Report on the developing European economic government as of September 8, 2011
1) … The NYT reports European Leaders Escalate Tough Talk on Greece.
European leaders escalated their hard-line talk on Greece Thursday, with the German finance minister threatening to leave the country at the mercy of financial markets if it doesn’t meet the conditions set for receiving aid.
2) … Seeking Alpha asks Is Greece About to Default?
Yields on two-year Greek government bonds reached 46.84% recently. This is roughly comparable to yields on Argentine bonds in early December 2001 – only a month before the country defaulted on its debt. Similar interest rates occurred this spring in Greece before the second bailout package was put together. The bailout saved Greece from defaulting back then, but the bailout is now falling apart while the fiscal situation in Greece continues to deteriorate
3) … Open Europe reports
Leaders comments point to a future fiscal union
Dutch Prime Minister Mark Rutte has called for a new “Commissioner for budgetary discipline” in the eurozone, who should have powers to impose budget restrictions and other penalties on profligate states that continually flout the Stability and Growth Pact rules. Rutte claimed that if such countries failed to adhere to the Commissioner’s rules then a mechanism should be put in place through which they can be forced or choose to leave the eurozone. NRC reports that, according to Dutch Finance Minister Jan Kees de Jager, Germany and Finland’s first response to the plan was positive.
In a speech yesterday, following the ruling of the German Constitutional Court, German Chancellor Angela Merkel welcomed the Court’s decision and reiterated her support for the euro saying, “Countries that share a common currency do not wage war on each other. Thus the euro is much, much, more than just a currency,” reports the FTD. The front page of the FTD runs with the headline, “Karlsruhe kills Eurobonds”.
Open Europe’s Raoul Ruparel was quoted in the Telegraph, Bloomberg, El Pais, Bloomberg Business week, San Francisco Chronicle, EurActiv, Business Insider, L’Express and Zerohedge saying, “The ruling also seems to further entrench the German government position that Eurobonds are a no-go, by warning that Germany should not assume other countries’ liabilities. However, the wording used by the Court also seems to suggest that joint debt in the eurozone could be constitutionally allowed if it involved a stronger German say over other member states’ fiscal policies.” FT EUobserver Volkskrant NRC Handelsblad NRC Elsevier Trouw FT 2 WSJ EurActiv Telegraph EUobserver 2 Slovak Spectator Independent El País BBC: Hewitt EUobserver 3 CityAM IHT Bloomberg Businessweek El País Telegraph live blog San Francisco Chronicle Business Insider L’Express Zerohedge FTD Reuters Independent: Chu Le Figaro: Rousselin El País: Vidal-Folch El País: Blair, Delors and Schröder Il Sole 24 Ore: Riolfi Il Sole 24 Ore: Bastasin FT Editorial FT: Rutte & De Jager WSJ Heard on the Street WSJ The Source WSJ: Mattich Telegraph: Hannan Guardian: Roubini and Berggruen
George Eustice: “We need to end the assumption of ever closer union”
The initiative of the new parliamentary group of new intake Conservative MPs aimed at developing thinking about how to revise the EU-UK relationship continues to receive coverage. An article in the Telegraph notes that the group “will work closely with think-tank Open Europe” and include also Labour and Lib Dem MPs.
On the BBC’s Today programme, George Eustice – one of the initiators of the new group
suggested “using this time in Government to forge a new deal for the EU and for our relationship with it.” He went on to argue, “For instance, we need to end the assumption of ever closer union. That clause that’s in all the treaties needs to be struck out and perhaps replaced by a presumption in favour of localism. If we did that, then the ECJ would be expected and required to judge in favour of returning powers, not in favour of gathering more.” TelegraphMailExpressBBC Today: Eustice
Eurozone leaders stress that the next tranche of Greek aid is not guaranteed
In recent days numerous high profile European politicians have been extremely critical of the Greek reform programme. German Finance Minister Wolfgang Schäuble led the way saying, in a speech to the Bundestag, “There can be no illusions here. As long as [the EU/IMF/ECB] mission cannot confirm that Greece has fulfilled the conditions, then the next aid tranche cannot be paid. There is no wiggle room here.” Reuters reports that, speaking during a visit to Bulgaria, Jean-Claude Juncker, Head of the Eurogroup, made strikingly similar remarks, saying, “Greece has to know that the targets we have laid out have to be reached and have to be respected…If not it cannot be taken for granted that the next disbursement will take place.” Klaus Regling, Head of the EFSF, went even further yesterday saying, “The objective [of the EU/IMF aid] is clear: it is to buy time. This is now working in Ireland and Portugal but it is not yet working in Greece…The hypothesis of a return of Greece to the markets in 2013 will not happen.”
The WSJ quotes a Greek official suggesting that the Greek bond swap, part of the private sector involvement in the second Greek bailout, cannot be finalised until the expanded scope of the EFSF, the eurozone’s bailout fund, is approved by all eurozone parliaments. The official suggests this will be done by October. However Slovakia has already suggested it may not vote on the issue until December. Reuters Reuters 2 Reuters France Kathimerini FT WSJ EurActiv CityAM CityAM 2 Le Figaro WSJ 2 WSJ 3 Kathimerini 2 Reuters 3 Reuters 4 Le Figaro Le Monde Pravda Le Point Le Journal du Dimanche LeP 2
Ashton encouraged to push forward with EU Military HQ without the UK
The Telegraph reports that the Foreign Ministers of France, Germany, Italy, Spain and Poland have sent a secret letter to EU Foreign Minister, Baroness Catherine Ashton, suggesting that she continue with plans to set up a European military headquarters, using so-called “structured co-operation” which allows some member states to pursue further EU integration even if not all 27 member states agree. A UK government spokesman said, “Structured co-operation was designed to encourage member states to work together to increase European capabilities…It is inappropriate to use EU mechanisms to advance the political agendas of only a few member states.” Telegraph ’
The European Parliament has reached agreement on EU member states policing each other’s debt in a framework agreement for Eurozone economic governance.
EurActiv reports that the political groups in the European Parliament have reached an agreement on how EU member states should police each other’s debts in the future, paving the way for the completion of the package six proposals on economic governance, although differences over voting procedures still remain. EurActiv.
Herman van Rompuy is critical of the current golden rule to limit deficits and public debt. Le Monde reports. “The governments don’t need this rule, they can do it (reduce their deficits) without such rules in their constitutions”, European Council president Herman Van Rompuy said. “All of that is a matter of application”.
Le Monde quotes a commission source. “What is good would such a rule do if it is not respected? Germany was the first euro country to introduce such a constitutional debt break, Spain, Portugal and Italy plan to it as well in order to increase their credibility in the eyes of the market. In France however Nicolas Sarkozy has abandoned all efforts to introduce such a role before the presidential elections in spring 2012 because he lacks the necessary votes to change the constitution due to the Socialists’ resistance. France arouses suspicions among Commission officials because the country has not presented a balanced budget in decades and it has a long history of watering down deficit rules and procedures
Mario Draghi calls for a European finance minister with the right to interfere directly in national budgetary and economic policies.
Commenting in FT Deutschland, Wolfgang Proissl points out that the most prominent eurozone central bankers have recently started campaigning for a new EU treaty. Mario Draghi come out in favour of a major treaty change at a conference in Paris on Monday when he asked for legally binding rules on structural reforms, competitiveness and growth enhancement to be included in the new treaty. The ECB president designate echoed earlier calls by Jean Claude Trichet repeated at the same conference demanding that a European finance minister with the right to interfere directly in national budgetary and economic policies be created. Even Bundesbank president Jens Weidmann has hinted that there is an option of creating a fully-fledged fiscal union in the eurozone provided the member states get a democratic mandate for such a far reaching change. Proissl points out the deeper reason for the central bankers calls is a fear that the euro governance was dysfunctional, as a result of which the ECB will come under pressure to perform political tasks.
4) … Der Spiegel reports Berlin Lays Groundwork for a Two-Speed Europe
“We will not rescue the euro by creating more and more committees and instruments,” says Horst Seehofer, the chairman of the CDU’s Bavarian sister party, the Christian Social Union (CSU).
That is precisely what Merkel has in mind. She can draw on a concept known as “Core Europe,” which was developed in the 1990s by the then-chairman of the CDU/CSU parliamentary group, a certain Wolfgang Schäuble, who now serves under Merkel as finance minister. Both have established various measures to rescue the euro in recent months, some for the EU as a whole and others exclusively for the 17 euro-zone member states.
Taking Things a Step Further. Although the heads of state and government have formally strengthened the Stability Pact for all EU countries, only those countries that have introduced the euro face the threat of harsh penalties. They, in particular, should commit to decreasing their government debt and strict conditions should govern the process. “No one cares whether Great Britain or Poland violate the 3 percent ceiling for the deficit,” says a German government official. A similar situation applies to the so-called Euro-Plus Pact. In it, the countries of the monetary union pledge to increase their competitiveness and fix weaknesses in their social systems, by raising the retirement age, for example. Every country that wants to participate can do so. Poland, for example, has joined the agreement. However, it cannot participate in the decision-making process. The rules were developed within the group of 17.
Labor Minister Ursula von der Leyen is interested in taking things a step further. She would like to see greater integration of social policy in the euro zone countries as well and envisions a Euro Group of labor ministers based on the finance minister model. But it doesn’t stop there. Merkel and Schäuble are seeking further steps toward integration in tax policy. At a meeting of the CDU/CSU parliamentary leadership last week, Schäuble said that because of resistance from countries like Great Britain, it is taking too long to agree on a financial-transaction tax applicable throughout the entire EU. Because of the delay, he said, he could imagine initially launching the project in the euro zone.
Giving Up Sovereignty The scope of a joint corporate tax proposed by Merkel and Sarkozy at their meeting
in mid-August is also likely to be expanded beyond the two largest member states. “This is much more broadly conceived,” says a source within the German government. The two leaders envision a largely uniform tax for corporations within the euro zone.
All of these ideas amount to the euro countries gradually giving up parts of their national sovereignty. It wasn’t until the crisis came along that a willingness to move in this direction began to emerge. Ironically, it is the countries most deeply affected by the crisis that serve as a model for this new approach. Greece, Ireland and Portugal have already overcome some obstacles when it comes to relinquishing sovereignty. Now the countries whose government finances are still healthy will be expected to give up some of their independence as well.
New bodies are to be formed to expedite the integration of the Euro Group. Germany and France want to make themselves more independent of the existing structures in the EU and no longer be solely dependent on the resources of the European Commission.
5) … Gold and the US Dollar rose as World Stocks, ACWI, and World Small Cap Stocks, VSS, traded lower today as Reuters reports Yet Another Set of Bad Economic Figures For Greece.
“GDP contracted at an annual pace of 7.3 percent in the three months to June, from 8.1 percent in the previous quarter, according to seasonally unadjusted figures by statistics agency ELSTAT, while unemployment stayed near record highs. “Domestic demand is incredibly weak, exports do not benefit from global economic growth. A 2011 deficit of 8.5 percent to 9 percent doesn’t seem implausible,” said Ben May, a London-based analyst at Capital Economics.”
Stocks falling lower included
6) The HUI precious metal mining stocks rose. Will there come a time when these too will fall lower or will some fund purchase these?
6) …. Mario Draghi will take over as ECB President on 11-1-11. Will he be granted powers to be the EU Fiscal And Finance Minister? Will Herman Van Rompuy rise to be President of the EU?
Per the Open Europe report European Leaders are calling for … and per the Euro Intelligence report European Leaders are acting for … a Fiscal Union with centralized political power over national spending. The former report is available free of charge and the latter is available by subscription. I encourage a subscription to each in order to obtain the facts.
As I commented yesterday, throughout history great leaders have emerged. This include Nebuchadnezzar ruling Babylon; Cyrus and Cyrus and Darius ruling Merdo Persia; Charlemagne ruling Rome; Tony Blair ruling Great Britain, and George Bush, The Decider, ruling America with Unilateral Authority. Soon ten kings will come to rule, each in his own regional power base. The coming President of the EU will be one knowledgeable with the scheme of framework agreements. A leading individual for this position is Herman Van Rompuy, as he orchestrated the original Greek bailout.
Out of the soon coming global sovereign debt and banking crisis, a new European Super Government will arise; it will be like a revived roman empire, with the iron of authoritarian diktat replacing the clay of socialist democracy. A new moneyness, will come from the word, will, and way of both the Sovereign and His Seignior. The people will be amazed by this new seigniorage, and follow after the Beast Regime of Neoauthoritarianism, giving it their allegiance, as it rules in all seven of mankind’s institutions and the world’s ten regions. Hence a Ten Toed Kingdom with a global footprint of toes standing firmly over humanity imposing austerity and debt servitude.
The Beast regime is simply an outgrowth of the 1974 Clarion Call and the Authoritarian Imperative of the Club of Rome, whose 300 select individuals provided a solution of regional economic government, when the Milton Friedman Free To Choose floating currency regime would collapse from deleveraging and disinvestment.