Mitt Romney, German Sympathizer

06/11/2012 11:24 am EST


Igor Greenwald

Chief Investment Strategist, MLP Profits

The presidential candidate’s top economic advisor is urging Angela Merkel to ignore everything Barack Obama has been saying, writes senior editor Igor Greenwald.

Does the road to the White House now go through Berlin and Frankfurt?

It’s obvious by now that Germany is Europe’s dominant taskmaster and paymaster, deciding who must do what in return for how much credit at a discounted rate.

But the last three days have highlighted how European policies made in Germany are also shaping (sapping) the US economy, with the potential to decisively influence the presidential race.

President Obama’s re-election depends crucially on optimism about the recovery and improvement in the still painfully high unemployment rate. Which is why he spent so much of Friday’s press conference urging Europe to do more to stem its financial crisis, before the strains overwhelm global growth (and his own political prospects, it goes without saying.)

Mitt Romney’s election odds, in contrast, improve greatly if the economy runs aground. Since it’s unbecoming for a presidential candidate to root for misery, his strategy was always thought to involve having rich backers destroy the other guy with anonymous attack ads, as in the Republican primaries.

But now it turns out there’s an audience even more crucial than the American electorate, and one that doesn’t need to be told the other guy is horrible, merely that he will soon be out of power, replaced by a much friendlier Mitt Romney. That audience is the German leadership, best reached via the pages of Germany’s leading business daily. And you don’t even need to buy ad space: they will be glad to run an op-ed by your senior economic advisor.

So here comes R. Glenn Hubbard, Columbia Business School dean, senior Romney advisor and a likely key policy-maker in Romney’s administration, with a column in the Handelsblatt headlined “Don’t Learn from America.”

“Unfortunately, the advice of the US government on solutions to the crisis is misleading, for Europe and especially for Germany,” Hubbard informs German Chancellor Angela Merkel. Specifically, the Obama administration’s calls for jointly backed Eurobonds, the recapitalization of Spanish banks along the lines of this weekend’s agreement, and bulk purchases of Spanish and Italian bonds by the European Central Bank should fall on deaf ears, Hubbard argues.

“These recommendations are not only unwise. They also reveal ignorance about the causes of the crisis and the future growth path,” Romney’s man writes.

Instead, Hubbard proposes that the present and future European rescue funds pledge, alongside the International Monetary Fund, to buy all the medium- and long-term bonds of compliant bailout applicants for the next two years.

This is not the worst idea in the world, though hardly an original one. And it mostly highlights the ideological gulf separating Romney/Hubbard from Merkel, who has stubbornly resisted such mollycoddling.

The Obama campaign complained that Hubbard “discouraged essential steps that need to be taken to promote economic recovery and attempted to undermine America’s policy abroad.”

The Romney camp kept mum, but Hubbard likely hopes that Germany’s demands for austerity on Europe’s periphery, lavishly praised in his column, will also be America’s policy toward its public sector come January. Romney is pushing public spending as a key campaign theme, decisive proof of alleged presidential incompetence.

In a campaign appearance in Iowa on Friday, Romney summarized the Obama platform as “we need more firemen, more policemen, more teachers. Did he not get the message in Wisconsin? The American people did. It’s time for us to cut back on government.”

According to The Hill, this proved a tad too rad even for Wisconsin Gov. Scott Walker, who quickly clarified that his reforms “allowed us to protect firefighters, police officers, and teachers. That’s not what I think of when I think of big government.”

So in a battleground state like Wisconsin, austerity remains a pretty hard sell, Walker’s victory notwithstanding. But so long as Germany keeps inflicting austerity on Europe, what sells or doesn’t sell in Wisconsin really doesn’t matter.

So long Germany persists on its current track, stock market losses and declining corporate confidence will make sure Wisconsin is none too happy come November. Hence Hubbard’s German foray. Because pity austerity’s victims all you want, but its dispensers also need some stroking now and then. On that score, mission accomplished.

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