|July 9, 2012
As Finland fuels alarm over a possible unraveling of economic and monetary union (EMU), a protest action by 172 German economics professors slamming Chancellor Angela Merkel’s agreement on direct recapitalization for ailing European banks has sparked a furious war of words with the Berlin government.
Wolfgang Schäuble, the German finance minister, says he’s “indignant” at the gauntlet laid down by the academics. Merkel claims that the summit move at the end of June changed nothing because the bank rescue measures have yet to be voted on by parliament. The problem is that few in Germany believe her.
In the aftermath of the Brussels deal on banking, once again, Merkel’s Law of Permanent Disappointment has come into play. With the euro falling toward the $1.22 level and Italian and Spanish yields heading back to danger levels, the capital markets say the latest concessions are not large enough to cure the euro’s problems — yet they are far too large for Merkel’s conservative critics, who say she has gone too far to prop up errant states with German savings.