Recent news indicate a further decrease of market’s trust to depth burdened EUROZONE contries. Open public disputes at highest political levels in Europe and a multitude of response ideas seem to be engaged in a time race against the tightening financial constraints. Critics also mentioned that the lack of public backing for the establishing of the EURO currency in Germany (more than 60% of the population feel they had ‘lost personally by changing the Deutsche Mark to the EURO’) is one of the most weakening factors in mid-term and long-term as policy makers in the country are hampered by a significant lack of public backing for EURO policies in general.
The recently published documents of the web initiative “wikileaks” showing to the public partly secret diplomatic messages of US Foreign Office personnel might not have any relevant effect on the international political relations in opposite to first indications by a number of media. An obvious lack of legitimization probably won’t be overlooked by political professionals independently from their location:
First, by creating “partnerships” with leading established media in Western countries as the “New York Times”, the “Guardian”, ” Le Monde”, “El País” and “Der Spiegel” the non profit character of wikileaks has become questionable as there is no transparency regarding potential financial aspect of these “partnerships”. Second, the content of the published documents as it was presented up to now do not show any relevant new political information beyond predominantly individual, informal and partly personal reports of US embassy personnel . Its publication seems merely to serve the voyeuristic needs of the international public bringing “wikileaks” closer to the identity of a commercial media service that is potentially built on the expense of existing laws. Third, the publishing strategy of the mentioned documents is following rules and reasons that are invisible to the public despite vague formulations on the respective website. It is hard to believe and even more impossible to prove that the information sources used within the administrative structures for “wikileaks” publications were not granted with any kind of benefit. It is also hard to believe that all players running this new political power machine have only and exclusively idealistic goals. And even if they should have had this highly moralistic impetus in the past especially in regard to the Iraq war: who is shaping the future value set of this institution that is not build on any democratic legitimization or control? It seems to be predictable that the lack of transparency and the questionable legal base of this politically powerful web platform could once turn against itself. As a result the freedom of speech and transparency as promoted by “wikileaks” might become further limited due to its obvious ignorance towards constitutional rights like the legal protection of mail or personality rights. Up to now “wikileaks” did not answer the follwoing question: Who protects individuals having certain responsibilities (or whatever function) from being denounced anonymously on platforms that do even pay for it?
An Aljazeera report from 24th of November 2010 compiles impressions of public anger in Greece and Ireland about the austerity measures put in place in these countries. Given the fact that the most painful effects of these measures will be felt by the largest groups of population in these countries only in mid-term and considering the shifted political responsibility to Brussels and the IMF it should be expected that anger and potentially escalating violence could spread over Europe especially to Spain, Italy and Germany.
G 20 summit pre-statements indicate strong German stance on trade surpluses potentially risking higher political volatility in Europe
With new alliances neither defined as temporary nor as emerging as for example the one of the world’s main exporters China and Germany, the G 20 summit in Korea is at high risk to end up in a deadlock. The potential readiness of Germany as an economic power to emancipate itself from Western main political powers as well as to play a more guiding if not dominating role in the European Union and its currency zone, could be interpreted as a potential shift of the economic power axis or as political blindness of German political leaders. Being heavily dependent not only from the European market but also from European cooperation and inner peace in Europe, German politicians won’t be able to bypass given geographic conditions as well as the need to balance its position within the European context. Confronting leaders of trade deficit stricken economies publicly as Ms. Merkel did before the summit addressing US President Barack Obama, without showing any willingness to outbalance export and consumption in her own country can’t be a successful strategy in political terms.
Paradoxically benefitting from the depth crisis at the European periphery with a weaker EURO, Germany could be on a risky path pushing for austerity in the area of its most important export clients as well as showing a lack of understanding for the concerns of the US partners, and on top of it by being potentially naïve on Chinas political goals in Europe. Germany had good reasons to boost domestic demand and to carry out public investment in order to strengthen its own civil society by improved educational systems, by creating a sufficient base for single mothers and children to grow (Germany has one of the lowest birth rates in Europe) or by easing its immigration policies for international talent to enable economic success also in the future. Poverty statistics from Germany underline all these needs clearly.
Chinese RMB depreciated continuously to the EURO, the Japanese Yen and other currencies since almost 6 months
Despite announcements of the Chinese government concerning an appreciation of the Chinese currency soon, the Yuan has continuously lost external value since May 2010 within the statistically largest international market, the Euro-zone, and the third largest market, Japan, as well as towards the Indian Rupee.
Having in fact lost more than 10% of its value towards the EURO and the Japanese Yen since June 2010, the Chinese exports were boosted by strong monetary support.
The Russian Ruble marks an interesting exception of these currency relations because, as a regulated currency by itself, the Russian monetary authorities depreciated the Ruble against the Yuan constantly in the same time.
Given the domestic regulations on foreign currency transfers in China forcing businesses to exchange external profits into domestic currency, the Communist Party of China controls the largest reserves in foreign currencies worldwide. Using this capital for acquisitions of Portuguese and Greek bonds for example, as recently announced, shows the potential political impact of China’s controlled economic system on traditional market environments. Being bailed out by Chinese currency reserves might have a further impact on worldwide currency relations as well as on the European position in the race of export competitiveness. It might be a temptation for weaker European economies to use the option of Chinese monetary support but it will be for sure a risky one.