In German geopolitical and cultural history, the head has always looked south and west, but the heart beat towards the east. The large confederated tribes of Saxons, Thuringians, Alamanni, Bavarians (who still speak different forms of German at home today) arrived in the Iron Age from the northeast, absorbed Slavic elements from the east over time and slowly began to assume a common identity only at the end of the first millennium. Their head, the rational component, looked to Rome to build the Holy Roman Empire and to the French Enlightenment to found a united and modern Germany. After 1945 he looked to America to rebuild the shattered economy and contain the Soviet Union.
The heart, for its part, has maintained a deep bond with the lands ranging from the Baltic to the Crimea (where the language of the original Goths was still spoken in some areas in the XNUMXth century). The passionate bond, which has sometimes set in motion the violent and muddy component of the German soul, has translated over the centuries into military campaigns, migrations, extensive conquests and equally extensive and dramatic retreats.
Compare the rigidity of the Rhine limes (where over the centuries the only frictions concerned the small spaces of the Saar, Alsace and Lorraine) with the elasticity of the oriental limes, vague, indefinite and continually oscillating in the immense spaces between Prussia and the Urals. Even Hitler clearly had double standards and treated occupied France differently than the Slavic world. He was ashamed to exterminate the French Jews in France and sent them to die in the eastern black hole.
Separating the Ukraine from Russia and Germanizing it has been a recurring political project for Berlin. He tried in 1919, tried again in 1941 and made a new attempt in 2014. It is interesting to note how the German left, since the days of the Second International (including the radical component of the Spartacists and Rosa Luxemburg), has never seriously opposed these designs and never fought for a Ukraine free from any external influence.
It is in this historical context that the clash between Berlin and Moscow over Ukraine that began in January must be read. Both in the case of Merkel and in that of Putin we are faced with cold and rational figures, but the fact that the clash takes the form of a game of chess and that the military plan is kept at a low intensity must not mislead the its hardness. The two opponents don't want to get hurt too much and hesitate to raise the bar too much. Putin is dealing with an economy weakened by capital flight and falling oil. Merkel must limit the damage that the sanctions inflict on a Eurozone that cannot afford a new recession, on pain of dissolution. The maneuvering spaces for the two contenders are narrow, the will to conquer them is strong.
Investors and traders read geopolitical events and the saga of European Quantitative Easing as parallel and therefore not communicating. They give too much weight to Weidmann's mock radical opponent of Qe, and underestimate the Ukrainian question, considering it only when it reaches the front pages of Western newspapers.
In Merkel's mind, the survival of the Eurozone (at least until the end of her mandate) and the maintenance of a large part of Ukraine in her sphere of influence are two priorities that interfere with each other and require unified management.
Indeed, Merkel has set herself an extremely ambitious goal. Bending Putin without damaging the Eurozone too much in itself requires balance and great tactical ability. Doing so without putting even a rifle in Ukraine and not even a euro both in Ukraine, where the Americans put the money, and in Europe, where the ECB puts it (for now, mainly in words), is almost diabolical.
Putin, an intelligent man, knows that the West raises its voice on Ukraine because it does not want to do anything on a military level and little on an economic one, but will send its tanks to Kiev only if Ukraine is admitted to NATO. Merkel, an intelligent woman, does not want Ukraine in NATO and holds back Poroshenko's requests in this direction with cold water.
So let's not expect clamorous re-editions of Budapest 1956 or Prague 1968. Let's not even think of a Russia that leaves Europe in the cold. Let us rather expect apparently more modest frictions, small enough to pass almost unnoticed before the eyes of the markets but such as to influence Merkel's attitude on sanctions and, in cascading, on the fiscal and monetary policy of the Eurozone.
The next moves in the chess game will be played on the possible territorial expansion of the two republics of Donetsk and Luhansk, on the cut of the pensions paid by Kiev to the citizens of the rebel areas, on the adoption of the ruble in the east of the country or on the attempt by the Russian speakers to carve out a corridor along the northern coast of the Sea of Azov, so as to connect the Crimea with the Donetsk republic and Russia by land.
Merkel, we repeat, knows perfectly well that no European (or American) soldier will ever fight in Ukraine. He must therefore play the game of sanctions and that of small provocations to the maximum.
Each tightening of sanctions has so far corresponded perfectly (and will continue to correspond) with a softening of German demands on Italy and France on public deficits and structural reforms. The turning point on the first point, which coincided with the apparently daring rebellion of Paris and Rome against Brussels' demands for austerity, occurred following the Ukrainian military defeat and the ceasefire agreed in Minsk in early September.
On Qe, the German intention was to hold out until the end and to grant it only in exchange for the serious launch of reforms in France and Italy. It is possible that Schaeuble has some genuine aversion to Qe. Merkel, a pragmatic politician, on the other hand has no prejudices and considers Qe a card to be played well and to be exchanged at a high price, not for free. As for Weidmann, who has always been Merkel's creature, her task is to offer cover for the German internal political market without seriously hindering Draghi, who proceeds in agreement with Merkel.
As we know, nothing came from Paris. A thousand promises and little substance have arrived from Italy, at least up to now. Despite this, Merkel has given the green light to cautious and gradual openings to Qe which again coincided with an increasingly evident deterioration of the Minsk ceasefire.
The real Qe, the one made with money, will be kept in the drawer for as long as possible and will be managed in the same head, that of Merkel, who will have to evaluate the stability of the internal consensus on one side and Putin's moves in Ukraine on the other other. In the meantime we will have winks, increasingly precise announcements, aperitifs, snacks, even substantial ones, based on Abs and Tltro and everything that will serve to keep up the Ifo, the stock exchanges and the morale of investors and economic operators.
Less attention to Weidmann, therefore, or to the various courts of justice and more attention to the Russian infiltrations in Mariupol.
Net of these issues, satisfied and happy markets until mid-January. Then, at the very least, some doubts.
