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Europe’s hit squad

Fraser Nelson

12 November 2011

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If you thought the EU couldn’t get any less democratic, meet the Frankfurt Group

The Old Opera House in Frankfurt — once Germany’s most beautiful postwar ruin and now its most stunning recreation — has become a symbol of European rebirth. And it was here, last month, that Angela Merkel and Nicolas Sarkozy met the EU’s bureaucratic elite in what would, in another era, be described as a putsch. They had grown tired of eurozone summits, with leaders flying here and there but getting nowhere. A smaller group needed to be formed, who would wield power firmly but informally. That evening, as they gathered to hear Claudio Abbado conduct the Mozart Orchestra of Bologna, a new EU hit squad was born.

As Silvio Berlusconi has now found out, this so-called Frankfurt Group means business. Only a few months ago, it would have been unthinkable that the head of one European government would try to destabilise or depose another. Now, two EU leaders have fallen in a week. As Sarkozy knows from recent experience, to enforce regime change one need only give a helping hand to the rebels.

The group cannot be accused of being secretive. At the G20 summit in Cannes, its officials walked around with lapel badges saying ‘Groupe de Francfort (GdF)’ and met four times. Britain was not included but the Foreign Office’s officials spoke as if they were in on the act. As one official put it: ‘We’re on our way to moving out Berlusconi.’

Such a statement may once have been seen as outrageous, but by last weekend it was undeniable that an operation to remove Berlusconi had begun. When Merkel and Sarkozy were asked if they had confidence in him, they rolled their eyes and gave each other wry smiles. The European Central Bank, which is also part of the Frankfurt Group, gave only minimal support to Italy — leaving the bond markets to do their worst to Berlusconi. The International Monetary Fund, whose new leader was also at the Opera house that night, made it clear that it would be sending its auditors to Rome on a regular basis to inspect the books. All this combined to send an unmistakable Old Europe message: we have ways of making you quit.

When that night in Frankfurt’s Alte Oper on 19 October was booked, no one was intending to form a new hit squad. The plan was to have just an ordinary taxpayer-funded extravaganza, a shindig to mark Jean-Claude Trichet’s retirement from the European Central Bank. Helmut Schmidt, the 92-year-old former chancellor of Germany who is now seen as a godfather of the European project, told the assembled dignitaries that ‘a crisis in the ability to act of the EU’s political bodies’ was ‘a much bigger danger for the future of Europe than over-indebtedness’. It was time to get tough.

When Merkel spoke, she admitted frustration with European summits and their cumbersome democratic mechanics. ‘The EU’s ability to act and room for manoeuvre has proven slow and complicated,’ she complained. ‘If we want to seize the crisis as an opportunity, we must be prepared to act more quickly and even in unconventional ways.’ Sarkozy arrived late, but just in time for the stitch-up of the decade.

Also in attendance was the new head of the ECB, Mario Draghi, an Italian with no love for Berlusconi. Then Christine Lagarde, the new (French) director of the International Monetary Fund, who is in charge of bailouts and can impose humiliating conditions (as she went on to do to Berlusconi). There was Jose Manuel Barroso, the increasingly thuggish European Commission president, and his economic sidekick Olli Rehn. The omnipresent Jean-Claude Juncker, Prime Minister of Luxembourg and head of the 17-nation eurozone group, was there with Herman Van Rompuy, who was elected EU president because he has no opinions on anything.

So the Frankfurt Group is, in effect, a merger between the EU hierarchy and German financial power: a kind of Brussels on the Rhine. It would not have been possible in the pre-crisis era when there were qualms about German might. Now the Germans are no longer apologetic. ‘The question of who could accept a German model has been settled by the market,’ said a German government spokesman recently. ‘We are really only talking about the details and the extent of the measures, not about their nature.’ This new, pugilistic tone is felt everywhere. Anonymous EU officials are now being quoted as saying things like: ‘Yes, wake up and smell the coffee. This is what you all signed up for.’

Poor old Mr Papandreou had provided target practice when he threatened to hold a referendum on the bailout. Only this summer, he had berated the EU for ‘indecisiveness and errors’. He found out just how decisive the slimmed-down Frankfurt Group could be when he was denied any bailout money, hastening his likely replacement with Lucas Papademos, a Frankfurt-trained former ECB official. Even Barroso had taken the remarkable step of destabilising Papandreou by calling for a coalition, breaking both protocol and the pretence that the EU Commission respected the sovereignty of its member states.

Berlusconi was a harder target. He has dodged enemies for most of his 17 years in politics, from the opposition to the Italian vice squad. Furthermore, Italy is not really bust. Strip out the debt interest, and its national books would not just be in balance but have one of the greatest surpluses in the eurozone. Its prosperous north is one of the richest parts of the Continent, and would be far richer if there were a lira to devalue and help exporters. Its households are savers, with an astonishing €8.6 trillion squirrelled away. Government debt, at 100 per cent of economic output, is high — but stable. Debt comes in many forms, and the average Italian owes half as much as the average Brit.

It is not at all clear who deemed Italy to be in crisis if the bond market charged above a supposedly fatal threshold of 7 per cent on its government debt. But one answer might lie in a declaration which Merkel made last year: ‘We must re-establish the primacy of politics over the market.’ Politicians have tried to do this, with little success, for generations. But it’s far easier now that the eurozone has created a giant apparatus whereby the strings of power can be pulled by a handful of people. The euro bailout fund, with its supposed €1 trillion of firepower, has just 15 staff. It might now be possible to wield immense power over a continent of nation states by assembling a few like-minded people in the back room of a Frankfurt opera house. And all in the name of European unity.

Democracy is viewed with caution — even distaste — by the Frankfurt Group, as are the markets. Juncker’s own views on pesky voters are famous since he phrased the problem of government thus: ‘We all know what to do, but we don’t know how to get re-elected once we have done it.’

We can now see a solution to the Juncker problem. You just enstool various leaders who were not properly elected in the first place and who won’t be seeking votes again. And have them do what you like.

But all this is, of course, fraught with danger. The idea of a prime minister chosen by foreign powerbrokers will be no more popular in Rome than it would be in Berlin. The idea of an ersatz politburo in Frankfurt will unnerve those EU members who lived under a real one in Moscow. Already, a third of Germans want out of the euro. That proportion will swell if Greece defaults within the euro, a trick that can only succeed with a massive compulsory foreign aid budget from Germany. Ireland’s finance minister is already speaking out against what he sees as a Franco-German coup, a democratically indefensible mutation of the European rulebook.

•••

David Cameron will know that, as Merkel said at the opera, there is opportunity in every crisis. If France and Germany have no respect for the EU’s rules, then why should Britain? If the Prime Minister were to declare that certain EU directives were suspended in Britain for an emergency period while it returned to growth, then what would the EU do? Through its EU membership, Britain already sends more foreign aid to the continent — £9 billion a year — than it does to the third world. Is the lesson of the Frankfurt Opera House not that the EU’s main paymasters can do what they like? George Osborne’s welcome belligerence at Tuesday’s euro summit, where he flatly rejected a financial transactions tax, should be the start of a new negotiating stance.

The EU which the Lib Dems so revere is now vanishing before our eyes. In its place comes a far more unequal union, with bullying lenders and enfeebled debtors. This illiberal, deeply undemocratic phase in the EU’s development fits a historical trend. In their definitive history of financial crises, This Time Is Different — Eight Centuries of Financial Folly, Carmen Reinhart and Ken Rogoff show that almost all modern downturns go through a cycle: financial crisis, followed by sovereign debt crisis, followed by ‘financial repression’. The last phase is always unpopular, and usually means severe cuts or finding ways to raid people’s savings — enacted by an undemocratic hit squad. This is what Sarkozy and Merkel and their allies in the bailout industry have now become.

Except this time it is different. When an Argentinian government imposes ‘financial repression’ on Argentinian people, it is unpopular enough, but tolerated. Should Germans impose such repression on thrifty Italian households, the political reaction may be incendiary.

Merkel and Sarkozy have both been fond of saying that they ‘will do everything necessary’ to save the eurozone. Neither Berlusconi or Papandreou would now doubt them. But a situation where even British officials talk about helping regime change in Italy is not one that can — or should — last long. Berlusconi’s demise marks the EU now entering its endgame. When empires collapse, they can do so very suddenly. David Cameron had better be ready.

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Purpleline

November 10th, 2011 10:56am Report this comment

I believe there are so many dark forces working in the corridors of Europe and the US at the moment Walsingham would be in his element.

It is rather shocking that Fox was removed as we are reminded today that 20,000 service personnel including Tanks & other equipment will be departing German soil in 2012. Just as an economic one nation German state starts wielding its muscles.

Maggie always opposed German re-unification and she was 100% right, we have seen although on the surface a benign Germany inch towards total control over the EU.

German is also very close to Russia and Putin, so the obvious step forward when all these Eastern Germans (Stasi) are in positions of power (20-years) is for Germany not only to look eastwards to a country with natural resources to feed its factories but also to be a political ally.

The Germans are very similar in nature to us Brits, in fact if we worked together we could do great things. Unfortunately the French have married Germany and will do everything to ensure that marriage does not end in divorce. That means accepting whatever the Germans say or do.

The UK is in mortal danger, not only should we pull out of the EU and only trade with them, but through traitor Gordon Brown we now have a second front to the North of us as socialist Scotland will mover closer to the EU and French influence.

Therefore we need to boost the MOD budget markedly and bring back conscription for two years before you can go to University.

For those people who will laugh remember we never defeated communism they just lost a battle in the great clash of ideas. We can see pockets of socialist / communist inspired campaigns against capitalism the real threat is Islamic-socialism. However, with the Germans the EU super state might just become a national socialist state.

Graham Swift

November 10th, 2011 11:02am Report this comment

This is like a putsch. Merkel and her gang of thugs resmble a certain group as existed in Germany in the 30s. What next ? Panzer Groups , Waffen SS and the Gestapo ?

NorthernGrouse

November 10th, 2011 11:06am Report this comment

Spot on. Those who said 'history is dead' are now seeing it written before our very eyes.

A Bloke of A Certain Age

November 10th, 2011 11:14am Report this comment

"The omnipresent Jean-Claude Juncker, Prime Minister of Luxembourg and head of the 17-nation eurozone group"

Prime Minister of LUXEMBOURG. FFS!

realitylite

November 10th, 2011 11:24am Report this comment

Well, we all know what's said about a night at the opera. It's not over till the fat lady sings.

The Meissen Bison

November 10th, 2011 11:28am Report this comment

Best not to mess with these guys if they can move cities or divert rivers...

Rhoda Klapp

November 10th, 2011 12:05pm Report this comment

Is anyone in UK politics defending this now? What do the LibDems and Labour say, about the daily rule-changing, muscle-flexing and interfering? Do they support it? Do they find it regrettable (but necessary)? What about the possibility of some inner core making up their own set of rules without consulting the rest? Is that OK?

I hold no brief for DC, but there is an opportunity here for him to get on the right side of this while the opposition are in denial and disarray (yes, the opposition inside the coalition and out of it). All it requires is for him to be bold, to stand up for our nation and be counted. Ha Ha Ha Ha, had you going for a minute there.

Jeremy Poynton

November 10th, 2011 12:16pm Report this comment

Jesus - now we have TWO Frankfurt Groups, and both enemies of the people.

Chris the Swede

November 10th, 2011 1:41pm Report this comment

The problem is the same everywhere in the eu the politicians want it but only a small minority want the end of their own state. That is the real goal of Brussels to create a state controlled by the eu cliché imposing their will on everyone else. I for one do not consider myself a “european” im a Swede as im sure most of you define your national identity as British, UK etc. yet now we have the word European citizen written in our passports and also have to thumb scan to get them its sick.

Ken

November 10th, 2011 2:10pm Report this comment

A very prescient essay Mr Nelson. Western leaders spoke of regime change in Afghanistan, in Iraq, in Libya and other 'foreign' parts and we shrugged, because after all, those places were 'different' from us. Now it would appear these were mere practice runs for undemocratic regime change by power mad European politicians and bureacrats. What are we going to do now?
As Prof Michael Hudson notes the EU has been captured by high finance demanding its bad bets be repaid at any cost including democracy: "EU: Democracy Incompatible with Debt" Collection." (Google michael-hudson dot com). Time to arrest the bankers methinks, before they bring on Chancellor Merkel's Third World War.

JohnPage

November 10th, 2011 2:37pm Report this comment

Fascinating. The irony is that none of this putsching about addresses the eurozone's central contradiction: southern eurozone countries have become uncompetitive with Germany at a fixed exchange rate, and their electorates won't accept the measures that would be needed to restore that competitiveness.

It’s no good anyone trying to govern southern Europe as if it were northern Europe – whether they’re domestic politicians or foreigners.

Greece & Italy are holding their breaths at the moment – wait till they get interim governments and the “reforms” start to bite. The streets will be lively. And neither country is likely to elect a government with a clear majority.

Removing their heads of government brings them no nearer a solution.

cityboozer

November 10th, 2011 3:12pm Report this comment

‘Groupe de Francfort (GdF)’

When the old Venezuelan currency was inflated to worthlessness and redenominated, the new one was called the "strong Bolivar".

Is there a hint of this in "Franc Fort"?

Man in a Shed

November 10th, 2011 6:21pm Report this comment

The Fourth Reich slips its disguise.

Michael

November 10th, 2011 6:22pm Report this comment

How quickly we forget.

We need to do more than wear poppies for a couple of weeks each year if we are to remember what it was all about. We need to maintain our guard against tyranny at all times, especially when it hides behind claims of necessity for its actions.

It has been said that those who are prepared to sacrifice liberty for temporary security deserve neither and will lose both.

The fear and distress now distracting the populations of several European countries from the assault on their democracies are the result of the "beneficial crisis" (their words) that the conspirators looked forward to as a means of accelerating the process of integration. They were warned of the consequences but they carried on anyway.

In other words, they were prepared to wreck entire economies and destroy the livelihoods and prospects of millions of people in pursuit of their vile political ends.

There aren't enough lampposts and they aren't high enough.

Molly Black

November 10th, 2011 7:19pm Report this comment

When the EU vision stated that it would avoid bloodshed and another great war, what it meant was , Germany would take over Europe without firing a bullet. The Socialist Quislings in every member state , especially ours, will see to that. Cameron and Clegg are 5th columnists and not to be trusted.

pixijade

November 10th, 2011 7:46pm Report this comment

I think you will find that Cameron and osborne are pushing for the 'remorseless logic' of fiscal union and further integration, which is what the frankfurt group is trying to do. If you think Cameron will "be ready" when the music stops you will be disappointed. Just when has Cameron thought through the consequences of anything?

Chris

November 10th, 2011 9:16pm Report this comment

Hasn't Sarkozy noticed that France is in a similar situation to Spain and worse than Italy. I don't think he'll survive long nor France be allowed in the new euro. The EU masters won't bail france out.
British politicians and apparatchicks should steer well clear of the frankfurt group, very dangerous allies

Lance Grundy

November 10th, 2011 9:52pm Report this comment

Great article Fraser.

disenfranchised

November 10th, 2011 9:54pm Report this comment

what are these people on? they even emerged wearing silly little badges, like new boy scouts.
may god help us....because no one else will.....

edgeplate

November 10th, 2011 11:25pm Report this comment

"Through its EU membership, Britain already sends more foreign aid to the continent — £9 billion a year — than it does to the third world. Is the lesson of the Frankfurt Opera House not that the EU’s main paymasters can do what they like?"

Firstly, I don't think Cameron or the rest of the British government have the slightest intention of throwing their weight about, more like go along with it getting the worst bargain possible. They are innocents abroad.

Secondly, given that the UK has a chance to lead from the heart of Europe and be a part of the axis, now Franco-German inflicting things on Italy and Greece etc in the name of the European Project, I'd really rather we didn't. In any case, if this were the way things were to be done, it would be nice to be asked. These machinations are not part of any of the current treaty obligation in fact they are quite contrary to them. What's happened to this referendum lock?

We should never have gotten into this, all these clever dick plans to install puppets here and there are quite likely to go horribly wrong and we'd be better off out and have no part of it.

Alan Douglas

November 11th, 2011 7:13am Report this comment

Purpleline says : "Unfortunately the French have married Germany and will do everything to ensure that marriage does not end in divorce. That means accepting whatever the Germans say or do."

Didn't Homer say something as wise : "The French are cheese-eating surrender monkeys."

Works for me.

Alan Douglas

Jeremy Poynton

November 12th, 2011 9:06pm Report this comment

Purpleline November 10th, 2011 10:56am

Quite so. Gorbachev noted that the Russians thought it insane that we were waving in what they had just waved out.

FaustiesBlog Libertarian

November 12th, 2011 11:13pm Report this comment

Was this not a conspiracy of the highest order?

Herbert Thornton

November 12th, 2011 11:45pm Report this comment

Repeating what I've said elsewhere - read Edward Lear's Owl and Pussycat verse.

While reading it, think -

Pussycat = Merkel
Owl = Sarkozy
Piggywig with a ring in his nose = Cameron
Ring in Piggywig's nose = Clegg
Fiveound note = Euro
Runcible spoon = Rompuy

A crazy situation indeed - but what's it all leading to?

Herbert Thornton

November 13th, 2011 1:43am Report this comment

Despite many people being convinced that there is a sinister plot to establish some sort of totalitarianism over Europe, and despite the implications that Merkel is motivated by a desire to establish German control over Europe, I think they are altogether too gloomy. I have doubts about it.

I incline rather to believe that Merkel was not so much imperialistic about Europe as idealistic. I also believe that she has now come round to realise that - disappointingly - the EEC and the Euro simply haven't worked.

I believe that she is now mainly motivated by the dreadful fear of inflation. This is shared by most Germans and results from consciousness of the horrendous effects of the Weimar inflation. Consequently, Merkel is resolutely - and rightly - opposed to the notion of helping to "cure" Europe's ills by simply creating more Euros. She believes, I suggest, that it would be better for Germany to abandon the Euro and revert to a German mark and to refuse to inflate it: and if that means and end to the Euro and the EEC, so be it.

I foresee a split between her and fanatical Europhiles and Eurocrats like Van Rompuy. I also foresee that she will be unwilling to help the French out of any financial difficulties France may have.

This makes me ask - where do Cameron and Clegg stand in this situation? Everything they do - and Clegg especially - makes me fear that they would rather line up with Sarkozy than with Merkel. To my mind that would be perpetuating the traditional British mistake of supporting France in order to oppose Germany.

British politicians should recognise the virtue of sound economics, wash their hands of the foolishness of the Euro and EEC, pursue fiscal policies more like Merkel's - and cooperate with Germany rather than with European failures. Indeed, if Merkel's fiscal policies were in any way to help Britain rid itself of Cameron and Clegg they should be welcomed.

I'd like to see Merkel as a worthy successor to Bismark and somebody in Britain (obviously not Cameron) emerge as a worthy successor to Disraeli. Bismark and Disraeli it should be remembered greatly admired each other - and got along well.

Herbert Thornton

November 13th, 2011 5:23pm Report this comment

I'm a bit surprised that the more fanatical Europhiles haven't accused Fraser of being a bit paranoid for using the heading "Europe's Hit Squad".

But as other posters have pointed out, there are certainly some very anti-democratic forces at work - and especially so in Britain.

Who, for example are those responsible for the relentless demonisation and harassment of both the EDL and of the BNP and even for the constant contempt with which UKIP is treated? And who is responsible for so much official, BBC and media disinclination to criticise the encouragement of immigration? Why is it that even Islamic terrorists and their supporters are "protected" from deportation on the most spurious and trivial grounds?

As for Britain's membership of the EEC Cameron and Clegg are so determined that it must not be questioned that they form a Hit Squad of their very own.

Pam Brown

November 13th, 2011 7:47pm Report this comment

While reading the article I couldn't get rid of scenes from "Quantum of Solace" flickering in my mind. Has Hollywood got this part in the Opera right? Actually, the article sends shivers down my spine, since obviously there're no qualms or reservations about doing away with democratic traditions. Ubiquitous technocracy at the top, gets all things right, or don't they?

J Weiss

November 13th, 2011 8:33pm Report this comment

Funny how all the former protectorates are crying for more money from the german sugar-
daddy- along the lines of Dr Funks 1940 paneuropean economic plans...

Norman Dee

November 14th, 2011 4:18pm Report this comment

So the plan so far is working, we have the first 2 quislings in place, our man Lord Haw Haw in place at the BBC. France is coming up for elections lets get shot of the squirt, Mr Hollande is socialist and much more pliable than the dwarf. Clegg will do for the moment, but Camerons replacement needs to be firmer, what about Kinnock ?

john miller

November 14th, 2011 4:57pm Report this comment

That's what we need - NAMES.

They may be democratically unaccountable, but as long as we know the names of the perpetrators of this colossal fraud, they will become accountable should the need arise...

Adam

November 15th, 2011 3:35am Report this comment

Read the articles at www.thetrumpet.com. Shows you where this 10 nation European superstate is leading the world. It ends in the greatest news ever!!!

Incredible14U

November 15th, 2011 1:17pm Report this comment

May i suggest a read of 'germany and the holy roman empire' by gerald flurry. Its top of the internet page and can be downloaded in pdf fomat. This book will explain what germany has done, doing and intends to become. So before you guawrf and toss it away remember as you read look at what germany is doing where is is leading.

Mark

November 17th, 2011 1:35am Report this comment

The article is very interesting, although I fundamentally disagree with the analysis of the response from the UK. The comments however are hilarious - do not adjust your tin hats people.

Tim

November 17th, 2011 11:28am Report this comment

@Mark - I agree - I like Mr Nelson's writings, though I don't always agree. But the comments, the comments - Sheesh... you don't know whether to laugh or roll your eyes. I know some will always seek to see dark plots etc - but real political life is both more prosaic and complicated. Merkel, Sarkozy et al are not in some huge underground bunker, chanelling Ernst Blofeld, stroking a white cat and muttering "No Mr Bond/Cameron, I expect you to die"...

André Rebentisch

November 17th, 2011 1:05pm Report this comment

The European Union institutions are complicated, thus you make up conspiracy narratives for your audience. The suggestion that the governments of Greece and Italy were removed from power and replaced by technocrats is a malicious and convenient distortion of facts. Berlusconi announced quite a while ago his intention to transfer power. His colleague from Greece committed political suicide. The "GdF" was made up for your narrative. For French observers GdF stands for "Gaz de France". There are so many official and semi-official working groups in international affairs, and we would be aware if "GdF" was an important one. In the very core of the committee hoax we find the (common) belief that decisions usually take place in closed circles of powerful persons - Not a very close approximation of reality... but reality would be rather boring.

James

November 17th, 2011 4:25pm Report this comment

Merkel, Sarkozy et al are not in some huge underground bunker, chanelling Ernst Blofeld, stroking a white cat and muttering "No Mr Bond/Cameron, I expect you to die"...
Now that was worth the wait! well Done sir.

John Richards

December 2nd, 2011 12:48pm Report this comment

"Berlusconi announced quite a while ago his intention to transfer power. His colleague from Greece committed political suicide."

Are you saying the Greeks demanded the replacement of their elected prime minister with the former vice president of the Central European Bank because he offered them a referendum on an issue of vital public interest? Or are you admitting it was a banker's coup?

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