Monday, July 6, 2015

Chapter 2. Berlin - Fast Money and French Ladies

by Paul A. Myers    All rights reserved.

Chapter 2. Berlin.

Chapter 2. Berlin

Sophie walked into the ultra-modern, glistening all-white reception room escorted by a dark-suited security agent. A receptionist stood and said, “This way, Madame d’Auverne. She’s expecting you.”

The door was opened and Sophie walked into the glass-walled corner office the size of a volley ball court occupied by the German chancellor. Angela Merkel stood and came around the desk and held out both of her hands to Sophie and bussed her on the cheeks. “So nice of you to come on such short notice, Sophie.”

“My pleasure, Madam Chancellor,” said Sophie as she looked around. Outside the tall plate glass windows the skyline of the new Berlin rose in the distance, the economic heart of Central Europe.

The chancellor pointed to a waiting chair and said to the receptionist, “That will be all.” She walked around her long desk and sat down.

“Before you go over and talk to Wolfgang,” she said mentioning Finance Minister Wolfgang Schäuble, “I wanted to put a perspective on events as they stand this Sunday morning. Undoubtedly they’ll be different Monday morning and every day this week. We don’t want to over react. The press will be looking for inflammatory statements.”

“Yes, we must carefully modulate our public statements.”

The chancellor looked off into the distance and then continued, “So flexibility remains a key. A golden rule is that in tough negotiations hard positions are to be avoided.”

“Agreed. We should also always use time to our advantage,” said Sophie. She shared with the chancellor a sense of patience, a willingness to let events play out until a favorable opening presented itself.

The chancellor turned to the big issue. “The geopolitical concerns are momentous. We can’t afford to have failed state on Europe’s doorstep.”

“Yes, it would be an onramp for hundreds of thousands of Muslim refugees into Europe. That would put Marine Le Pen into the final round of the next French presidential election.”

Merkel sadly nodded at this portentous thought. Moving on, the chancellor said, “As you know, I fully believe that if the euro fails then Europe fails.”

“All of us feel that way,” said Sophie.

The chancellor frowned as she summarized her dilemma: “Now the question becomes is it better to pay almost any price to keep Greece in the euro or would it be letter to let them go?”

“Yes, I understand the problem,” said Sophie. “But Greece keeps changing its positions. We’re aiming at a moving target.”

“An erratic target,” said Merkel, a tinge of frustration in her voice.

“Yes,” said Sophie. “But that movement may give us the room to maneuver in clever and unexpected ways.”

The chancellor nodded in agreement with this insight. Capitalizing on this type of situation was why Sophie held the diplomatic portfolio she did. Sophie was always looking at the other party’s brief; she was never locked into her own. The chancellor continued, “Alexis Tsipras thoroughly surprised us with his announcement about a holding referendum in Greece next weekend on the bailout package. We had no advance word,” she said mentioning the Greek prime minister.

The chancellor pulled over a copy of the New York Times and read, “Mr. Tsipras tossed a grenade.” She put the paper back down on her desk and looked at Sophie glumly.

Sophie mentally winced at the word “grenade” and then said, “He doesn’t seem to see the boundaries…or the courtesies…”

Merkel nodded and added, “And that finance minister,” she said referring to Yanis Varoufakis, the Greek finance minister. She shook her head in wonder.

Yes, thought Sophie. Varoufakis looked and acted like a runaway from a garage band. She kept her thoughts to herself.

“If the Greek prime minister would have just signed, we could’ve got past this round,” said the chancellor sadly. “Debt relief and less austerity could have been handled later—out of the public eye.”

“Yes, he burned up the backroom that a deal could have been negotiated in,” said Sophie.

Changing the subject, Merkel asked, “You spoke with Christine?” She was referring to Christine Lagarde, the head of the International Monetary Fund.

“Yes, I was at their headquarters in Washington Friday. They’re all on board.”

“Thank you. Christine is a great consolation to Wolfgang. She is one of the few who speaks in a clear voice.”

“Yes, she is the solid wall in front of which we maneuver,” said Sophie with a sure eye on the coming negotiating arena.

“Yes, if we leave it to Brussels, there will be muddle…” and the chancellor made a pained expression, “and confusion. Wolfgang knows that.”

“I’m on my way to speak to Wolfgang. Any special instructions?”

“He should keep his public utterances muffled this week; we’ll let Brussels deliver the message.”

“That will be out of character,” said Sophie with a smile thinking about the plain-spoken finance minister. The chancellor made a light smirk.

“Let’s stay flexible,” said Merkel. “We have to be ready to discuss anything.” She thought for a moment and added, “Nevertheless, for now our public position is that everyone has to follow the same rules in the euro.”

She paused and then considered her words carefully. “Events…events…it is possible events in the coming days will bring a new government to power in Athens.”

Sophie nodded. That was one exit out of the crisis. But it was also something Jim would call a “lucky bounce,” and he was pretty clear that is not the way to play the game.

The chancellor stood up and walked around the desk and took Sophie’s hands in hers. “I was sorry to hear about the passing of your grandmother.”

“Grandmère lived a long and adventurous life,” replied Sophie. Sophie’s grandmother, la vicomtesse Inès d’Auverne, had died the previous winter at a great age in the family’s chateau in Normandy. Her grandmother, like her fifty or sixty predecessors stretching back centuries—les vicomtesses—had written an engaging tell-all memoir about her exploits in the halls of power in Europe and in the boudoirs of the leading men of the day. The series of memoirs—all renowned for their intimate frankness and sharp political insight—were the centerpieces in many rare book collections around the world.

“Yes, I read the memoir of her mother—fascinating insights about the years between the wars. I trust we will get to read her memoir in due time?”

“It will be out soon. I will see you get one of the first copies.”

The chancellor smiled. “Yes, I would like to read about the woman who put a smile on Der Alte’s face,” she said with a twinkle in her eye, referring to the legendary postwar German chancellor Konrad Adenauer.

“Soon,” said Sophie beaming.

The chancellor walked her over to the door.

The Air Ministry

Outside, the security agent escorted Sophie to a shiny black Mercedes limousine. The security agent said to the driver, “The Air Ministry. Finance minister’s office.” The Air Ministry was the nickname of what had once been the largest office building in Berlin, the headquarters building built in 1935-36 to house Hermann Goering’s Luftwaffe organization. It had miraculously survived the destruction of World War II and forty-five years as an office building housing the Communist ministries in East Berlin, a stolid bastion to a Marxist society symbolizing East Germany’s commitment to non-movement. It was now home to the mighty German finance ministry and associated agencies.

As the limousine pulled to a stop in front of the mammoth boxlike building with all the charm of an American penitentiary a uniformed sentry came forward and opened the door. Sophie got out and was escorted up the flight of steps. At the door, a well-presented aide met her and said, “This way. The minister is waiting for you.”

Sophie followed the aide down the hallways listening to her heels tap on the hard polished surface. Presently she was ushered into a spacious office with bookcases and comfortable seating. Schäuble was sitting behind the desk and looked up. “Good morning, Sophie. Have a seat.”

He finished with some papers and set them aside. Then he wheeled and turned and with strong arms and broad shoulders pushed his wheelchair in a graceful arc around the desk and came out and parked near a bookcase. Schäuble had had his spinal cord severed by an assassin’s bullet in the early 1990s just after the German reunification.

“It’s about Greece?” he asked to start the conversation off.

“Yes, what else?”

“Seen Angela?”

“Yes, I’ve just come from there. Her main concern is winding up with a failed state on Europe’s doorstep.”

“Yes, I understand. But can we survive with a failed state inside the euro?” said the uncompromising finance minister.

“You know I believe that is a good question,” said Sophie.

“Close integration—the key to the eurozone having a better future—depends on tough rules,” lectured Schäuble.

“Yes, but we have to place Greece somewhere in the maze of rules.”

“You know I believe in a multi-speed European Union,” said Schäuble. “I have sympathy for British prime minister Cameron’s position where there is a circle of countries outside the euro that preserve greater sovereign rights.”

“Yes, I understand,” said Sophie. “The inner core integrates rapidly while the other countries go slower.”

“Exactly. And Germany leads this inner core…” said Schäuble. “Either way we go with Greece, it will be expensive. Possibly it would be better to smooth their way to the outside…with Great Britain.”

“Yes, Great Britain would be of great use in such a situation,” said Sophie as she chewed over this idea in her head. “Interesting possibilities,” she mused.

“If that opportunity were to present itself…” said Schäuble.

“I would of course be on the lookout…” said Sophie as Schäuble smiled.

Changing subjects, Schäuble asked, “Christine? You’ve seen her?”

“I saw her Friday in Washington.”

“Yes,” he drawled with a saturnine smile. He knew the women folk were going to soften him up. “So Athens?”

“Yes, the announcement of the referendum came as a bit of a surprise.”

Schäuble rocked the wheelchair this way and that, moving the right wheel forward and left wheel back. “A bit of a surprise…I was at the Eurogroup meeting,” he said mentioning the powerful policy group of eurozone finance ministers. “Not a word was spoken.”

“Well, Vanoufakis was there, not Tsipras,” said Sophie.

At the sound of the name Vanoufakis, Schäuble pushed hard on both wheels and did a wheelie, bringing the footpads up a foot off the floor. Sophie could all but see steam coming out of the finance minister’s ears. She stood up and walked over, afraid that he might tip over.

“Relax,” he said. “I’m good at this. I get a lot of practice.”

She smiled and stepped back and sat down. Boys will be boys. She watched as he expertly balanced the wheel chair and wiggled it this way and that, finally bringing the front wheels back down onto the floor with a light thud.

“What’s Draghi doing?” he asked, mentioning Mario Draghi, the head of the European Central Bank.

“He’s slowly cutting the supply of cash. The ATMs are limited to sixty euros a day per customer.”

“That horse is out of the barn. The ECB has pumped almost ninety billion euros into Greek banks just since February. While we’ve been talking, they’ve been…”

“Yes…for now…”

“You don’t know, Sophie. I’ve got to take the phone calls from Weidmann,” he said, mentioning Jens Weidmann, head of the Bundesbank, Germany’s powerful central bank.

“I can sympathize with your commiserations…”

“He goes on and on about the monetizaton of debt, reminding me that it is against the laws…”

“Possibly he is fighting the last war…”

“It’s all about 1923 I’m afraid,” said Schäuble, mentioning the great inflation of 1923 which scared the German psyche for generations.

Moving on, Sophie said, “The chancellor says that any agreement must pass muster with the finance ministers…only they can say yes.”

“And the chancellor only wants the finance ministers to speak collectively, not individually,” he said with a knowing smile. He knew—stay quiet.

“I believe that was part of the message I was supposed to deliver.”

Schäuble laughed. Schäuble knew better than to ask who had actually decided on the overall strategy. That was Sophie’s job—to go around telling mortals like him that “they” had decided upon such and such.

“And the chancellor has been clear that she isn’t hearing any more appeals from Athens,” said Sophie.

“So Angela isn’t taking Athens’ phone calls,” said Schäuble dryly. The goddess that doesn’t answer her telephone. “So there’s no way those guys can get a ‘Yes’ out of her.”

“Not for now,” agreed Sophie.

“And she’s also the only person who can say ‘No’ and she can’t be reached,” said Schäuble with a brittle laugh.

“That’s our approach for this week—the Greeks have to go over to the finance ministers’ door if the answer is ‘yes’ and somewhere else—vague we might say—if they want to deliver a ‘no.’ They can only find one door—the one we want them to go through.”

“Who is going to be the public face this week?”

“It has been decided to let Juncker and Tusk present the public positions of the European Union,” said Sophie, referring to Jean-Claude Juncker, the head of the European Commission, and Donald Tusk, the head of the European Council.

“So much for the public,” said Schäuble. “What do the knowledgeable observers think?”

“Possibly events will bring regime change in Athens. A new government that can negotiate.”

“And who might push the regime change? Only the Americans are dumb enough to try to directly engineer regime change—and their record…Iran…Iraq…”

“There’s a lot of outside money invested in Greece. When the previous Greek government was making progress, the international players went for the upside…a lot of Greek politicians like money…”

“Yes, they can be bought…as long as it is someone else’s money…the old game…the hedge funds make billions…and the German taxpayer writes off tens of billions…some strudel that is…”

“Eventually some form of debt cancellation…disguised of course,” ventured Sophie. “Christine mentioned that.”

“Yes, more extend and pretend. It probably can’t be helped,” said the dour finance minister. He held his hands to the side of his head in mock exasperation and said, “Too much reality is bad for my delusions.”

Sophie laughed.

“In conclusion,” the finance minister said, “remember Grexit is not only about dealing with one weak member, but also about strengthening the rest of the club.”

“Yes, a better future is nonnegotiable,” said Sophie.

“Well said by Europe’s best negotiator,” said Schäuble with a laugh.

Sophie demurely said, “Thank you.”

Schäuble slowly wheeled around, a light smile of expectation on his face, and directly faced Sophie. “Enough about that. Tell me some more about your grandmother. I’ve read most of the memoirs of les vicomtesses from the past couple of centuries. Great insights. Those memoirs plus Thucydides and a good biography of Bismarck and you’ve got a grip on international politics. Is your grandmother’s memoir about to come out?”

“Soon. I’ll get you one of the first copies.”

Schäuble relaxed and mused, “Great, what you’ve already told me is fascinating. Too bad De Gaulle was such a straight arrow…that would have made interesting reading…”

“Yes, that’s what grandmère said with a bright eye and sly smile…an interesting time missed…”

Schäuble laughed for the first time that morning, and probably the last time that week.

Sophie stood up and walked over and patted Schäuble on the shoulder and said, “Wolfgang, you’re rock in a sea of indecision. Please give me regards to Ingeborg. At one of these conferences we can all have dinner again.”

“We’d love that, Sophie.”

Sophie turned and walked over to the doorway and out of the building.

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