shocked by ‘vulgar’ Anglo Irish Bank tapes
New Straits Times
BRUSSELS : Irish Prime Minister Enda Kenny said Friday he was thunderstruck by leaked tapes at the centre of a scandal at the bailed-out Anglo Irish Bank which he said has tarnished Ireland’s reputation. But Kenny said after an EU summit in Brussels …
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Mocking Germans Adds Irish Insult to Banking Injury
Irish politicians say jibes at Germans by some of the country’s former bankers undermine their case for securing help to cut the 64 billion-euro ($83 billion) bill for saving the financial system. John Bowe, a former executive at the now defunct Anglo …
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Anglo Irish Bank scandal ‘damages democracy’, Angela Merkel says
Angela Merkel has expressed “contempt” for the disgraced Anglo Irish Bank executives caught on tape mocking Germany’s involvement in the institution’s €30bn (£25.7bn) bailout. The German chancellor delivered a strong condemnation of the revelations, …
BRUSSELS (AP) — German Chancellor Angela Merkel on Friday blasted newly disclosed comments by former directors of Ireland’s most notorious bank, who mocked foreign depositors and conspired to conceal the true scale of their losses while winning a …
Speaking at the EU summit in Brussels, Enda Kenny, the Irish prime minister, gives his response to recordings of Anglo Irish Bank staff joking about a bailout deal and mocking Germany. His comments follow an accusation from the German chancellor …
Are we now living in a German Europe? In an interview with EUROPP editors Stuart A Brown and Chris Gilson, Ulrich Beck discusses German dominance of the European Union, the divisive effects of austerity policies, and the relevance of his concept of the ‘risk society’ to the current problems being experienced in the Eurozone.
How has Germany come to dominate the European Union?
Well it happened somehow by accident. Germany has actually created an ‘accidental empire’. There is no master plan; no intention to occupy Europe. It doesn’t have a military basis, so all the talk about a ‘Fourth Reich’ is misplaced. Rather it has an economic basis – it’s about economic power – and it’s interesting to see how in the anticipation of a European catastrophe, with fears that the Eurozone and maybe even the European Union might break down, the landscape of power in Europe has changed fundamentally.
First of all there’s a split between the Eurozone countries and the non-Eurozone countries. Suddenly for example the UK, which is only a member of the EU and not a member of the Eurozone, is losing its veto power. It’s a tragic comedy how the British Prime Minister is trying to tell us that he is still the one who is in charge of changing the European situation. The second split is that among the Eurozone countries there is an important division of power between the lender countries and the debtor countries. As a result Germany, the strongest economic country, has become the most powerful EU state.
Are austerity policies dividing Europe?
Indeed they are, in many ways. First of all we have a new line of division between northern European and southern European countries. Of course this is very evident, but the background from a sociological point of view is that we are experiencing the redistribution of risk from the banks, through the states, to the poor, the unemployed and the elderly. This is an amazing new inequality, but we are still thinking in national terms and trying to locate this redistribution of risk in terms of national categories.
At the same time there are two leading ideologies in relation to austerity policies. The first is pretty much based on what I call the ‘Merkiavelli’ model – by this I mean a combination of Niccolò Machiavelli and Angela Merkel. On a personal level, Merkel takes a long time to make decisions: she’s always waiting until some kind of consensus appears. But this kind of waiting makes the countries depending on Germany’s decision realise that actually Germany holds the power. This deliberate hesitation is quite an interesting strategy in terms of the way that Germany has taken over economically.
The second element is that Germany’s austerity policies are not based simply on pragmatism, but also underlying values. The German objection to countries spending more money than they have is a moral issue which, from a sociological point of view, ties in with the ‘Protestant Ethic’. It’s a perspective which has Martin Luther and Max Weber in the background. But this is not seen as a moral issue in Germany, instead it’s viewed as economic rationality. They don’t see it as a German way of resolving the crisis; they see it as if they are the teachers instructing southern European countries on how to manage their economies.
This creates another ideological split because the strategy doesn’t seem to be working so far and we see many forms of protest, of which Cyprus is the latest example. But on the other hand there is still a very important and powerful neo-liberal faction in Europe which continues to believe that austerity policies are the answer to the crisis.
Is the Eurozone crisis proof that we live in a risk society?
Yes, this is the way I see it. My idea of the risk society could easily be misunderstood because the term ‘risk’ actually signifies that we are in a situation to cope with uncertainty, but to me the risk society is a situation in which we are not able to cope with the uncertainty and consequences that we produce in society.
I make a distinction between ‘first modernity’ and our current situation. First modernity, which lasted from around the 18th century until perhaps the 1960s or 1970s, was a period where there was a great deal of space for experimentation and we had a lot of answers for the uncertainties that we produced: probability models, insurance mechanisms, and so on. But then because of the success of modernity we are now producing consequences for which we don’t have any answers, such as climate change and the financial crisis. The financial crisis is an example of the victory of a specific interpretation of modernity: neo-liberal modernity after the breakdown of the Communist system, which dictates that the market is the solution and that the more we increase the role of the market, the better. But now we see that this model is failing and we don’t have any answers.
We have to make a distinction between a risk society and a catastrophe society. A catastrophe society would be one in which the motto is ‘too late’: where we give in to the panic of desperation. A risk society in contrast is about the anticipation of future catastrophes in order to prevent them from happening. But because these potential catastrophes are not supposed to happen – the financial system could collapse, or nuclear technology could be a threat to the whole world – we don’t have the basis for experimentation. The rationality of calculating risk doesn’t work anymore. We are trying to anticipate something that is not supposed to happen, which is an entirely new situation.
Take Germany as an example. If we look at Angela Merkel, a few years ago she didn’t believe that Greece posed a major problem, or that she needed to engage with it as an issue. Yet now we are in a completely different situation because she has learned that if you look into the eyes of a potential catastrophe, suddenly new things become possible. Suddenly you think about new institutions, or about the fiscal compact, or about a banking union, because you anticipate a catastrophe which is not supposed to happen. This is a huge mobilising force, but it’s highly ambivalent because it can be used in different ways. It could be used to develop a new vision for Europe, or it could be used to justify leaving the European Union.
How should Europe solve its problems?
I would say that the first thing we have to think about is what the purpose of the European Union actually is. Is there any purpose? Why Europe and not the whole world? Why not do it alone in Germany, or the UK, or France?
I think there are four answers in this respect. First, the European Union is about enemies becoming neighbours. In the context of European history this actually constitutes something of a miracle. The second purpose of the European Union is that it can prevent countries from being lost in world politics. A post-European Britain, or a post-European Germany, is a lost Britain, and a lost Germany. Europe is part of what makes these countries important from a global perspective.
The third point is that we should not only think about a new Europe, we also have to think about how the European nations have to change. They are part of the process and I would say that Europe is about redefining the national interest in a European way. Europe is not an obstacle to national sovereignty; it is the necessary means to improve national sovereignty. Nationalism is now the enemy of the nation because only through the European Union can these countries have genuine sovereignty.
The fourth point is that European modernity, which has been distributed all over the world, is a suicidal project. It’s producing all kinds of basic problems, such as climate change and the financial crisis. It’s a bit like if a car company created a car without any brakes and it started to cause accidents: the company would take these cars back to redesign them and that’s exactly what Europe should do with modernity. Reinventing modernity could be a specific purpose for Europe.
Taken together these four points form what you could say is a grand narrative of Europe, but one basic issue is missing in the whole design. So far we’ve thought about things like institutions, law, and economics, but we haven’t asked what the European Union means for individuals. What do individuals gain from the European project? First of all I would say that, particularly in terms of the younger generation, more Europe is producing more freedom. It’s not only about the free movement of people across Europe; it’s also about opening up your own perspective and living in a space which is essentially grounded on law.
Second, European workers, but also students as well, are now confronted with the kind of existential uncertainty which needs an answer. Half of the best educated generation in Spanish and Greek history lack any future prospects. So what we need is a vision for a social Europe in the sense that the individual can see that there is not necessarily social security, but that there is less uncertainty. Finally we need to redefine democracy from the bottom up. We need to ask how an individual can become engaged with the European project. In that respect I have made a manifesto, along with Daniel Cohn-Bendit, called “We Are Europe”, arguing that we need a free year for everyone to do a project in another country with other Europeans in order to start a European civil society.
A more detailed discussion of the topics covered in this article is available in Ulrich Beck’s latest book, German Europe (Polity 2013). This interview was first published on EUROPP@LSE
From time to time we like to highlight events from the long often-dark history of Royal Dutch Shell.
From time to time we like to highlight events from the long often-dark history of Royal Dutch Shell.
We have previously published evidence that Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis.
This article reveals how Shell collaborated in the Nazi annexation of Austria and Czechoslovakia in the run up years to World War 2.
Royal Dutch Shell and its long-term leader, Sir Henri Deterding, who became an ardent Nazi, had a close relationship with Adolf Hitler and his henchmen. Deterding was the subject of gushing praise by Hitler.
Rhenania-Ossag was the operating company for the Royal Dutch Shell Group in Nazi Germany. Shell was seeking an oil monopoly in the German market.
As one of the two biggest German oil companies and the main lube oil manufacturer, Rhenania-Ossag was an industry leader in Nazi Germany. Many of its workers and directors were Nazis.
The Nazi regime did not take control of Rhenania-Ossag until January 1940.
Following Hitler’s annexation of Austria on 12 March 1938 and the Nazi occupation of Czechoslovakia in March 1939, Royal Dutch Shell Group managing directors sanctioned Rhenania-Ossag taking over the Shell operating companies in those countries. This meant that a company dominated by the Nazis gained control over Shell companies in Austria and Czechoslovakia.
This clearly fell in with the Nazis plans, or otherwise it would not have been permitted.
This all took place before the outbreak of World War2 and while Royal Dutch Shell was still in control of all subsidiary companies, including Rhenania-Ossag.
Most of the above information comes directly from Volume 2 of “A History of Royal Dutch Shell” (page 78) and the remainder from Wikipedia.
We have already noted the Nazi government’s appointment of a Verwalterfor Rhenania-Ossag in January 1940; the Bataafsche Verwalter subsequently assumed formal control over the companies in countries under German occupation or in the German sphere of influence, such as Hungary.
Of the Group’s companies under Nazi control only Astra, Rhenania-Ossag, and Nafta Italiana continued operating at their former levels. As we have already seen, Astra was drawn into the German war effort. As one of the two biggest German oil companies and the main lube oil manufacturer, Rhenania-Ossag was an industry leader in the country. Following Hitler’s annexation of Austria and Czechoslovakia, Group managing directors sanctioned Rhenania-Ossag taking over the Shell companies in those countries.142 With the rupture of overseas supplies, Rhenania-Ossag turnover plummeted, but the company formed part of the official oil cartel and thus had a share in the processing and distribution of any oil coming in, which assured a steady, if meagre, flow of revenues. In December 1940 the Verwalter activated the hidden financial reserves built up during the 1930’s to raise the company’s capital from 75 million to 120 million Reichsmarks. A year later Rhenania-Ossag floated a bond loan of RM 60 million to payoff an old loan from Bataafsche and finance some new installations.143 Meanwhile, the relationship between parent company and subsidiary had to some extent been reversed by the appointment of Rhenania-Ossag’s research director as Verwalter over Bataafsche’s Amsterdam laboratory, to ensure that it would contribute to the German war effort.
Astra was the operating company of Royal Dutch Shell in Romania.
Nafta Italiana was the operating company of Royal Dutch Shell in Italy.
Austria was annexed into the German Third Reich on 12 March 1938.
Following the Anschluss of Nazi Germany and Austria, in March 1938, the conquest of Czechoslovakia became Hitler’s next ambition. The incorporation of the Sudetenland into Nazi Germany left the rest of Czechoslovakia weak and it became powerless to resist subsequent occupation. On 16 March 1939, the German Wehrmacht moved into the remainder of Czechoslovakia.
Staff meeting of the Shell oil factory in Hamburg Curio-Haus, 8 April 1935.
March of Rhenania-Ossag employees on 1 May 1938 (on the accompanying sign says: “Operating-cell Rhenania Ossag”)
AN ARTICLE WELL WORTH A READ
by Golem XIV on JANUARY 24, 2011 in LATEST
Now that Mr Cowen has lost control of his party, coalition and country, the Irish can expect to be bullied and hectored from all sides. It is more important than ever for Ireland to defend herself against the claims that she owes the rest of us. She doesn’t.
Every European bank exposed to Irish loans, every bond holder holding Irish debt – both bank and sovereign, and every foreign central bank concerned for the solvency of its own banks will start to crank up a barrage of propaganda and threats. It will be top of everyone’s propaganda agenda to make sure the Irish election offers no choices that could destabilize the unexploded ordinance of European bank insolvency.
The European financial class will be desperate to ensure that the Irish have an election that is carefully constrained so as not to offer anything that might actually help them. As far as the banks, the ECB and all the leaders of nations whose banks would suffer losses if Ireland were to default or restructure, the Irish people are NOT to be exposed to ideas of default.
All parties must be told, and if that fails to convince, made to feel directly via the bond market, the consequences of any alteration of the course followed so far. And, of course, it has already started. Here is what senior ECB banker, Lorenzo Bini-Smaghi, said on January 15th regarding Ireland’s electoral choices.
“It would be dramatic for Ireland if just by changing government you renege on the promises that Ireland as a sovereign has made.”
Not that he would dream of making veiled threats to try to frighten Irish public opinion into choosing what would be best for the banks over what would be best for the Irish people.
“Look at those countries which defaulted, like Argentina, Pakistan, Ukraine, Zimbabwe, Cote d’Ivoire. Do the Irish people want to go through the same experience?”
No mention of Iceland there. Funny that.
The foreign press will run story after story about the dangers of ‘contagion’, of the need for responsibility and resolve. The Irish Central bank will step in to make grave pronouncements if the political parties seem not to be holding the line.
Foreign leaders such as , Merkel, Olli Rehn, Barosso, Trichet and our British clowns, all with their own national interest, will give talks and be quoted in their papers about the need for steady fiscal responsibility and the unthinkable consequences of any waivering.
If there is any rumbling of popular discontent, then scape goats will be found – people upon whom some anger can be harmlessly vented. But if that does not work then the rhetoric will get more pointed. Ireland will be reminded that ‘it’s their fault’ and they ‘have no one to blame but themselves’. In the German press any hint that Ireland may be thinking of restructuring will be met with dark reminders of how ‘Ireland’ in the form of Depfa had to be bailed out by Germany.
In short I don’t think the Financial class is pleased that the politically unreliable (when it comes to European questions) Irish are going to have an election at this delicate time. I think the run up to the elections will involve a lot of propaganda designed to shout down any opposition to bail outs and debt payments.
So I thought this might be a good moment to get a few things on record regarding Depfa, HRE (Hypo Real Estate) and the banking crisis blame-game.
For those who aren’t already familiar with the Depfa and HRE story, here it is in a very small nut shell. Hypo Real Estate was the huge German bank which we were all suddenly told, back in 2008, had to be bailed out by the German State at vast cost. But, they said, they had no choice, because Hypo (HRE) was so large and its debts so huge that if it collapsed it would, at the very least, bring down German banking. It was Europe’s AIG – to big to be allowed to fail. Then the back story emerged. HRE had bought ‘Irish’ bank Depfa at the top of the market at almost the same time as RBS bought ABN Ambro. Both purchases were insane and both killed the purchasing bank.
It was then put about that the collapse of HRE was in fact due to a huge funding crisis at Depfa always referred to as ‘its Irish subsidiary’. From that came the notion that Depfa must have hidden its true state from HRE. Why else would HRE have bought a bank which couldn’t fund itself?
And that is how the story firmed up. Irish Depfa must have lied about its true state in an effort to sell itself to Hypo, so that when Depfa’s hidden financial problems surfaced, the cost of them killed Hypo and then fell upon the German rather than the Irish tax payer.
It is sometimes easy to forget with all the sordid and ruinous business of Anglo Irish, that the beginning of the whole crisis in Ireland and in Europe was intimately tied to Depfa and HRE. Thus I think it is worth reminding ourselves of some of the misinformation and perhaps offering a few less well known facts. Facts which might help the Irish defend themselves.
It was often said, particularly in the German press, that Depfa ‘brought down HRE’. Had HRE not bought Depfa when it did in 2007, then it would have been the Irish, who had incubated the problem, who would have had to pay for it, not the Germans. There is always this undertone that somehow Depfa must have lied to or misled HRE.
Was DEPFA really an Irish Bank which the Irish should have bailed out?
Less than 1% of Depfa’s business was Irish. Virtually no Irish Banking money flowed into Depfa or its deals. Depfa was not a major employer in Ireland. A couple of hundred jobs at most. Few of its senior positions were held by Irish people. Thus in purely bloodless financial terms there was virtually no reason for Ireland to bail out Depfa. Depfa was not systemically important to Ireland or the rest of its banking sector. Depfa was, however, vital to the continued health of the German banking sector. Add to this that the size of any bail out of Depfa was quite beyond what Ireland as a nation could have done. Ireland’s total IMF bailout stands at €85 billion. All on its own the HRE/Depfa bail out has already cost Merkel well over €100billion. Depfa, like one or two other banks in Ireland, was simply too big for its host. It was a financial cuckoo in the nest.
The German’s, however, would have bailed out Depfa even if it had not been bought by HRE because Depfa’s failure would have crippled something essential to the entire German banking sector – the Pfandbrief business. The Pfandbrief is a German ‘covered bond’. A covered bond is simply a super safe kind of bond. It is considered as safe as Sovereign bonds but gives a higher return. Germany invented the Pfandbrief and its banks relied on it.
The Pfandbrief/covered bond is considered super safe because, unlike other bonds, the Pfandbrief is backed by a ring-fenced set of assets which cover the total value of the Pfandbrief/bond. So even if the bank issuing the Pfandbrief were to go under, the Pfandbriefs themselves would never default. And it has been the bed-rock of the Pfandbrief’s reputation that in 250 years no Pfandbrief has ever defaulted.
At the time of the Depfa bail out there were €806 Billion in Pfandbrief outstanding. The third largest chunk of the German bond market and the section that had been growing rapidly and which everyone wanted to be a part of. The German banking sector wanted to grow and compete with the British and the Americans on the international stage. They saw the Pfandbrief as an important part of their strategy. This article from 1999 gives a great feel for how the markets were then, as they stood on the cusp bubble years.
If Depfa had gone down, it would have taken the AAA rated dependability of the Pfandbrief with it. Ireland could let that happen, Germany could not. That is why, I think, Germany would have bailed out Depfa no matter who owned it.
Why did Depfa move to Ireland if it was still a ‘German’ bank?
Depfa was always a German bank, that had simply chosen to locate itself in Ireland for funding and regulatory reasons. Does this mean that Ireland was stealing Germany’s banking sector? No. The best way to think of Ireland is as German’s off-shore tax haven banking centre with one significant feature – it was within the Euro zone. Every country has one. The UK has many. Germany needed one and Ireland was happy to oblige. Thus it suited Germany as much as it did Ireland. It was a partnership.
Of course Ireland made itself everyone’s honey. But I think it is fair to say that of her many customers she had a special relationship with Germany. Think about it. Depfa, HRE and HVB (Now UniCredit), Deutsche Bank, LBBW, DZ bank, Commerzbank, Bankgesellschaft Berlin, Landesbank Sachsen, WestLB all gravitated to Dublin.
The fact that this arrangement/partnership has fallen apart in acrimony doesn’t alter the fact that when the money was flowing the Germany banks, German bankers and all their politicians were every happy with what was going on in their Irish subsidiary. Ireland does not owe Germany an apology.
In fact I think Ireland should be asking Germany some hard questions over the sometimes abusive relationship German banks have had, and some still have, with Ireland. See here for how WestLB after it collapsed created an SPV called Phoenix, as a means for parking/dumping €23 billion of toxic ‘assets’ in Ireland. This, it seems to me, is the Toxic Debt Wasteland I wrote about, becoming real.
How did the Irish Funding work?
Depfa had always raised its cash through its own Pfandbrief bank. It’s source of funding were the Landesbanks who in turn got the cash from the bottom of Germany’s banking system the Kasse, deposit banks. They had all the cash.
But there were limiting factors. German money was the spur to Depfa’s early growth but the bank, according to a former board member I have spoken to, wanted more. They wanted better access to international funding and international customers. Neither, as more than one German banker has told me, was readily available in Germany.
Ireland made itself a meeting place for those with money in need of investing and those looking for loans. For Depfa in particular it was an attractive place. Depfa had decided to target Russian and East European public investments (investing in publicly funded works) and Ireland had made itself attractive to Russian and Eastern money. Money in various shades of shadiness flowed to Ireland. The timeline of German banks and for that matter all European banks (thinking of UniCredit here) going to Ireland runs parallel to East European and later Russian money beginning to flood out of the former soviet states looking for a new home in the West. Ireland met that need. Ireland become THE favourite investment destination for Russian money.
Money was placed in the East. There were and are plenty of subsidiaries there who could pass it along to be funneled westward through Austria (Bank Austria) or Cyprus onward to Ireland where it could find its way to the heart of European banking in Ireland.
Depfa set up a brand new bank Depfa ACS bank, specifically to tap into all this new money. It even got the Irish parliament, in agreement with the European authorities and German banking sector, to write a new law making it possible. Ireland created its own version of the Pfandbrief – the Asset Backed Security. This allowed lots of new money to join with the steady flow of Germany money from the Landesbanks to unite in Ireland to the benefit of Ireland AND Germany.
Of course Europe has access to all sorts of Off Shore Banking so what made Ireland special? Ireland was physically close, was already a corporate centre, was English speaking (good for the Americans), was low tax, used English Law (good for London) and had the same ‘we can do if for you’ attitude of Luxembourg. What gave Ireland the edge over Luxembourg was it offered faster turn arounds on setting up deals and far more lax regulation. Ireland was perfect.
Ireland and Luxembourg are banking competitors. But Luxembourg is not English speaking, is slower and worst of all has a regulator who occasionally regulates. The Luxembourg regulator has all his own teeth. Ireland’s had his removed along with his balls a long time ago.
As long ago as 2005, Charlie McCreevy, Ireland’s former Minister of Finance, (another Fianna Fáil man who was at the Ministry of Finance before Brian Cowen took over that job and showed everyone how it should really be done!) who then became European Commissioner for Internal Market and Services (nothing like failing at one job in order to get a better job…) addressed an esteemed EU/UN gathering in New York in 2005 in which he famously stated
“As Finance Minister in Ireland I saw what great entrepreneurial energies that a “light touch” regulatory system can unleash. 25 years ago we were the sick man of Europe. Today we are among the richest countries in Europe. Ireland is indeed testimony to the fact that you don’t need to be rich in natural resources to generate real wealth.”
That was shortly before someone shouted ICEBERG!
For those of you whose German is better than mine you will enjoy this German television (ZDF) expose of German Banking in Ireland and Depfa/HRE in particular*. Apart for revealing interviews with senior people in the German banking world, it also contains a brief interview with David McWilliams who famously referred to the fact that the German bankers behaved in Ireland “like men in a brothel” – with the blind eye of the Irish Financial Regulator seeing no evil. WhistleblowerIRL’s roller coaster experience as UniCredit Ireland’s risk manager illustrates the extent of the Irish regulator’s incompetence and/or criminality, and refusal to actually enforce regulations.
You can find more on Ireland’s regulatory cess pit and WhistleblowerIRL’s story in Why Bank Regulation is a Joke, and Who Bankrupted Ireland. For more the details of WhistleblowerIRL’s very much ongoing story see his blog here.
Of course if you want no regulation why not just go to the Caribbean? The answer comes back to the German banks again.
Much of the money flowing into Europe looking to be invested would end up in Special Purpose Entities/Vehicles (SPE, SPV) or Structured Investment Vehicles (SIVs). These are the legal containers which house and run the securities in a Collateralized Debt Obligation. You securitize debts, you put them in a CDO you house the CDO in an SPE/V or SIV and you need somewhere to set up and domicile the SPE/SIV. What Germany wanted was to have the dubious advantages of off shore combined with the above board respectability of Europe. German investors, the Landesbanks, wanted their money inside the OECD cordon of respectability while getting all the perks of off-shore. Ireland provided both.
A former, very senior banker from Depfa told me the Landesbanks could not buy Depfa’s debt/Asset Backed Securities fast enough. Any issue Depfa made would be pre-sold to and wolfed down by the landesbanks before the ink was dry. This was a partnership.
Now before I wrap this first part up, I would just like to note that,
Another banker, based in Germany, has recently pointed out to me that in all of the discussion about the Greek-Ireland-Spain/Portugal bailouts, the debate over the tax-payers’ money that was, and still is, being poured into the now-nationalised HRE/Depfa has mysteriously been silenced. I wonder why? The banker referred me to this documentary which raises some interesting questions about why and how HRE was bailed-out. It makes the importatnt link to Akerman at Deutsche Bank and how he appears to have told, not advised, but told, Merkel what to do. Merkel might be more of a tin wind-up model of an Iron lady rather than the real thing.
As I have very basic German-language skills, I would welcome any comments readers might have about these documentaries. This would help me to learn more about the HRE/Depfa saga.
On that note I am going to break the story here to stop this becoming too large. I will continue in the next part with the question:
So what went wrong? And why did HRE buy Depfa when it was already going wrong?
In which we will meet once again our old adversaries AIG and Goldman Sachs.
* I think no longer available
Part Two Tomorrow
THERE are three reasons why a managed exit by Ireland from the eurozone is the most urgent economic priority. But first consider this reality.
He was referring, in particular, to the impact of eurozone polices on peripheral countries. But much closer to the centre, France — whose credit rating was downgraded late last year — is now deeply mired in a second recession, with no obvious way forward. The Economist has called France “the time-bomb at the heart of Europe”.
In the late summer of 2010, I argued in these pages and elsewhere that if Ireland did not change course, matters would be taken out of the government’s hands. They were. The “inconceivable” happened. The “inconceivable” may be happening again.
The austerity doctrine imposed the burden of adjustment to the post-2008 economic collapse on the labour market. It is an indefensible misuse of economics that the eurozone “authorities” should seek stability on the back of tens of millions of unemployed — this month’s eurozone unemployment figures reached yet another record.
It is equally indefensible that, within an economic epoch characterised by intellectual capital and innovation, youth unemployment should now stand at an average of 25% — and more than double this in some of the peripheral countries which are most in need of their intellectual capital and capabilities.
At this stage in the present recessionary cycle, there is no sense in what is being done to the economy — and what is being planned for forthcoming budgets. After five austerity budgets the deficit has been reduced, at a terrible cost, and with much further to go. The country has been brought to the brink just to impose further cuts of €300m — of which half is slated to come from health including disability services that are already bleeding.
“Adjustment” to an economic shock is never painless. Adjustment to the post-2008 crisis required deleveraging the banking system, restructuring the economy and restoring competitiveness. However, the larger point is that the whole Irish political system proved incapable of delivering a consensus around how we could ourselves undertake these “adjustments”. Instead, it ceded responsibility to our “partners” — and it has used the power of strangers to enforce regressive and counterproductive policies. The policies reflect the self-interests of other and larger powers.
The economies of a still growing number of countries are being impoverished while countries at the centre — Italy and France — are caught in the headlights of a still lengthening recession across the eurozone. The only response has been “we need more integration”, or, to put it another way, more and more power and control to the centre. But it is the policies dictated from the centre that are the cause of the problem, and which are now subverting what the wider European project was originally all about.
Ireland is caught up in this nihilism. We have learned the hard way that no one at the centre is much interested in Ireland, except as a nuisance in terms of its corporation tax (which is now under very real threat). Also, as a “poster child” for policies that have failed and whose failure has, as the IMF have repeatedly pointed out, jeopardised global economic stability.
So, to return to the three primary reasons for a managed exit by Ireland from the eurozone.
The first arises from the fact that, facing into an unprecedented economic crisis, the eurozone “authorities” required countries with very different economies and burdens to conform to the stability and growth criteria — a maximum 3% budget deficit and a 60% debt/GDP. These were originally “indicative”. And yet, in the face of a seismic and accelerating economic crisis, these indicative criteria were transformed into articles of faith, to which all had to conform. It made no sense.
Furthermore, the intellectual underpinning of austerity which the eurozone “authorities” adopted was the Roghoff/Reinhart theorem — that is, above a debt/GDP ratio of 90%, countries enter a kind of “black hole” from which they cannot escape. This has been discredited. Nobel Prize-winning economist Paul Krugman and others have argued that the line of causation probably does not run from “high” debt to low growth but rather from low growth to rising debt. Common sense would indicate that this was surely the case in the post-2008 eurozone.
These fundamental errors were reinforced by the destructive time-table initially required for adjustment. In the case of Ireland, being compelled to even attempt to meet the “stability” criteria by 2014 was deeply damaging — it further exacerbated the underlying problems of adjustment. The eurozone authorities were wrong in their myopic fixation on reducing debt and effectively ignoring what is key to the whole ratio, namely, growing GDP, while simultaneously pushing ahead with, and incentivising, structural reforms.
Instead, there has been a succession of crisis summits involving people with big jobs talking about people with no jobs being “more flexible”.
In recent months, the eurozone authorities have started backtracking: Grudgingly accepting the evidence that their short- term austerity doctrine has been enormously damaging to the eurozone and to global stability. It is a bit late for them to be making speeches on “rebalancing austerity”.
It is little comfort to Ireland or its economy to have “good” school reports from a troika comprised of European institutions whose policies were deeply flawed and an IMF that has no business lending its credibility to an ideologically driven agenda.
It defies common sense that an Irish government should still feel obligated to defend such policies and attempt to impose two more years of “fiscal consolidation”.
Talk of “exiting the bailout” is wide of the mark. The burden of ‘troikanomics’, including onerous debt-servicing costs, stretch into a future that is dominated by those who preached the austerity doctrine in the first place.
Ireland’s growth capacity has been compromised; the best and brightest — our engineers and architects, doctors and nurses, teachers, entrepreneurs — have left and the morale of those remaining is being destroyed. This is not “adjustment”; it is tantamount to self-harm.
The second reason for a managed exit by Ireland is that these same policies are doing enormous damage to two of the most fundamental pillars of a stable and functioning democratic economy. Healthcare and education are the foundations for sustainable growth, innovation and social solidarity. The cuts being imposed arising from the doctrine of austerity are not evidence-based. At the micro-level, in schools and local health provision, they are doing damage that will take years to reverse. The only force that is driving these cuts is short-term book-keeping to appease the troika.
The third reason relates to the damage that is being done to the wider EU project. Ireland is, by its history and conviction, empathetic with Europe and with European solidarity. Austerity has, however, reinforced German hegemony within the eurozone and there is little evidence of the solidarity that was once at the heart of the European project. The UK’s disenchantment with Europe has become significantly more marked. Recent survey evidence demonstrates a deep-seated and widening gulf between the peoples of France and Germany. Expectations of recovery are no longer taken seriously by people in the eurozone.
Recovery cannot be built on a lack of confidence or disillusionment. Ireland has become dependent on the powerful and the peddlers of myths. It does not have to be dependent. It can contribute far more to the European ideal and the single market, outside of the eurozone. Denmark is a case in point.
There is no longer any appetite for the argument that only further integration will solve this crisis. This is a self-serving argument and finds no resonance among national populations. There is always a danger to democracy when the elite — the ‘authorities’ — become semi-detached from the beliefs of the people from whom they get their legitimacy. Riot control is a poor and an obdurate response to the reality that the ‘authorities’ have lost the argument.
In a world a little braver, a bit more far-seeing and one which was capable of learning — and moving on — Ireland would host a meeting of the peripheral countries. They would hammer out the basis for a managed exit from the eurozone for all or some. Those who aspire to national leadership would come out from behind the barricades of “There is no alternative” and would take up again the freedoms and responsibilities of which they are trustees.
Everyone knows the stereotypes. Germans save for the future, while Spaniards spend everything they earn. So it’s not surprising that Germany has survived the recent crisis in decent shape, while Spain is a mess, with unemployment at roughly 27 percent. If only the Spaniards had been as thrifty as the Germans, this never would have happened, right?
Wrong. The spending patterns of Spanish households did not cause the euro crisis, but were a response to the imbalances created by excess savings in Germany. Furthermore, these excess savings were not caused by the thriftiness of German households, but by policies that forced up German savings rates to levels that Europe could not absorb without creating serious imbalances.
National savings and household savings are often assumed to be the same thing, but are actually very different. The household savings rate is the share of household income — mainly wages, investment income, and social transfers like welfare payments and pensions — that households do not spend on consumption.
The national savings rate, on the other hand, includes not just household savings, but also the savings of governments and businesses. It is defined simply as a country’s GDP minus its total consumption. While the household savings rate is determined primarily by the cultural and demographic preferences of ordinary households, the national savings rate is not. Indeed in some cases, such as China and Germany, the household share of all the goods and services a country produces, which is primarily a function of policies and economic institutions, is the main factor affecting the national savings rate.
National savings, in other words, have very little to do with household preferences and a lot to do with policy. Take China, which has by far the highest national savings rate in the world at roughly 50 percent. This is in part because Chinese households, like those of many poor countries lacking a robust social safety net, save a high proportion of their income.
But while China’s savings rate is extraordinary, Chinese household savings rates are merely on the high side, and on par with other East Asian nations. Chinese households, it turns out, are not nearly as thrifty as their exceptionally high national savings rate implies. Why, then, is China’s savings rate unprecedented? The main reason is the very low household income share of GDP. Chinese households retain a lower share of all the goods and services the country produces – around 50 percent — than households in any other country in the world.
This is a consequence of policies Beijing put into place over the past two decades that goose GDP growth by constraining growth in household income. These include low wage growth, an undervalued currency, and extremely low interest rates, all of which reduce household income while subsidizing growth. As a result, the household share of China’s total production of goods and services has been falling for 30 years, from 60-70 percent in the 1980s to 50 percent today. Consequently, as households earn a declining share of what China produces, they also consume a declining share. China’s high savings rate, in other words, has little to do with Chinese thrift, and much more to do with policies that reduced the share of Chinese household income relative to GDP. This is also true in Germany.
In the 1990s, Germany saved too little. It ran current account deficits for much of the decade, which means it imported capital to fund domestic investment. A country’s current account deficit is the difference between how much it invests and how much it saves, and Germans in the 1990s did not save enough to fund local investment.
One of the most horrific terms in history was used by Nazi Germany to designate human beings whose lives were unimportant, or those who should be killed outright: Lebensunwertes Leben, or “life unworthy of life”. The phrase was applied to the mentally impaired and later to the “racially inferior,” or “sexually deviant,” as well as to “enemies of the state” both internal and external. From very early in the war, part of Nazi policy was to murder civilians en masse, especially targeting Jews. Later in the war, this policy grew into Hitler’s “final solution”, the complete extermination of the Jews. It began with Einsatzgruppen death squads in the East, which killed some 1,000,000 people in numerous massacres, and continued in concentration camps where prisoners were actively denied proper food and health care. It culminated in the construction of extermination camps — government facilities whose entire purpose was the systematic murder and disposal of massive numbers of people. In 1945, as advancing Allied troops began discovering these camps, they found the results of these policies: hundreds of thousands of starving and sick prisoners locked in with thousands of dead bodies. They encountered evidence of gas chambers and high-volume crematoriums, as well as thousands of mass graves, documentation of awful medical experimentation, and much more. The Nazis killed more than 10 million people in this manner, including 6 million Jews. (This entry is Part 18 of a weekly 20-part retrospective of World War II)[45 photos]
Warning: All images in this entry are shown in full, not screened out for graphic content. There are many dead bodies. The photographs are graphic and stark. This is the reality of genocide, and of an important part of World War II and human history.
Symbolic of the defense of Sevastopol, Crimea, is this Russian girl sniper, Lyudmila Pavlichenko, who, by the end of the war, had killed a confrimed 309 Germans — the most successful female sniper in history. (AP Photo)
Members of the Women’s Army Corps (WAC) pose at Camp Shanks, New York, before leaving from New York Port of Embarkation on Feb. 2, 1945. The women are with the first contingent of Black American WACs to go overseas for the war effort From left to right are, kneeling: Pvt. Rose Stone; Pvt. Virginia Blake; and Pfc. Marie B. Gillisspie. Second row: Pvt. Genevieve Marshall; T/5 Fanny L. Talbert; and Cpl. Callie K. Smith. Third row: Pvt. Gladys Schuster Carter; T/4 Evelyn C. Martin; and Pfc. Theodora Palmer. (AP Photo)
Three Soviet guerrillas in action in Russia during World War II. (LOC)
Ack-Ack Girls, members of the Auxiliary Territorial Service (ATS), run to action at an anti-aircraft gun emplacement in the London area on May 20, 1941 when the alarm is sounded. (AP Photo)
The German Aviatrix, Captain Hanna Reitsch, shakes hands with German chancellor Adolf Hitler after being awarded the Iron Cross second class at the Reich Chancellory in Berlin, Germany, in April 1941, for her service in the development of airplane armament instruments during World War II. In back, center is Reichsmarshal Hermann Goering. At the extreme right is Lt. Gen. Karl Bodenschatz of the German air ministry. (AP Photo)
A group of young Jewish resistance fighters are being held under arrest by German SS soldiers in April/May 1943, during the destruction of the Warsaw Ghetto by German troops after an uprising in the Jewish quarter. (AP Photo)
The first “Women Guerrilla” corps has just been formed in the Philippines and Filipino women, trained in their local women’s auxiliary service, are seen here hard at work practicing on November 8, 1941, at a rifle range in Manila. (AP Photo)
Little known to the outside world, although they have been fighting fascist regimes since 1927, the Italian “Maquis” carry on their battle for freedom under the most hazardous conditions. Germans and fascist Italians are targets for their guns; and the icy, eternally snow-clad peaks of the French-Italian border are their battlefield. This school teacher of the Valley of Aosta fights side-by-side with her husband in the “White Patrol” above the pass of Little Saint Bernard in Italy, on January 4, 1945. (AP Photo)
A nurse wraps a bandage around the hand of a Chinese soldier as another wounded soldier limps up for first aid treatment during fighting on the Salween River front in Yunnan Province, China, on June 22, 1943. (AP Photo)
Two women of the German anti-aircraft gun auxiliary operating field telephones during World War II. (LOC)
Mrs. Paul Titus, 77-year-old air raid spotter of Bucks County, Pennsylvania, carries a gun as she patrols her beat, on December 20, 1941. Mrs. Titus signed-up the day after the Pearl Harbor attack. “I can carry a gun any time they want me to,” she declared. (AP Photo)
Nurses are seen clearing debris from one of the wards in St. Peter’s Hospital, Stepney, East London, on April 19, 1941. Four hospitals were among the buildings hit by German bombs during a full scale attack on the British capital. (AP Photo)
Polish women are led through woods to their executions by German soldiers sometime in 1941. (LOC)
The first contingent of U.S. Army nurses to be sent to an Allied advanced base in New Guinea carry their equipment as they march single file to their quarter on November 12, 1942. The first four in line from right are: Edith Whittaker, Pawtucket, Rhode Island,; Ruth Baucher, Wooster, O.; Helen Lawson, Athens, Tennessee,; and Juanita Hamilton, of Hendersonville, North Carolina, (AP Photo)
A French man and woman fight with captured German weapons as both civilians and members of the French Forces of the Interior took the fight to the Germans, in Paris in August of 1944, prior to the surrender of German forces and the Liberation of Paris on August 25. (AP Photo)
Elisabeth “Lilo” Gloeden stands before judges, on trial for being involved in the attempt on Adolf Hitler’s life in July 1944. Elisabeth, along with her husband and mother, was convicted of hiding a fugitive from the July 20 Plot to assassinate Hitler. The three were executed by beheading on November 30th, 1944, their executions much-publicized later as a warning to others who might plot against the German ruling party. (LOC)
Miss Jean Pitcaithy, a nurse with a New Zealand Hospital Unit stationed in Libya, wears goggles to protect her against whipping sands, on June 18, 1942. (AP Photo)
62nd Stalingrad Army on the streets of Odessa (The 8th Guard of the Army of General Chuikov on the streets of Odessa) in April of 1944. A large group of Soviet soldiers, including two women in front, march down a street. (LOC)
A girl of the resistance movement is a member of a patrol to rout out the Germans snipers still left in areas in Paris, France, on August 29, 1944. The girl had killed two Germans in the Paris Fighting two days previously. (AP Photo)
Women and children, some of over 40,000 concentration camp inmates liberated by the British, suffering from typhus, starvation and dysentery, huddle together in a barrack at Bergen-Belsen, Germany, in April 1945. (AP Photo)
Some of the S.S. women whose brutality was equal to that of their male counterparts at the Bergen-Belsen concentration camp in Bergen, Germany, on April 21, 1945. (AP Photo/British Official Photo)
In this June 19, 2009 photo Susie Bain poses in Austin, Texas, with a 1943 photo of herself when she was one of the Women Airforce Service Pilots (WASPs) during World War II. Bain is one of 300 living WASP members that hoped at the time to be honored with the Congressional Gold Medal. The bill passed and on March 10, 2010, more than 200 WASP veterans attended a ceremony to be presented with the Congressional Gold Medal. (AP Photo/Austin American Statesman, Ralph Barrera)
Specially chosen airwomen are being trained for police duties in the Women’s Auxiliary Air Force (WAAF). They have to be quick-witted, intelligent and observant woman of the world – They attend an intensive course at the highly sufficient RAF police school – where their training runs parallel with that of the men. Keeping a man “in his place” – A WAAF member demonstrates self-defense on January 15, 1942. (AP Photo)
Amnesia, recession, the failure of political elites, divided societies… The free and caring Europe that was the dream of oppressed peoples no longer exists, it is just that European leaders lack the courage to admit it, says a Bulgarian political analyst.
The European Union no longer exists, at least not as we know it. And the question is not what will be the form of the new Union, but rather why this Europe, which was the focus of so many of our dreams no longer exists. The answer is simple: today, all of the pillars that served to build and justify the existence of the European Union have collapsed.
Chief among these was the memory of the Second World War. A survey of German secondary school students in the 14-16 age bracket, which was published a little over a year ago, showed that a third of these young people did not know who Hitler was, and 40 per cent were convinced that human rights had been respected to an equal degree by every German government since 1933. This in no way implies that there is a nostalgia for fascism in Germany. No, it simply means that we now have to contend with a generation that has nothing to do with this history. Today the conviction that the EU continues to derive legitimacy from its roots in the war is in an illusion.
The second element that facilitated the geopolitical emergence of to the Union was the Cold War: once again, a phenomenon that no longer exists. Today, the EU does not have – and cannot have — an enemy that can justify its existence in the same manner as the post-1949 USSR. In short, allusions to the Cold War can in no way contribute to the resolution of the EU’s problems of legitimacy.
The third pillar that has crumbled is prosperity. The EU continues to be very rich – even if this observation does not apply to countries like Bulgaria. However, 60 per cent of Europeans believe that their children will not live as well as they do. With this in mind, the problem is not how we live today, but what kind of life can we expect in the future. The positive prospect constituted by faith in a better future, which was a powerful source of legitimacy, has also disappeared.
Another source of legitimacy was a belief in convergence, which led poor countries joining the EU to expect that they would progressively acquire advantages in tune with membership of a rich man’s club. This still had some basis in fact a few years ago, but today, if the economic forecasts for the next 10 years are to be believed, a country like Greece is likely to remain as poor in comparison to Germany as it was on the day of its accession to the Union.
Everyone says that the EU is an elitist project. It’s true. Today, the problem is not that elites have become anti-European, but that they no longer carry any weight in national debates. The fact that all of them are fundamentally in favour of a united Europe is of no consequence, because no one listens to them anymore; they have lost touch with the people. Take a close look at sociological surveys, and you will see that the legitimacy of the EU has different explanations depending on whether you are in the north or the south of the continent.
In countries like Germany and Sweden, people have confidence in the EU because they also believe in the good faith of their own governments. In Italy, Bulgaria and Greece, people do not trust their own politicians, and that is why they believe in the EU. The logic of this position is that “even if we do not know them, the politicians in Brussels could not be worse than our own.” However, the latest crisis has shown this sentiment is beginning to crumble, and this confidence has been undermined.
Europe is aging
Last but not least, the final pillar is the welfare state. There is no denying that the existence of a strong welfare state is an integral part of the identity of the EU. As it stands, however, the issue is not whether this welfare state should be viewed as good or bad, but whether it can continue to be viable in a context that is not only marked by global competition, but also by major demographic changes in Europe. The problem is that the Europeans are melting away like snow in a hot sun. By 2060, 12 per cent of the EU’s population will be over 80 years old. Europe is aging. So perhaps the fact that the Union often behaves like a senile pensioner in the international arena is not a coincidence. And from whom should we borrow to keep this welfare state which is so vital to the elderly up and running? From future generations? Unfortunately, they are already being tapped to pay for the accumulation of public debt…
Another consequence of the crisis has been the emergence of new divisions on the continent. Within the EU, there is no longer any separation between the West and the East, but other more critical distinctions have taken its place.
EU is not the Eurozone
First and foremost, there is the distinction between Eurozone countries and other states. Very often, when they speak of the EU, the French, the Germans and the Spanish are really thinking about the Eurozone. However, this division will remain irrelevant while strategically important countries like Sweden, Poland and the UK are not included in the euro. The other major division is the one that exists between creditor and debtor countries. When Greece wanted to organise a referendum on the country’s bailout, Berlin made the following objection: “You want to hold a referendum about our money!” There is some sense to this remark … No country should be held hostage by the Eurozone. But that is precisely the problem when you have a currency without a common policy.
How should the crisis be tackled? On close examination, some EU countries are in crisis, while others are not — or are at least not as badly affected. At the same time, in some cases, the crisis has had a positive impact on certain practices. From this standpoint, the main outcome of every policy is that there are winners and losers. This is something that the politicians have been careful not to tell us. However, it is not so much a problem, because it is always the case: there are always winners and losers. The devil is in the detail: how should people be compensated and how should others be convinced that it is in their interest to adopt such a policy in the first place.
We continue to be convinced that win-win policies do in fact exist. Given the current situation in the EU, however, this amounts to wishful thinking, because the natural solidarity that exists in nation states has yet to be established on the level of the Union. Worse still, EU countries do not all share the same history or the same language. It is not unusual to speak of “we” in reference to Europe, but what does this mean exactly? If the EU is to function correctly, the absolute need to define what is meant by “we” in the context Europe will have to be addressed.