There must be an EU “currency commissioner” with sweeping powers to strike down national budgets; a “large step towards fiscal union”; and yet another EU treaty.
Finance minister Wolfgang Schaeuble dropped his bombshell in talks with German journalists on a flight from Asia, and apparently had the blessing of Angela Merkel, the chancellor. “When I put forward such proposals, you can take it as a given that the chancellor agrees,” he said.
Officials in Brussels reacted with horror. “If that is the demand, they are not going to get it. Nobody in the Council wants a new treaty right now,” said one EU diplomat
“We’ve got the fiscal compact and quite enough fiscal discipline. Not even the Dutch want a commissioner telling them how to tax and spend,” he said....
The term “Fiskalunion” in Berlin has a specific meaning: more power to police the affairs of debtor states. It does not mean debt mutualisation or a joint EU treasury. Germany has so far refused to cross this Rubicon.The Telegraph (UK)
Germany shocks EU with fiscal overlord demand
Ambrose Evans-Pritchard
(h/t Dan Lynch posted in MMT DALLAS DEFICIT OWL COMMITTEE)
15 comments:
Germany is apparently experiencing a revival of its historical compulsion to dominate and affection for authoritarian solutions.
ah, the growing pains of a new trasnational state..
(the american states are still smarting)
Re Germany’s “compulsion to dominate” which Dan refers to, it’s perfectly normal for a country to want to dominate. The British did it when they had their empire, and currently the US has the world covered with military bases, and Iran would like to lay down the law in the Middle East etc etc. Although the US wields its power with more wisdom than most powerful countries in history.
But in the case of the EZ and Germany, Germany has the choice of 1, buying near worthless periphery debt and being taken for a ride by the periphery, or 2, of laying down the law and insisting on limits to money printing with the result that the periphery suffers severe austerity.
Austerity for uncompetitive countries is the EZ’s way of making them competitive. That’s a defective system. But that’s the way it was set up. It was what Germany and other EZ countries originally signed up to.
I suppose we'll see what happens, but I think that rather than simply putting in place an unelected official who can order member-state governments around, German and EU officials ought to focus their efforts on more productive activities, like developing Euro-bonds and recapitalizing ailing banks.
To address this very issue, I've detailed a number of solutions to the sovereign debt crisis that leaders should consider on my blog.
wait, wait... lemme guess... and you propose that the overlord be Germany or a puppet of Germany
Interesting:
"Huw Pill, from Goldman Sachs, said Germany has, in fact, allowed “veiled” debt mutualisation through its share of €750bn (£607bn) of bail-out liabilities. Less visibly, it has let the ECB boost its balance sheet to 32pc of GDP, even before it embarks on “unlimited” purchases of Club Med bonds. This includes a €1 trillion lending blitz to banks, and more than €200bn of bond purchases.
The Bundesbank has also accepted €750bn in claims from EMU peers under the ECB’s internal Target2 payment system. These claims rotate risk from banks to the German taxpayer. “The Bundesbank’s Target2 balances need to be evaluated carefully. They do represent a real German exposure towards the periphery: they cannot be dismissed as mere accounting entries,” said Mr Pill, who helped create the Target2 system.
It is precisely for this reason that Swiss rating agency I-CV stripped Germany of its AAA rating last month. “Germany has taken on contingent liabilities of €2 trillion. When you create these backstops, the money comes from somewhere and it can all go wrong,” said I-CV’s Rene Hermann.
Germany is in deeper than it likes to tell its own people."
This is starting to come back to Germany, Warren predicted this way back with his Exodus "10th Plague" analogy for Germany...
and also gets to the Target2 "Trap" that Jose G. from Brazil has been pointing out here... whether they know it or not, the deficit nations have the Germans by the balls...
rsp,
And looks like the moron "ratings agency disease" extends to Switzerland too:
" the money comes from somewhere and it can all go wrong,” said I-CV’s Rene Hermann."
Denial of the ex-nihilo characteristic of state currency. And belief that "money" is all exogenous...
Ralph, how is the Merkel austerity regime making peripheral countries more competitive? Impoverished countries can't grow and invest resources in building competitive industries. To me, this whole business just looks like a case of traditional northern European racism, moral fanaticism and hostility toward Mediterranean Europeans.
Also, the ECB could buy all of that debt from the current bondholders, so no one gets taken for a ride. The ECB, not Germany.
"Austerity for uncompetitive countries is the EZ’s way of making them competitive."
Ralph, I think that is a bit of a stretch. Make them competitive? A more apt decription is to make them wage slaves.
Nothing good can come from this.
"Denial of the ex-nihilo characteristic of state currency. And belief that "money" is all exogenous..."
Matt, I think they just want US to believe thatmoney has to come from "somewhere". That way they can conspire to control the "somewhere".
Hence the phony Economics Nobel and all of the other manufactured "research" to convince us.
It's a mess, isn't it ?
I'm just not seeing a fiscal union happening. There's no love between the EU states. They're at each other's throats.
On the other hand, we've yet to see a popular push for monetary sovereignty. So the disaster will prolly continue to fester until some sort of tipping point is reached.
They're playing with fire.
Matt Franko says:
" (Germany) also gets to the Target2 "Trap" that Jose G. from Brazil has been pointing out here"
Yes, the periphery has all the instruments it needs to turn the tables and stop austerity with the special type of deficit-financing made possible by well-designed TARGET2 system.
The only element that has been lacking is political will and ideological fortitude.
But the situation is deteriorating fast in Greece, Spain and Portugal where the present governments may not last their mandates. Once new elections are called in one of these countries then will be the time to start disseminating the idea of financing the deficit through a state-owned commercial bank - and eventually dump the full amount of foreign debt outstanding on the TARGET2 balances of the periphery NCBs (as liabilities) and Buba and the ECB (as assets).
Jose,
This Goldman-Sachs guy more or less agrees with you the way I look at it....
rsp,
"Germany is apparently experiencing a revival of its historical compulsion to dominate and affection for authoritarian solutions."
http://static.fjcdn.com/large/pictures/9d/88/9d884b_680631.jpg
Remember, NATO was created to keep the Russians out, the Americans in and the Germans down.
Ralph, why not (3) Sensible money-printing, like a Job Guarantee for the periphery (and everywhere else)? A "fiscal transfer" which as Wray says, is fiscal, but not a transfer. Or see Warren's just-a-few-days-ago comment at this old thread at Naked Keynesianism - Which will not take Germany for a ride by the periphery.
The buying of "nearly worthless" periphery debt by the ECB, coupled with sane deficit spending in the afflicted areas, would make this debt worth something. The only thing they have to fear is fear itself.
As an admirer of the enormous cultural achievements of Germany, and a sympathizer of the Germans, I have to say that the problem is that they really believe the facile, seductive nonsense of "mainstream" Euro-economics. I mean, does anyone know the name of a good German economist, somebody who is NOT spouting nonsense in German to the German people, somebody vaguely equivalent to circuitistes like Alain Parguez or Claudio Sardoni? I looked a bit and came up with maybe one name. Should we reproach for blindness those whose eyes have been put out?
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