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This article in Zeit Online tries to provide the facts behind Merkel's decision made in a period of 24-48 hours to let refugees marching towards Austria from Keleti station in Budapest, Hungary, September 5, 2015, to enter Germany. Other reports pointed out that too little time was given to make the decision and that it was purely done on humanitarian terms. And made during that short window of time, in which a decision had to be made to turn away the refugees going on foot for hundreds of miles or to turn them away. Given Germany's earlier history the choice was a difficult one but erred on the side of being humanitarian. Though Merkel's selfie with a refugee at a hostel on Sept 10, would seem to suggest otherwise, Merkel has said her decision was made with so little time and little opportunity to understand all the ramifications of this. It was not an open invitation to refugees to come to Germany. 

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As growth slows in Germany, with contraction in the second quarter followed by expected growth of annualized 1% in the remainder of the year, debate is growting for tax cuts and ways to promote business investment. DIW, a think tank in Berlin, says the government's goal of a balanced budget may be unsustainable in the current economic climate. Deep spending cuts in Spain and Italy have not been supported by increased spending in Germany, say critics, leading to a too tight fiscal policy for the weak state Europe is in. ECB president Draghi is also pointing out the the need for changes, by saying- "It may be useful to have a discussion on the overall fiscal stance of the euro area with the view to raising public investment where there is fiscal space to do so."

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The latest Commerzbank estimates show Germany and Japan, both with large capital goods industry, showing declining GDP of about 7% in 2009. That is a steep decline stemming from the lower demand in industrializing countries like China, India and other countries. The German government has only committed so far 88 billion euros ($120 billion) or 3.5% of GDP. To get some idea what the German government is thinking look at the GDP numbers from the government, which show only a 2.25% decline. Compare this with other estimates closer to Commerzbank's estimate- BNP Paribas shows 5.4% contraction, Deutsche Bank 5%, German think tank DIW 4-5% drop. And the government estimate scheduled date for revision is April 29. This may explain the gap between what the Obama administration is saying to the Europeans: you need further stimulus, and what the Chancellor Merkel is saying: we will be just fine. The French government is saying saying the same thing the German government is saying. But France with a smaller export industry is expected to see a drop of less than 4%, the USA 4%, by Commerzbank estimates. Experts say as German elections approach in September, Merkel is going to have to respond with larger stimulus amid large job losses. And sentiment may be shifting in France as job losses mount, as evidenced by large turnout across France calling on the government to help in recent demonstrations....

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The SPD's Peter Steinbruck's criticism of Merkel's handling of the eurozone crisis. Speaking to the Bundestag Steinbruck said Merkel had wasted time and billions of dollars of taxpayers before committing to keep Greece in the eruozone. "You should have held this speech three years ago... Never has Germany been so isolated in Europe as it is today." He said Merkel was not being honest with Germans that to be part of Europe Germany had to take on some of the cost and that it was worth it. Instead she was riding the wave of negative opinion for the eurozone and at the same time trying to keep up Germany's influence in Brussels, creating a perception of a new kind of German "industrial imperialism." This comes as France's president Hollande expressed serious dissatisfaction with Merkel's handling of the eurozone crisis in an interview with reporters of 5 European newspapers in October 2012.

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Debate in Germany over whether there should be exception to the minimum wage agreement of 8.50 euros per hour. The head of the federal employment agency, Heinrich Alt, says a universal minimum wage would reduce incentives for young people to join vocational training. The new labor minister, Social Democrat Andrea Nahles, says "there will be no exceptions, notwithstanding all the escape fantasies." The Social Democrats insisted on the minimum wage to win support from rank and file working class members after losing support in its own base with the increase in the low wage sector in Germany. Unemployment in Germany is less than 5%, but this comes with an increase in lower wage workers as part of the reforms under the Social Democrat Schroeder administration when unemployment was close to 10%. Economists say the increase in wages would increase weak consumer spending in Germany and increase imports from other eurozone countries. In 2011 the share of the German population making less than the new minimum wage of 8.50 euros an hour, according to the German Institute for Economic Research, is- for former East Germany 27%, for former West Germany 15%, for ages under 24 years 44%, for ages 25 to 60 years 15%. This does not affect the manufacturing sector in East Germany as wages in the sector are above 8.50 euros. The other problem is that wages appear to be declining in Germany, with wages decreasing by 0.3% in October 2013, according to the Federal Statistical Office. ...

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Porter cites a report by Kai Daniel Schmid and Ulrike Stein of the Macroeconomic Policy Institute in Dusseldorf. The report shows the top 10% of Germans having 26% of the country's income before taxes and transfers in 1991. This increased to 31% by 2010. For the same period of about 20 years the bottom half of the population took in 17% in 2010 dropping by 5% from 22%. The growing income inequality in Germany is comparable to what has happened in the U.S. over this period.

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The Alternatives for Germany political party and the opposition to the euro inside Germany. The support for the party is not broad grass roots based and some observers see it as a movement of the elite. It was started by Hamburg economcs professor, Bernd Lucke. Many party members formerly belonged to the Christian Democratic Union led by chancellor Merkel. Over two thirds of the members listed on the home page for the party have doctorates. The new party could create uncertainty about the outcome of the German by drawing votes away from Merkel.

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Greece's New Democracy party and Mr. Mitsotakis wins about 41% of the vote in Greece's elections. Syriza come is second with 21% and Pasok left party at 12%. Mitsotakis has increased Greece's growth to twice the eurozone rate, and cut migrants by 90% in line with EU policy. New Democracy party gets 145 seats in a 300 member parliament. The first round was conducted under proportional representation, only 60% of voters cast their vote. Mitsotakis will go for another election by July because in a second round the winner gets additional seats and this could let it form its own government. It sees this as needed to maintain policies of economic growth that have led to GDP growth at twice the rate of the eurozone. A surveillance scandal appears not to have affected the election results as Greeks opted for stability and growth. Mitsokatis himself put it this way- "This is not the time for experiments that lead nowhere." Greece was almost out of the eurozone when Syriza conducted referendums on the debt repayment that led to a chaotic situation, and then moved in the opposite direction in callous implementation when the Eurozone held firm. Mitsotakis said Greece needs to achieve an investment grade rating to lower borrowing costs. Worldwide the policy of delivering on growth is key to success in elections in democracies and in countries that are catching up after the colonialist phase. This is true for delivery of infrastructure and public services such as water and electricity, modern rail in India. It is true also for winning enough public support in countries like China that run parliamentary representation under one party the CCP. Strict immigration controls since 2015 reflect a similar policy pursued recently by Italy. Migrants have dropped by 90%. This is popular among Greeks. Looking back Merkel made a serious error in letting in migrants coming in from Hungary and Austria at the beginning of the migration inflows into the EU in 2015. Merkel came from former East Germany, the communist led GDR, and had no understanding of how harmful this would be for the European Union. In just one year by 2016 the misguided open migration policies of Merkel had led to her CDU party getting less votes than an anti immigration AfD party in her home state of Meckenburg. It led to anti-immigration movements in Europe that were used by parties in a self-serving way including in Britain that led to exit of Britain from the EU. It also led to a decade of austerity and a lost decade for the European Union as it permanently sidelined parties to the left such as Social Democrats that unknowingly or unwittingly ended up with the blame for the public's discomfort with lack of borders and migrants upsetting borders. In balance the right way to tackle this was to build stronger economies that supported workers and families in the EU, that then invested significantly in developing countries of Africa and Asia to help them catch up with modernization. Another failure in policy was the Bush-Obama Merkel policies in failed states such as Iraq and Afghanistan. There it was fundamentally important not to get involved in any way that committed US or EU's precious resources.  ...

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The Ifo Institute's Hans-Werner Sinn presents the German view on bailouts for Greece, Ireland, Portugal, Spain and Italy. He says that socializing of debt was proved to be a bad idea even in the U.S. experience when eight states and territories were allowed to go bankrupt in the 1830's and 1840's, and even though California is close to being bankrupt no one suggests socializing the debt. The European Economic Advisory Group has favored short term assistance and liquidity assistance but not aid for insolvency. Bundesbank assistance for international shift of refinancing credit, also called Target credit, is estimated at $874 billion, since 2007. Greece and Portugal current account deficits were financed using this. ECB purchase of government bonds $250 billion, and $500 billion in rescue programs from the IMF, and additional help from the European rescue funds such as EFSF. Sinn says Germany would lose $1.35 trillion if the euro fails. If Greece, Ireland, Italy, Portugal and Spain go bankrupt and repay nothing, and the euro survived, Germany would have lost $899 billion by his estimates. He responds to critics by saying that the Marshall Plan gave Germany 0.5% of GDP for 4 years, or 2% in total, or about $5 billion today if taken as 2% of Greek GDP....

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Business Week's Michael Lewis has some serious questions and a message for investment bank Goldman. His questions- ACA was incompetent which is why it was chosen as CDO (collaterized debt obligation) manager. ACA was chosen by Goldman precisely because it did not know what it was doing and lost $900 million in the process. So too IKB, the dull witted German bank which lost $150 million. Goldman did not lose $100 million on the Abacus deal because Goldman was shorting the subprime market by March 2007 the time of the Abacus deal. Knowing this requires transparency of all dealings of Goldman's proprietary trading desk to understand real losses. Fab Tourre, the 27 year old Frenchman, is just a kid in this game. The real name behind this is Jonathan Egol. Who is this guy who clearly knew the subprime market was doomed in 2006 in remarks he made at the time.

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In Europe, France, Spain, Germany and other countries are giving cash subsidies to customers to buy cars when they turn in older cars. These refunds range from 1000 to 2500 euros, and reward the purchase of smaller more fuel efficient vehicles. It has boosted sales in Europe where sales are running at an annual rate of more than 13 million because of the subsidies, according to Credit Suisse analyst, which is well above the 11 million level of last year. The average American car says the analyst has been on the road for 9 years similar to that in Germany, so it makes sense for the USA. He says it could increase sales in the USA to 12 million cars, down from the 16 million sold in 2007 or the 13.4 million rate of 2008, but far higher than the 9.5 million rate in the first few months of 2009. In Europe small cars are dominant and it plays to the markets of large carmakers like Peugeot, VW, FIat, and Renault. But in the US Japanese carmakers are dominant in the small car market. Detroit carmakers make too many large cars and pickup trucks so the impact would be less. But the program could be fashioned in the US on a drop down in size and increase in fuel efficency, so that the clear direction is towards smaller cars. Turning in a pickup truck for a family car like a Malibu or a LaCrosse might promote fuel efficiency, and move things in the right direction. Its useful to note that even in Germany more expensive cars or brands have barely benefitted German car sales jumped 21.5% in February, but mass market manufacturers recorded a 37% surge, while sales of premium cars fell 19%. In Italy which started its program Feb. 6, buyers receive 1500 euros for trading in acar at least 10 years old. Fiat Punto sales have shown a strong increase. Fiat's facory in Melfi, southern Italy, is now running at full capacity after running on areduced scale from October 2008 to February 2009. It makes the Punto. In France 30-40% of car sales are coming from the scrapping deal, according to French Auto Manufacturers Association. Overall sales are running at about 6% below last year's rate, but in the absence of the scrapping deal sales might be off 10-15%. One concern for the French is that sales not drop off after the scrapping deal stops.France saw this happen in 1997and 1998 after ascrapping deal in 1994-1996. However considering that the cost to the German government for scrapping deal was $2 billion, the solution to this would be continue this program till the economy recovers and car sales are strong. Considering the benefits for an important industry and the societal benefit in lower pollution, it would be worth the cost....

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Pearlstein argues that the US and the Obama administration achieved most of its goals, even though the Europeans took the credit. On regulatory reform, Geithner's regulatory reform proposal he says, could well have been written at the French Finance Ministry, as at the US Treasury. And it gives Obama ammunition to prepare, as private equity, hedge funds, and banks try to water down his proposals for regulatory reform. By having member countries commit to adding $850 billion to the resources at the IMF, and regional development banks to provide help to countries in serious difficulties- and giving instructions that the money can be used not only for debt rollover, bank recapitalization and balance of payments support, but also for stimulus spending, infrastructure investment, trade finance and social support- the Obama adminstration has accomplished a great deal. It has succeeded in putting in place the necessary financial resources to support not only the financial systems of countries in Eastern Europe, Asia and Latin America that need help, but put emphasis on the need for resources to go for helping reduce job losses, create jobs, and provide some forms of income or support to people in these countries. This is a major step as it means the countries of Eastern Europe and other developing countries can deal with their crises in confidence. Mexico is taking loans from the IMF. Dominique Strauss Kahn had begun the policy of shifting IMF's focus to these social goals as significant parts of the recovery process in countries, but he faced the old mindset among the IMF staff, as when its reported staff wanted to increase interest rates in Pakistan by 10% instead of the 3% that was finally agreed to. That would have caused serious difficulty to the people of Pakistan, created chaotic situation and disturbed the social fabric of that country. See the link to this for S. Korea and for Pakistan. And as Gordon Brown put it the old conditionality that lay behind the IMF loans, is phased out. This makes it the new policy at the IMF backed by the G20 mandate. The Washington consensus which prescribed open borders, floating exchange rates and fiscal prudence is now ended. And to support this change the developing countries will have a bigger say in IMF policy and decisions. ...

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Even though 61% of Germans in a recent poll want migrants with an open asylum application  in another EU state to be turned back, about two thirds of people in the Forsa poll of June 15, say they want this to be done with a European resolution not a unilateral approach. This favors Chancellor Merkel in her dispute with coalition partner CSU leader Seehofer who seeks a tougher approach to immigration. Seehofer's attempt as Interior Minister to set a new order at German borders without the agreement of the Chancellor would be a challenge to Merkel's authority. The dispute was postponed for 2 weeks till consultation with European partners. Merkel says this would be a challenge to the authority of the Chancellor. 

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German response to Obama's urging for a bigger stimulus as seen from the American side. The German side looks at the hyperinflation of the 1920's, the American side looks at memories of the Great Depression and the Hooverist response, in the early years before Roosevelt.

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Greece's minister for migration tells the Times that seven charities including one in London form part of a chain stretching from Somalia to Britain in which smugglers move migrants illegally.  One of the seven charities is in London and is seen as colluding with human traffickers who are putting lives of migrants at risk. Greece has 70,000 migrants living in squalid refugee centres. Of these 17,000 are on islands in the Aegean sea. Europe cannot cope with all these migrants illegally making the crossing, much less during this pandemic. It has also unsettled the countries where migrants are settled on a humanitarian basis as there is at the same time serious neglect of poverty stricken communities inside Europe who are not getting the assistance they deserve. The result is even less focus on the development needs, on infrastructure, education and healthcare of the countries in Europe where migrants are headed, with the attention diverted to the migrants issue. Economic progress in Europe and rapid development could not only improve the condition of people in all communities, it could also help finance more foreign aid development project assistance to Africa and other countries. This would if vigorously done keep people in their home countries and help fulfill their development aspirations there, which is the better way.  Chancellor Merkel of Germany should have opted for a better way by setting up a program for aspiring migrants in the countries of Africa with a generous visa program offering training and technological skills, which could then be brought back to the country in Africa where it could generate jobs and opportunities with the necessary capital from European and other financial institutions and governments. This effort made in alliance with Britain and France could be powerful in its impact. Instead a haphazard three years of migration led to internal divisions, loss of confidence in the CDU and the SDP, FDP parties in coalitions, ending up where it should have started in the first place- reducing the migration to a trickle, returning some migrants back to their countries, and focussing on bringing economic assistance and development assistance to African countries for opportunities in these countries and a brighter future so that no one would want to leave and drift on oceans in tiny boats in the first place. The condition of the people in Africa is not so hopeless that the best they can do is to send their young people to drift on boats on the high seas in the hope of refugee status. China has shown that the there is a path from famine during the years following the Great Leap Forward to the development of today. India is doing that now and can repeat that story. Japan and South Korea, Taiwan have done this after devastating wars and out of nothing. Imagine what the world would be like if all these people in Asia set out on small boats for Europe.       ...

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German chancellor Angela Merkel took a lot of criticism during the height of the euro crisis in 2010-2012, but maintained her composure, sense of direction, and flexibility to a changing environment. She emerges from the leadership test more confident than ever during the 2013 elections for chancellor. Relations with Greece under president Samaras are also being mended after the riots in Athens during 2011-2012. She has also shown flexibility coupled with firmness in the setting of deficit targets for eurozone countries, and the courage to address issues of equity and fairness by calling for setting minimum wages industry by industry. On social and womens issues members of her cabinet have pushed for fairness. She will be remembered for her leadership, ability to learn from mistakes as time progressed during the eurozone crisis and taking firm action when needed, as the eurozone recovers from its financial crisis.

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Krugman points out that the inflation adjusted wages of non-supervisory workers in the retail field in America has declined by 30% since 1973. He says there are no adverse effects on unemployment because workers in retail are not competing with workers in other countries as happens in manufacturing. They are also some of the lowest paid workers to begin with, and the numbers are not small. One estimate is that here are 30 million workers who would benefit from an increase in the minimum wage from the current level of $7.25 to $10.10. State by state comparisons provide proof of this as no evidence of losses in employment are to be seen when one state has raised the minimum wage and another neighboring state has not. Germany is facing a similiar problem of low paid temporary workers and a new coalition government is planning an increase in the minimum wage in 2014 as a response to increasing inequality and disparity in incomes developing in the last two decades.