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Euro bail-out in doubt as "hysteria" sweeps Germany
Christian Wulff, Germany's president, stunned the country last week by accusing the European Central Bank of going "far beyond its mandate" with mass purchases of Spanish and Italian debt, and warning that the Europe's headlong rush towards fiscal union stikes at the "very core" of democracy.
"Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," he said ...
Tel 28 Aug 2011European banks set cash test by IMF chief
Bundesbank questions legality of EU bail-outs
"The latest agreements mean that far-reaching extra risks will be shifted to those countries providing help and to their taxpayers, and entail a large step towards a pooling of risks from particular EMU states with unsound public finances," said the bank's August report.
It said an EU summit deal in late July threatens the principle that elected parliaments should control budgets.
The Bundesbank said the scheme leaves creditor states with escalating "risks and burdens" yet no means of enforcing fiscal discipline to make this workable.
There are no plans as yet for EU treaty changes to correct these distortions.
"Unless there is a fundamental change of regime involving a far-reaching surrender of national fiscal sovereignty, it is imperative that the 'no bail-out' rule – still enshrined in the treaties – should be strengthened by market discipline, rather than fatally weakened," the report said ...
China has been a crucial prop for the eurozone, accumulating some €700bn of EMU bonds over the past decade as it seeks to lower dependency on the the US dollar.
Beijing has pledged support for Italy and Spain over recent months but there are signs that the Politiburo is losing patience with Europe's leaders ...
Tel 22 Aug 2011
Communitarian CitizenshipFinland's demands for collateral ...
ECB austerity drive raises fears for democratic accountability in Europe
Europe needs debt relief, not decades of austerity
IMF: Brussels needs more power over euro nations' budgets
It's time the EU had a new economic philosophy
Reform the euro or bin it
Maastricht madhouse
What Will a European Economic Government Entail?
The EU is still avoiding the issue: is it a confederation, or a federation; and how do the voters control it?
The proposal calls for the 17 euro-zone member states to anchor balanced-budget provisions into their constitutions, and to take account of European Commission concerns when setting their national budget plans ...
Gustav Horn, director of the IMK economic institute ... says ...
"Countries with current account deficits would have to commit themselves to a more restrictive fiscal policy."
That means they would have to cut government spending, raise taxes or limit wage increases. "How the countries do that should be left up to them."
But countries with surpluses, like Germany, would also have to adjust their policies.
Horn says these countries would have to strengthen their domestic demand through higher wages or benefits, or via tax cuts.
If Merkel and Sarkozy are serious about an economic government, they will have to sign up to something else too. "In the medium term in a common economic area, one will have to levy joint taxes and have a significant common budget," says Enderlein.
France and Germany have made a start: They plan to harmonize their corporate taxes and introduce a pan-European tax on financial transactions.
But that can only be the first step on the road to an economic government.
Der Sppiegel 17 Aug 2011
Meeting at Gödöllö in Hungary to consider the Portuguese request for assistance, EU ministers issued a statement on Friday saying:Three scenarios for Europe's economic future
"Euro-area and EU financial support will be provided on the basis of a policy programme which will be supported by strict conditionality."
For "strict conditionality" read severe budget cuts.
The disparity between the eurozone's need for sophisticated solutions and the provincialism of its political leaders (to say nothing of their economic illiteracy) becomes more painfully obvious by the day ...
Gdn 11 Apr 2011
Demanding the Mark Back
As a playwright, Rolf Hochhuth ... took to the theater stage and unmasked consulting companies like McKinsey as exploitation machines.
Now Hochhuth is campaigning against the euro -- and his stage is Germany's Constitutional Court.
"Why should we help rescue the Greeks from their sham bankruptcy?" he asks.
"Ever since Odysseus, the world has known that the Greeks are the biggest rascals of all time. How is it even possible -- unless it was premeditated -- for this highly popular tourist destination to go bankrupt?"
In the spring, he joined a group led by Berlin-based professor Markus Kerber that has filed a constitutional complaint against the billions in aid to Greece and the establishment of the European stabilization fund, which was set up in May 2010.
Hochhuth wants the deutsche mark back. "I don't know if this is possible. I only know that Germany lived very well with the mark."
It's an opinion that suddenly places this nearly 80-year-old man in a rather unusual position, at least for him: on the side of the majority of Germans ...
Der Spiegel 27 Dec 2010
Don't be fooled – the federalist agenda in Europe is still being slowly accomplished
... as we saw with the conditions placed on Ireland and Greece, the peripheral nations have lost a good deal of the fiscal autonomy they had anyway.
Small nations have their pride so it was presented as a "deal" rather than a "diktat". The effect is the same; Brussels telling Dublin and Athens what they can borrow, and strongly suggesting how they tax and spend too.
The European Financial Stability Fund has already been doing the work of a European Treasury, albeit with no democratic accountability.
And a single euro zone bond? There again the reality is creeping in.
A single European treasury would depend on a German guarantee, and we're implicitly there already ...
Independent 05 Dec 2010
European Central Bank boss calls for even greater euro harmonisation
• Jean-Claude Trichet says euro critics will be proved wrong
• Expert says euro is limping towards its end
• Fears of contagion from Irish bailout are growing ...
Speaking at a hearing of the economic and monetary affairs committee of the European parliament in Brussels, [Jean-Claude Trichet - European Central Bank president,] said:
"We have got a monetary federation. We need quasi-budget federation as well.
"Yes, we could achieve that if there is strong monitoring and supervision of what there is.
"Because what exists doesn't correspond with the actual situation that we are facing. It is a situation where we need quasi-federation of the budget." ...
Guardian 30 Nov 2010Merkel: Germany could abandon the euro
Worries About Italy and Belgium in Euro Zone
Eurozone's stability depends on pain in Spain
Eurozone states will need an act of union to save the single currency
The euro's difficulties stem from a fundamental paradox, namely the combination of a single currency with many nation states.
Plenty of monetary unions work perfectly well, but only because they also tend to be associated with political union ...
The single currency removed the risk of "virtual default" because countries within the eurozone no longer had their own currencies.
But it was always wrong to assume that the removal of the risk of "virtual default" also removed the risk of outright default.
Indeed, by getting rid of the "virtual default" option, the risk of outright default actually rose.
And the sudden realisation of this new reality lies at the heart of the crisis now doing so much damage to the euro.
The United Kingdom deals with this problem through the use of a political arrangement which allows for incomes in one part of the Union automatically to be transferred to another part.
And because it's a transfer, not a loan, there is no sense in which one part of the Union can default to another, one reason why we don't spend our waking hours worrying about the individual fiscal arithmetic in, say, Scotland or Wales ...
Independent 29 Nov 2010 Larry ElliottIreland must find €17.5bn from its pension fund and reserves for bailout
Irish Republic 85bn euro bail-out agreed
What the UK is contributing to Ireland
Ireland's boom, and its banks, have gone
Irish bailout includes emergency €10bn to stem run on banks
Spain could be forced to seek a bail-out within months
Merkel confident plummeting euro can ride out storm
Portugal approves austerity measures
Spain Defiant
Merkel's Reputation on the Decline in Europe
Bracing for Bailouts
Ireland
Portugal
Spain
Italy
Greece
When will Germany call time on its economic experiment?
... the threat to the euro comes not from the weakest members, but from its strongest.
Though the single currency is more the project of Germany than anyone, the patience of its voters is dwindling.
Remember what triggered the current phase of the eurozonecrisis: a speech to the German Parliament by Angela Merkel in which the Chancellor promised to reform the rules on financial stability so as to ensure, for the first time, that investors took a share of the pain in any bailout.
Ms Merkel's speech could hardly have been worse timed and condemned Ireland to the fate it is now suffering.
But her frustration is understandable: Germany cannot simply go on picking up the bill for bailing out profligate fellow euro members.
That is not politically acceptable – or even possible, if it comes to a rescue of Spain.
Reform of the treaties governing the euro is thus essential for Germany – and a much more radical overhaul than what Ms Merkel proposed three weeks ago.
Think powers to kick countries out of the euro should they breach its fiscal rules, for example ...
Independent 25 Nov 2010Merkel: Germany could abandon the euro
Which EU Problem Child Will Be Next?
Merkel's Reputation on the Decline in Europe
Merkel in eurozone permanent bail-out vow
Taxpayers with too much power
Desperate fight to save the euro
Bailout for Spain would empty European coffers
Faith in European banks shaken by stress test doubts
Spain is Europe’s Lehman-in-waiting
Chancellor Faces Tough Sell on Irish Bailout
This bail-out blackmail must be stopped
What’s happening in Ireland right now is not, at root, a sovereign debt crisis, but another banking crisis. The reason it has spilled over into a problem of national solvency is that it has overwhelmed the country’s capacity to afford further bail-outs ...
An alternative way of resolving these crises must be found, in a manner that doesn’t plunge us all back into the dark ages.
That means setting up a system that enables some form of managed default, both of individual banking systems and entire countries.
In Ireland, the principle of making holders of the riskier forms of debt share the costs of restructuring has already been recognised.
Junior debt holders in Anglo Irish Bank have been required to take significant "haircuts", losing a large part of their money.
A mechanism for extending these haircuts into senior debt, and possibly into the wider depositor base, needs to be agreed as a matter of urgency.
Nations must stand ready to deal with the consequences in their own banking systems.
Here in Britain, senior officials at the Bank of England are working with their overseas counterparts on a regime for winding down banks that are "too big to fail" that protects taxpayers and loads the costs on to the banks’ creditors in a predictable way.
These plans need to be brought forward with immediate effect, and applied to banks in Europe’s troubled fringe economies.
Telegraph 19 Nov 2010 Fractional Reserve Banking IMFIrish finance minister will seek support for bailout in guise of 'contingency loan'
Irish rescue deal delayed by corporation tax row
US firms warn Irish over tax move
Plucky Irish felled by the twisted, self-serving logic of the eurozone
IMF chief urges leaders to cede more sovereignty to EU
Allied Irish Bank suffers massive withdrawals
Ireland told: Take EU bailout or trigger crisis
Dublin warned it has 24 hours to make decision as EU emergency talks loom amid fears Irish banks' contagion may spread to other eurozone countries ...
Portugal has seen its borrowing costs rocket along with Ireland's as speculation has grown that it too may have to consider a bailout and the finance minister, Fernando Teixeira dos Santos, told the Wall Street Journal that there had been a contagion effect for his country because of fears about Ireland's ability to pay its debts ...
The Bank of Spain governor, Miguel Ángel Fernández Ordóñez, a member of the European Central Bank's governing council, told a banking conference in Madrid that he expected an "appropriate reaction" by Ireland to calm markets ...
Guardian 15 Nov 2010Euro under siege after Portugal hits panic button
Will the ECB pull the plug on Ireland?
Should Britain fund an Irish bailout?
Europe stumbles blindly towards its 1931 moment
Ireland resists calls to seek EU financial aid
EU's bailout fund
Irish debt crisis: timeline
... one can see what both the Commission and Mr Van Rompuy's review are getting at.Europe's impossible dilemma
The routine way in which many EU members have flouted the commitments they once made about public debt – and all the big members breached the growth and stability pact last year – has made a nonsense of the deal ...
And since all EU members have signed up to the growth and stability pact, this is not an issue just for the eurozone.
It would be difficult to operate a system where only eurozone members were penalised for transgressions, with the 11 EU nations outside of the euro, including the UK, free to break their word without fear of punishment ...
The eurozone crisis earlier this year made it clear that the existing pact is hopelessly out of date.
German voters will not countenance their government continuing to implicitly guarantee the debts of irresponsible EU members.
Sanctions of one sort or another are going to be a necessary evil. Best of luck with that Mr Van Rompuy.As you imply, David, this is one that will be good for the sale of blood pressure reduction pills.Independent 30 Sept 2010
It was not, to say the least, a good idea to introduce a common currency without having a single European chancellor. (Carts, horses, and the ordering of.)
This goes to the heart of the weakness inherent in the EU: is it a confederation - as the 13 ex-colonies were at the time of Treaty of Paris 1783 - or a federation - as the US became a few years later - in which the federal government controls economic policy?
A pity to have waited until an economic crisis forced the issue, but that's the consequence of putting utopian theories first.
It's a straight choice: what's good for people vs what good for the neoliberals.
The likes of Barroso, and Merkel, couldn't give a XXXX for anything other than their utopian project.'The EU Has Finally Opened the Door to Economic Union'
Europe hit by wave of anti-austerity protests
IMF poised to send permanent officials to Greece
Although widely praised for implementing the toughest austerity measures in post-war history, the Greek government also faces growing criticism over the pace of reforms agreed in return for a €110bn (£90bn) EU and IMF-sponsored rescue package in May.
Until last week when it agreed to dispense the second instalment of loans to Athens, amounting to €9bn, the IMF had postponed stationing permanent representatives in the capital. Tellingly, the inspectors' main brief will be to monitor the reform of tax collection and public spending.
The Ta Nea newspaper reported at the weekend that the European commission is studying the possibility of extending the three-year support programme until 2020. "Senior EU officials believe the Greek government will not be able to apply the hard conditions of the memorandum of understanding [between Athens and its international lenders] within the appointed timeframe," it said.
Guardian 19 Sept 2010European debt crisis
The IMF today accused eurozone governments of relying on "crisis management" to get through their troubles and warned they needed to move quickly to centralise economic decision making or risk a double-dip recession.IMF: Brussels needs more power over euro nations' budgets
Democracy? Not on the IMF's watch!
A series of reforms allowing the eurozone to impose stricter discipline on government budgets by increasing power at the centre must be agreed along with plans to tackle the structural weaknesses in the European economic system, including labour reforms, it said.
Without taking action, and moving quickly to harmonise monetary and fiscal policies, growth will stall and public finances will worsen again, possibly dragging down the world economy ...
Guardian 07 June 2010
The E.U.'s Dangerous Game
There are lessons to be learned from this debacle. First, no government should sign an agreement that guarantees an open-ended recession, and leaves it to the world economy to eventually pull them out of it.
This process of “internal devaluation” — whereby unemployment is deliberately driven to high levels in order to drive down wages and prices while keeping the nominal exchange rate fixed — is not only unjust, it is unviable. This is even more true for Greece, given its initial debt burden.
The tens of thousands of Greeks in the streets have it right, and the E.U. economists have it wrong. You cannot shrink your way out of recession; you have to grow your way out, as the United States is doing (albeit too slowly).
If the E.U. and the I.M.F. will not offer a growth option to Greece, the country would be better off leaving the Euro and renegotiating its debt.
Argentina tried the “internal devaluation” strategy from mid-1998 to the end of 2001, suffering through a depression that pushed half the country into poverty.
It then dropped its peg to the dollar and defaulted on its debt. The economy shrank for just one more quarter and then had a robust recovery, growing 63 percent over the next six years ...
NYT 12 May 2010
It's time the EU had a new economic philosophy
The current system for running the euro structure is ... toothless ... that ... the Greeks are now paying a heavy price in social injustice for so-called Greek national sovereignty.
National governments are not obliged to work within a coordinated euro-area wide economic strategy. They pay no penalty for breaking the rules ...
There are other glaring deficiencies.
There is no adequate system for transfers of resources to compensate the less competitive EU regions and countries for the inevitable effects of economic integration such as exists in all other economic and monetary unions (such as the United States).
There is not even a symmetrical obligation on those euro-area countries that are strongest to stimulate consumption and growth and thus to balance measures by weaker economies obliged to curb consumption and employment because of excessive budget deficits and state debt ...
The EU leaders ... should unambiguously signal their intent to make European economic union a reality by give euro-area decision-making bodies real decision-making powers over fiscal policy, discipline and balanced economic growth ... the EU as a whole must accelerate plans for tough European wide regulation of financial markets, banks and speculators something which whoever forms the next British government would do well to support ...
In truth, the very foundations of the global neo-liberal system ... is now discredited.
The EU as a whole also needs a new economic philosophy based on green and sustainable growth and which encourages social cohesion ... and which actively promotes greater social equality.
Guardian 07 May 2010 Blog Economic DemocracyReform the euro or bin it
Reform the euro or bin it
Joseph Stiglitz puts people before "a flawed economic model"Germany (like China) views its high savings and export prowess as virtues. But ... Keynes pointed out that surpluses lead to weak global aggregate demand – countries running surpluses exert a "negative externality" on trading partners. Indeed, Keynes believed it was surplus countries, far more than those in deficit, that posed a threat to global prosperity; he went so far as to advocate a tax on surplus countries.
The social and economic consequences of the current arrangements should be unacceptable.
Those countries whose deficits have soared as a result of the global recession should not be forced into a death spiral – as Argentina was a decade ago.
One proposed solution is for these countries to engineer the equivalent of a devaluation – a uniform decrease in wages. This, I believe, is unachievable, and its distributive consequences are unacceptable …
There is a second solution: the exit of Germany from the eurozone or the division of the eurozone into two sub-regions. ...
There is a third solution, which Europe may come to realise is the most promising for all: implement the institutional reforms, including the necessary fiscal framework, that should have been made when the euro was launched.
It is not too late for Europe to implement these reforms and thus live up to the ideals, based on solidarity, that underlay the euro's creation.
But if Europe cannot do so, then perhaps it is better to admit failure and move on than to extract a high price in unemployment and human suffering in the name of a flawed economic model.
Guardian 05 May 2010exiledlondoner
6 May 2010, 8:40PM
When Wall Street thinks rigid austerity measures are not the way forward, then it's time to try a new approach.
Will the Eurozone countries allow themselves to be sacrificed one by one to maintain Germany's position?
The problem is that Greece, Spain and Portugal desperately need a devaluation - something that to the Germans is akin to heresy.
This was always going to happen sooner or later, when they fudged the convergence criteria - the Eurozone is not one economy.
Guardian 06 May 2010Wall Street panic as Dow plunges on fears for financial system
Greece and the single currency: Europe's existential crisis
Argentina to repay 2001 debt as Greece struggles to avoid default
Maastricht madhouse fuels EMU-wide contagion
In a rational world, Brussels would tap the EU's AAA rating to issue cheap "Barroso Bunds" to cover rescue costs.
But we are not in a such a world.
We are in the Maastricht madhouse, a currency union without a treasury, ruled by the "no bail-out" clause of Article 125 of the EU Treaties.
Europe is at last paying the price for fudging the true implications of EMU ...
Four professors will launch a legal challenge in early May at the Verfassungsgericht (high court). Should they secure an injunction, EMU may fly apart.
The Court ruled in 1993 that Maastricht was constitutional only as long as EMU remains an area of monetary order.
"A 'transfer union' is a bottomless pit and is bound to threaten currency stability. That is what we are going file," said Tübingen Professor Joachim Starbatty.
When accused of consigning Greece to ruin, he told the Frankfurter Allgemeine that EMU exit and default is Greece's only salvation.
"The truth has to come out into the open. Greece is in no position to pay it debts," he said.
The EU-IMF "therapy" of deflation for Greece repeats the catastrophic errors of Chancellor Heinrich Bruning in the early 1930s and must lead to a depression, he said.
Yet that is what IMF chief Dominique Strauss-Kahn is preparing for Greece ...
"The only effective remedy that remains is deflation. That will be painful. That means falling wages, and falling prices. There is no other way."
Actually, the IMF pursues other ways often, last year in Jamaica. What Mr Strauss-Kahn means is that the EU will not tolerate any other way.
The Greek people must be sacrificed for the Project ...
Telegraph 25 Apr 2010Greece wins widespread support for boldness of reform plans
Greece faces ‘big sacrifices'
Eurozone agrees €110bn Greece loan
Europe evolves
Mr Rehn is wise to reconsider the eurozone’s rules. But his singleminded focus on reprimanding deficit countries is not enough.Several articles use the word 'endgame' in respect of the Greek crisis. The FT reports that the EU's economics commissioner - Olli Rehn - wants tougher auditing powers, but it avoids the logical conclusion: that sixteen sovereign governments cannot have sixteen independent economic policies AND share a single currency.
A new rulebook should not continue to simply punish the overindebted. It should also encourage nations that run large current account surpluses to spend more.
Europe also needs new enforcement mechanisms. If elected politicians are to follow the rules, voters must reward them for doing so.
That means, above all, that the euro laws must be enforced for all countries – not just the small ones ...
FT 15 April 2010Greek meltdown in danger of spreading
Years of austerity for bailed-out Greece
Fury in Greece over IMF intervention
Greece asks for IMF-EU rescue talks
Greece is the first domino to fall, but are others far behind?
Greece has no option but to take the money
Greek bonds fall further
The center-left Frankfurter Rundschau writes:Merkel's Greece Deal 'Betrays the Concept of Europe'
"If -- after forty years and a single currency -- the Chancellor now calls on the International Monetary Fund to save Greece, she is betraying the very concept of Europe.
"In calling on the IMF, Merkel calls on none other than the United States, which dominates the IMF with its blocking minority of 17 percent. What a wretched state of affairs. What a disgrace for the European Commission and the European Central Bank. It is as if Germany could not solve a problem of the size of Hesse.
"And the betrayal goes deeper still: In the past, every European crisis has deepened EU integration. It moved forward in the very moments when the pressure became unbearable and the institutions revealed weakness. Now, though, it is moving backwards." ...
Der Siegel 26 Mar 2010
A top official at the European Central Bank has taken the unusual step of publicly criticizing the German government.'Detrimental to the Euro'
Lorenzo Bini Smaghi, one of the ECB's six board members, has attacked plans to call on the International Monetary Fund to come to the aid of Greece, saying such a move could undermine Europe's common currency, the euro.
"If the IMF steps in, the image of the euro would be that of a currency that is able to survive only with the external support of an international organization," he told the influential German weekly Die Zeit, in an interview to be published on Thursday.
German Chancellor Anglea Merkel has repeatedly suggested that cash-strapped Greece turn to the IMF instead of relying on the European Union -- or other countries in the 16-member euro zone -- for financial assistance, should it become necessary.
France has recently indicated that it agrees with Merkel's position.
Indeed, the two big countries could push through the plan during the European Union summit on Thursday and Friday in Brussels despite deep misgivings in the rest of the 27-member bloc about allowing the IMF to dictate terms to a euro-zone country ...
Der Spiegel 24 Mar 2010
We feel your pain. But not enough to put our hands in our pockets to help you. Behind the sham show of solidarity, the simple message for the troubled government of George Papandreou was that Greece is not Alabama and Brussels is not Washington.Greece faces devaluation, default or deflation.
Next stop the IMF
In the United States, the federal budget is worth around 25% of national output each year. States where the economy is booming pay more in tax receipts to the Treasury than they take out in spending. Poor states receive more from Washington than they raise in taxes. The sun belt subsidises the rust belt.
Europe has no such mechanism ...
Guardian 11 Feb 2010
How Brussels Is Trying to Prevent a Collapse of the Euro
Sub Text: It's about relinquishing more sovereignty to Brussels
Cohesion and Stability
The Commission doesn't hold Greece solely responsible for the current euro woes. Experts close to Economic and Monetary Affairs Commissioner Joaquín Almunia say nearly every participating country is compromising the cohesion and stability of the common currency.
"The combination of decreasing competitiveness and excessive accumulation of national debt is alarming," the experts wrote in a recent report, adding that if the member countries don't get their problems under control, it will "jeopardize the cohesion of the monetary union."
Differing economic development within the euro zone and a lack of political coordination are to blame, they say. In the more than 10 years since the euro was introduced, the Commission states, it has become clear that simply controlling the development of member states' budgets is not enough. What that means, more concretely, is that the stability provisions stipulated in the Maastricht Treaty to regulate the common currency aren't working, and member states need to better coordinate their financial and economic policy measures.
That is precisely what euro skeptics have said from the beginning -- that a common currency can't work in the long run without a common economic and financial policy. The member countries' governments ignored these objections, unready to give up a further aspect of their national sovereignty.
Now politicians are facing a difficult decision: Should they continue as they have, thus potentially undermining the euro's ability to function? Or should they yield a portion of their national sovereignty to Brussels? ...
Der Spiegel 09 Feb 2010