Angela Merkel – die Hungerkanzlerin

Angela Merkel's handling of the financial crisis in the Eurozone brings to mind failed leaders of the past – such as Herbert Hoover – whose actions – or inactions- only exacerbated an already dire situation.  But Steve Forbes as a better historical analogy – this one from the Weimar Republic:

Not since the early 1930s has a democratic government made such grave economic miscalculations as today’s Merkel administration. In the pit of the Great Depression German Chancellor Heinrich Brüning imposed severe austerity measures, the most damaging of which were an array of new taxes. Berlin feared that an unbalanced bud-get, even as the economy was catastrophically contracting, might unleash a bout of hyperinflation. Merkel worries that if the European Central Bank goes whole hog trying to stem the euro-destroying crisis by massively buying Spanish and Italian bonds, a destructive inflation will result.

Berlin’s fear of inflation is as wrong now as it was in 1930–32. European financial institutions are being mortally threatened: Their liquidity is being drained. U.S. money market funds, for instance, have withdrawn about $1 trillion. At the same time, regulators are telling banks to shore up their capital, which means distressed asset sales and the calling in of loans. Europe is headed for another recession. More dangerously, the implosion of its banks will trigger another global financial explosion à la 2008–09, or something even worse.

It is very rare indeed that Steve Forbes and Paul Krugman agree on anything, but here is one instance where they are in accord. 

Brüning and his policies remain controversial even today.  Historians such as Knut Borchardt point out that Brüning had very little choice but to ram through a budget surplus in light of Germany's reparations payments under the Versailles Treaty.  Also, the hyperinflation of the early years of the Weimar Republic made it impossible for Brüning to devalue the Reichsmark.  Nevertheless, Heinrich Brüning will always be remembered as "der Hungerkanzler" (the "starvation chancellor"), and he died embittered and disgraced in Norwich, Vermont (in 1970). 

Whether one agrees with Borchardt or not, we all know what Brüning's austerity ushered in.  We can only hope that Angela Merkel will not suffer the same fate:

Will Angela Merkel be a modern-day Brüning? Her place in history depends upon the answer—as does the well-being of the world. (Steve Forbes)