IMF – World Bank meetings: US – Germany clash instituted, anti-globalization prospects visualized

IMF/World Bank annual meetings in Washington, U.S., October 2016. AM16 CNN Debate on the Global Economy International Monetary Fund Managing Director Christine Lagarde (L) and German Finance Minister Wolfgang Schauble participate in a CNN Debate Seminar on Global Economy October 6, 2016 at part of the 2016 IMF/World Bank Annual Meetings in Washington, D.C. (IMF Staff Photo/Stephen Jaffe).

IMF/World Bank annual meetings in Washington, U.S., October 2016. AM16 CNN Debate on the Global Economy International Monetary Fund Managing Director Christine Lagarde (L) and German Finance Minister Wolfgang Schauble participate in a CNN Debate Seminar on Global Economy October 6, 2016 at part of the 2016 IMF/World Bank Annual Meetings in Washington, D.C. (IMF Staff Photo/Stephen Jaffe).

This year’s annual meetings of the IMF – World Bank Group in Washington D.C., which kicked off on Thursday 6 October, turned out to be an all out financial war of words between the United States and Germany. In the middle of it stands the battered Deutsche Bank. For a start, there was a confrontation between the German Finance Minister Wolfgang Schäuble and Christine Lagarde, the Managing Director of the International Monetary Fund, the almighty institution where the US is the largest (18%) and pace setting shareholder.

Lagarde and Schäuble

Berlin badly wanted to avoid Deutsche Bank’s problems being discussed at the annual meetings. Last Thursday though, Lagarde, despite knowing this very well, had some very tough advice for the largest bank of Germany. She more or less said that Deutsche has to altogether change its business model. She also pressed Deutsche to swiftly come to terms with the US regulators, about the colossal fine of $14 billion the American Department of Justice has imposed on the lender.

On Saturday 8 October, Schäuble reacted by saying that there is too much talk about the future of the German bank. He then observed that “the danger for a new crisis has not at all vanished”. Putting together his comments, the conclusion is that the fine of $14bn which the Americans have imposed on Deutsche can cause a new financial Armageddon.

Lew targets all European banks

Then came Jack Lew, the American Secretary of Treasury who implied that all the European banks are dangerously undercapitalized, and consequently appear unable to face possible new risks which the global financial system may produce. According to Reuters, Lew said that “We’ve also been clear that Europe has not done as much as the United States and this is a case where sometimes doing more is better”. Apart from that, Lew had more to reprimand the Germans for.

The US Secretary concurred with IMF’s Lagarde in demanding that Germany agrees that the EU forgives a large part of the Greek debt. If not, this country won’t be able to stabilize its still ailing finances and start developing again. In short, Greece will continue to be a dark spot in the global financial system and the Europeans have to deal with that. It’s their problem, the Americans said.

Dijsselbloem standing for Germany

Last but not least, Jeroen Dijsselbloem, the Dutch minister of Finance and President of Eurozone’s powerful Eurogroup – the council of euro area ministers of Finance – took the tally to support the Germans in their clash with the Americans. He said that the fine of $14bn the US Department of Justice has imposed on Deutsche Bank is not just too big, but it constitutes a threat to the global financial stability. In other words, he returned the Lew remark that Greece is a European problem, which threatens the world financial system.

Not surprisingly, Dijsselbloem and Schäuble read the financial situation exactly in the same way. Not only do the two of them agree that the American fine on Deutsche is a threat to global stability, but they both object to the forgiveness of a good part of the Greek debt as the IMF and Washington urgently demand.

Threats taking shape in the horizon

Putting together what the American and the European financial leaders said at the end of last week, leads to the conclusion that new and more serious threats appear in the global horizon. The Americans point to the dangerously inadequate capitalization of the European banks and of Deutsche ‘par exellence’. They also spot Greece as a standard threat to stability and demand that the Europeans short this mess out. The Europeans answer that the US is the culpable party by threatening the largest German lender with a fine, which if paid in full may trigger a new financial Armageddon.

While Deutsche Bank utterly divides the West, the current economic leaders of America and Europe appeared united against the growing popular resentment for globalization and more economic integration. They briefly termed similar political platforms in Europe and the US as ‘populist’. According to Reuters they “…pledged to take steps to ensure trade and economic integration benefited more people currently left behind”. Mind you, they didn’t promise to safeguard the economic and financial globalization, obviously because they probably prefer to do that taciturnly. By the same token, though, they want to be seen as bowing to the ‘populist’ idea, that globalization and economic integration ‘has left more people behind’. This is a plain recognition that the anti-globalization plan is already a reality to reckon with.

Anti-globalization like Brexit

The truth remains that the Brexit has changed the way those things are now thought about and politicized. It suffices to watch the Canada-EU (CETA) and the US-EU (TTIP) free trade agreements slowly die. Even the celebrated North American Free Trade Agreement (NAFTA of US – Canada -Mexico) is in danger. The Agreement is questioned by both the Republican (?) Donald Trump and Democrat Hillary Clinton.

All those international trade platforms are currently considered by large parts of the American and the European public opinion, as ‘job exporting’ vehicles and champions for the large multinational groups. The voters want this to change and, already, strong political forces on both shores of the Atlantic Ocean have incorporated the anti-globalization and protectionist tickets in their agendas. Just think of Donald Trump, Marine Le Pen, the Hungarian Prime Minister Victor Orban, the expanding extreme right German party AfD, the Italian Five Stars Movement of the comedian Beppe Grillo, the Polish governing Law and Justice party and many others.

An alarmed Germany

The most alarmed western politicians in view of the possibility for more protectionism, more trade barriers and less globalization are the Germans and for very good reasons. Germany’s welfare depends so much on exports, like no other country in the world. Half of the country’s GDP comes from sales abroad (7% only to Britain). If you thought that China is the leading world exporter you are mistaken. China exports 22% and Japan 18% of their corresponding GDP.

Schäuble had more bitter things to say about the new anti-globalization reality, than for the US fine on Deutsche Bank. Reuters reported him as saying “More and more, people don’t trust their elites. They don’t trust their economic leaders, and they don’t trust their political leaders. In the UK, everyone from the elites told the people ‘don’t vote for a Brexit.’ But they did.” He added that Germany is trying to hold Europe together. However, Berlin is losing the fight in its backyard too, mainland Europe. Both the European South and the Visegrád Group of countries (Czech Republic, Hungary, Poland and Slovakia) are now openly questioning their participation in the European Union for more than one reason, mainly blaming Berlin.

Next year it may be much worse

In conclusion, this year’s annual meetings of IMF – World Bank just ascertained that every day the world is becoming a more dangerous place. Apparently, the financial leaders had no solutions to offer and they contained themselves in exchanging threats and bitter remarks. Everybody seems to wait for the results of the elections in the US this November and in France and Germany in 2017.

Next year, the IMF-World Bank autumn meetings may be even more polemic and paradoxical. Alas the usual victims, the hard working taxpayers and the unemployed, will be called to pay the price, if the new leaders prove more thoughtless and egotistic than the current ones.

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

EU Commission spends billions without achieving targets

On the detention of children in the United States of America

Thought AIs could never replace human imagination? Think again

An entrepreneurial point-of view on tackling the migration crisis and the risks of abolishing Schengen

EU seeks foreign support on 5G from Mobile World Congress 2015 as the “digital gold rush” begins

Human rights: breaches in Russia, the Rakhine State and Bahrain

The challenges of mental health among the Syrian medical students

Millions of people eat octopus- here’s why we shouldn’t

Brussels enraged with Swiss referendum result to keep out EU citizens

The EU accuses Russia of bullying Ukraine to change sides

Bigotry makes politicians ‘complicit in the violence that follows’ : UN independent experts

Brexit: MEPs concerned about citizens’ rights

Tuesday’s Daily Brief: Libya civil war, African displacement, global trade tensions, terrorists’ children ‘secretly detained’, and more

Madagascar: UN chief commends leaders, State institutions following ‘historic milestone’ election

Alexis Tsipras ready to test Eurozone’s political sturdiness; Up to what point?

Worldwide terror attacks have fallen for the third year in a row

Alarming level of reprisals against activists, human rights defenders, and victims – new UN report

Who can compel Wallonia to unlock CETA, the EU-Canada free trade pack?

WEF Davos 2016 LIVE: Banking moguls continue brandishing financial Armageddon to intimidate us all but in Davos they worry about the very distant future

A Sting Exclusive: “Consumer expectations for the 2015 UN summit on climate change”, Director General of BEUC Monique Goyens outlines from Brussels

Rohingya refugee shelters ‘washed away’ in Bangladesh monsoon rains: UN agency

A Young student assesses the Programme for International Student Assessment (PISA)

Why schools should teach the curriculum of the future, not the past

Decade ending 2019 likely to be hottest on record

A machine din

Financial Transaction Tax: More money for future bank bailouts?

Final preparations for DCX and IFRA Expo 2019, in association with The European Sting

These clothes were designed by artificial intelligence

We can save the Arctic if we follow the Nordic countries’ lead

Central African Republic: UNICEF outlines key actions so fresh peace deal can make real difference for children

Artificial Intelligence and Machine Learning: “Am I a real Boy?”

This is the IMF’s latest take on the economy in 2020

Terrorism diverts resources from ‘much-needed’ development to ‘costly’ security, warns UN envoy for Central Africa

DR Congo: ‘New waves of violence’ likely, UN warns, unless State acts to prevent intercommunal reprisals

A Sting Exclusive: “Change is challenge, change is opportunity”, Commissioner Bienkowska cries out live from European Business Summit 2015

ECB indicates south Europeans can endure more austerity

IMF: How can Eurozone avoid stagnation

Will the French let Macron destroy their party political system?

“None of our member states has the dimension to compete with China and the US, not even Germany!”, Head of EUREKA Pedro Nunes on another Sting Exclusive

UN emergency relief fund has ‘never been more critical’: Guterres

In Finland, speeding tickets are linked to your income

UN chief saddened at news of death of former US President George H.W. Bush

‘Action and tangible progress’ needed to finally ‘win the peace’ for Syrians: UN envoy

Sri Lanka PM: This is how I will make my country rich by 2025

NHS: A great healthcare system but how accessible is it to migrants?

How Africa’s entrepreneurs are changing the direction of globalization

Tuberculosis infections declining, but not fast enough among poor, marginalised: UN health agency

Using ‘leprosy’ metaphors in political rhetoric ‘fuels public stigma’ and discrimination: UN rights expert

EU revengefully shows no mercy to Cameron by demanding a fast and sloppy Brexit now

Will 2020 be the year blockchain overcomes its hype?

At last a good price for the Greek debt!

Health privatization to blame for health inequality or poor investment in public health?

Why leaders need to upgrade their operating systems

Hospitals in Yemen attacked, disrupting healthcare for thousands of vulnerable civilians

Tiny Iceland teaches the West how to treat bankers

Finland is a world leader in clean energy. Here’s what’s driving its success

A new Europe for people, planet and prosperity for all

Climate change and health: creating global awareness and using earth resources wisely

3 reasons why Singapore is the smartest city in the world

5 technologies that will forever change global trade

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s