On August 11th, German media got hold of and published an
internal Bundesbank report which maintained that Greece would likely need
further relaxation of the terms of its rescue bailouts. The report contained
revelations that could be deeply embarrassing to the government of Angela
Merkel that has maintained forcefully that German taxpayers would face no
further commitments. The revelations could potentially be a potent weapon for
her political opposition in the upcoming election. More broadly, the
revelations reveal a wide gap between economic reality and the sunny face of EU
The Bundesbank is widely considered to be the epicenter of Germany's notoriously conservative banking culture. Unlike central banks in other countries, such as the Federal Reserve and the Bank of England, the Bundesbank has been known to operate with actual political autonomy. The leaked report claims that the Greeks have been "barely satisfactory" in their compliance to prior commitments. In addition, the Bank harbored "substantial doubt" that Greece would be able to implement the required reforms and that Greek approval of the process resulted from "political necessity".
In late September Germans will go to the polls for a national election to determine the makeup of their national parliament, the Bundestag. Some believe that Chancellor Merkel's ruling coalition may be vulnerable. There is a very strong, and growing, belief among rank and file Germans that the country should reject open ended financing of southern EU members who cannot put their fiscal houses in order as the Germans themselves have managed to do. This sentiment puts them at odds with the current ruling coalition in Berlin.
The 'dream' of a European Union demands the eventual yielding of complete sovereignty to the EU by every member nation. But each nation faces a different cost/benefit. To the southern tier nations access to the sound euro currency, appeared as a huge opportunity. It most cases EU membership was well supported on the street. For the major core 'contributing' nations the rationale was not so simple. It varied not just between member nations but also between their leaders and people.
The French leaders and even those of the 'Buffer' countries saw the EU as hobbling Germany and preventing intra-European war. German elites have long been the most extreme champions of EU integration, which would doubtless put the Germans in a position of extreme power across the entire Continent. However to such a political victory will require sacrifices that the German "volk" do not appear willing to make.
(An important interview) Saving the Net from the surveillance state (And Crony Media): Glenn Greenwald speaks up (Q&A) | Nick Sorrentino