COMMENT: The Germans don’t want to bail out Ukraine

By bne IntelliNews March 2, 2015

Mark Adomanis in Philadelphia -


Walter Russell Mead, a dedicated conservative who for some strange reason insists on calling himself a liberal, is a prolific observer of foreign affairs. Mead is regularly published in a number of centrist, establishment publications and for that reason is extremely useful as a bellwether of elite opinion: he’s not too far right to anger big-time Democrats, and he’s rightwing enough to please Republican “thought leaders.”  

Mead recently wrote an article "The Open Ukrainian Society and Its Enemies" in which he describes the emerging Washington consensus about Ukraine, and outlined a strategy that would work to isolate, and eventually defeat, Vladimir Putin's Russia.

Mead's strategy is internally consistent and logical. It astutely recognizes that any push-back against Russia must be multifaceted and rely on a combination of military, economic and political pressure. So if Mead's strategy is logical and if it recognizes what needs to be done, why does it fail? A very simple reason: it takes no account of political reality.

Mead understands that the only way Ukraine will ever be able to stand up to Russia is if its economy is put on a much sounder footing. Apart from cheering the International Monetary Fund (IMF) lending package, his economic prescription amounts to the following:

One approach would be to create a mutually beneficial system of credits that Ukraine could use to purchase needed goods from Eurozone countries — stimulating their economies and creating jobs where Europe badly needs help, but also helping Ukraine get a leg up. Again, this unifies the West rather than divides it.

It’s unclear what planet Mead has been on for the past five years if he thinks that a programme of aggressive Keynesian stimulus would “unify rather than divide” the West. The odds of the EU engaging in this particular policy is somewhere between “infinitesimally small” and “zero.” Why? The answer is extremely simple: the German voter.

Stimulus a dirty word

In both words and deeds since the onset of the global financial crisis, Germany has been incredibly consistent in the belief that Europe already spends too much money and that “structural reforms” are the only way to jolt the economy back to life. “Stimulus” is a dirty word to German voters and to the center-right government now running the country.

One thing about which almost everyone agrees is that Angela Merkel is a canny and astute politician. It’s not an accident that she's won so many elections and has such consistently high poll numbers. A recent Vanity Fair profile made clear one of the reasons for Merkel’s long winning streak: she conducts a ridiculously large number of polls on the German electorate's opinions, more than 600(!) between just 2009 and 2013. That is to say that Merkel, on average, commissions more than one poll a week. She is clearly someone with their finger on the pulse of the German public. 

Merkel’s policy of Europe-wide austerity and structural reform, a policy that has been doggedly pursued despite an economic catastrophe of world-historical significance, isn’t a “mystery” that needs to be solved. It won’t be the subject of future scholarly research or anguished graduate seminars in political economy. Rather, it’s a simple and straightforward representation of what the German public wants. You can rest assured that if German voters thought of stimulus as anything other than anathema, then Merkel would already have accented to it.

As in her engagement with Germany's EU partners, Merkel has been quite consistent in her stance regarding Ukraine: no money is forthcoming and "structural reform" is the best antidote to what ails the economy. There is no reason whatsoever to doubt that this is also what German voters think.

It is, of course, possible to argue that a German-style policy of austerity and structural reform isn’t going to work. It seems obvious that Ukraine is going to need a lot of money from somewhere to avoid defaulting on its foreign debt, and there is a fair argument to be made that there must be some kind of aid to sweeten the bitter pill of austerity. Personally, I would be in favour of a substantial (albeit conditional) programme of financial assistance to Kyiv.

But those arguments are going to be entirely moot until there is a sea change in German public opinion. If Ukraine is banking on a huge EU bailout, it is going to wait in vain, because that bailout isn’t forthcoming. 

Mark Adomanis is an MBA/MA student at the Wharton School of Business and the Lauder Institute. Follow him on Twitter @MarkAdomanis

Related Articles

Ukraine's largest PrivatBank faces down nationalisation fears

Graham Stack in Kyiv - Ukraine's largest lender PrivatBank has survived a stormy week of speculation over its future, but there are larger rocks ahead, with some market participants anticipating the ... more

bne:Chart - Russia begins to steady the ship according to latest Despair Index

Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.