Certain politicians belong to the cult of the euro. To devotees, the euro is not just a currency; it is a step on the way to a political union of the continent to create a full United States of Europe. European voters are not in favor of a U.S.E, but this does not stop these politicians from using undemocratic means to save the euro and thereby save their grand project.
Merkel, Asmussen and Schaeuble are all acolytes in the cult. The problem they are encountering is how to save the euro with German money without the German public realizing what they are up to.
After digesting the ECB’s print-to-finance plan, the German press came down hard against it. Today, Asmussen started the spin to convince the German people that this will not cost them dearly.
The political cover that the ECB is using is that financing failing governments is within the scope of monetary policy. Asmussen repeats this talking point, but the print-to-finance plan has nothing to do with monetary policy.
Each country in Europe is experiencing a different part of the business cycle, so it requires a different price for money, also known as the interest rate. The problem with having a currency union with one central bank is that you get one interest rate for Germany, which is still growing, and Greece and Spain, which are in the midst of depressions.
Buying bonds of cash-strapped countries will not make a difference in rates. What would make a difference is each country reverting to a national currency, but that option is off the table due to the cult of the euro. J.P. Morgan said that people have a good reason for doing something and the real reason. The good reason here has to do with monetary policy, but the real reason is to keep the political aspirations of the cult of the euro on track.
Asmussen points out that aid will come with strings attached and talks of tough conditions. He does not mention that Greece is receiving aid, and the tough conditions are causing a depression not to mention a great deal of resentment. German chancellor Merkel routinely appears in Greek political cartoons festooned with a certain mustache.
By the way, Greece will need either more aid or will default on the bailout it received in March, and the cult of the euro seems determined to throw more money at the PIIGS in order to support the euro. The German public is beginning to realize that they are paying for the political ambitions of their leaders by throwing their money down a black hole located just south.