Europe is Out of Time, Breakup Inevitable
One of the many interesting aspects of the Eurozone crisis is how many key political and central bank leaders fail see (or at least admit) that Europe is out of time.
Even more peculiar are statements by ECB president Jean-Claude Trichet who finally does realize time is of the essence, yet Trichet "solution" is a set of measures that must be passed by all 17 nations when those nations cannot agree on EFSF funding, on Eurobonds, on collateral for Greece, or even on whether a fiscal union or transfer union must take place.
In some instances the differences boil down to big country vs. small country concerns. In other instances it is Southern "club-med" states vs. Northern states. Some countries refuse to give up sovereignty, while others welcome giving up sovereignty.
It does not help matters when German chancellor Angela Merkel seems to change her mind on something every other week.
German Court OK's Bailouts, But "No Blank Check"
On Wednesday the German court ruled that bailouts were legal. However, chief judge Andreas Vosskuhle also stated "This was a very tight decision. It should not be mistakenly interpreted as a constitutional blank check authorizing further rescue measures", adding that parliament was "forbidden from setting up permanent legal mechanisms resulting in the assumption of liabilities based on the voluntary decisions of other states."
Finally, the court ruled government must get approval from parliament's budget committee before granting aid.
Those rulings went pretty much as expected but parliamentary approval of any kind is yet a further restriction and will slow things downs, even if just a bit.
Incredibly Messy Politics
- Italy's prime minister has a voter approval rating of 22% (see Italy austerity plan dents Berlusconi govt support)
- Merkel's Christian Democrat party (CDU), only managed to pull in 24% of the vote in her home state in an election September 4th (See Merkel's Credibility Shattered; CDU Party Defeated in Regional Election, Merkel Coalition at Risk)
- Spanish Prime Minister Zapatero’s Socialist Party suffered a massive defeat over his austerity programs in May. It was the worst rout in 30 years for Zapatero’s Socialist party. (See Prime Minister Zapatero’s Socialist Party Routed in Spanish Elections; Antinuclear Greens Surpass Merkel's Party in Local German Vote)
- In Finland, True Finns party chairman, Timo Soini launched a scathing and accurate attack against Jean-Claude Trichet, Jean-Claude Junker, and the ECB for its policy raping taxpayers of various countries to pay back German, French, UK, and US banks that made stupid loans for stupid reasons. (See True Finns Party Chairman: Greece, Ireland and Portugal Ruined; Gangrene Spreads; Enron Looks Simple; Spain Next Zombie)
- German Chancellor and French President oppose Eurobonds (see Merkel, Sarkozy Reject Euro Bonds and Expansion of Rescue Fund; What Does it Mean? Middle of the End for Merkel)
- 89% of the German population oppose the expansion of the EFSF and doubt that ever larger amounts will solve the debt crisis. 80% demand that parliament must agree each time before Germany can take on additional burdens and risks. 85% demand that financial institutions, rather than taxpayer, take the first losses when a country defaults. (see 90% do not want bigger bailout).
- Marine Le Pen, a top French candidate who wants to "let the Euro die" is polling ahead of French President Sarkozy (see articles below)
The last two bullet points are from Bailout Rebellion in Germany, on ZeroHedge. Here are expanded excerpts from the original articles.
French President Nicholas Sarkozy May Be Ousted in Preliminary Voting
In French elections, the top two candidates face a runoff in the national elections. France 24 reports New poll shows far right could squeeze out Sarkozy
Marine Le Pen, leader of the anti-immigration National Front (FN), is projected to win enough votes to knock out President Nicolas Sarkozy from the second round of next year’s all important 2012 presidential election, the French daily Le Parisien's revealed on Thursday.
The poll confirmed a previous Le Parisien survey conducted in early March that gave Le Pen a considerable head start over Sarkozy, and even a small edge on IMF boss Strauss-Kahn. The March survey said Le Pen would gather 24% of French votes, beating Strauss-Kahn’s 23% and Sarkozy’s 20%.
In Thursday’s survey Strauss-Kahn climbed to 30% and Le Pen dipped down to 21%. Either way, the figures makes Le Pen a credible candidate in the 2012 race.
Those polls were conducted in April before the Strauss-Kahn affair and I have not been able to find a more recent poll.
Marine Le Pen Says "Let the Euro Die"
The results for Le Pen are very interesting because of her stance on the Euro. Via Google Translate, please consider M. Le Pen says "let the euro die".
We must "let the euro die a natural death," means of reassuring the markets and revive the economy, said the president of the Front National Le Pen Marine, interviewed this morning on France Info.
Asked about the remedies it proposes to end the economic crisis, she said that we must "first stop bailouts repeat: there was Greece, now there will be Cyprus, Italy, the Spain ... " "There are masses of savings to do," she said, particularly expenses related to immigration. "The cost of the AME (State medical assistance for undocumented) explodes, there are 20 billion euros of social fraud against which nothing is done," she added, saying that "of 60 Vitale million cards, 10 million are false, that qualify for benefits unjustified ".
The market clearly says "Time's Up", yet politicians cannot agree on one major thing, and to top it off, voters are fed-up with austerity measures, bailouts, and politicians.
Clearly Le Pen is an anti-Euro, anti-immigration candidate and that is just the kind of message that can easily catch fire in this environment.
Merkel Proposes "Two Speed Europe" in Divide and Rescue Plan
Given that 17 countries cannot agree on anything, and voters are in open revolt of current leaders, it is preposterous to believe a "Two-Speed" Europe is the answer.
Merkel discarded "Two Speed Europe" long ago, but the plan is back in play as noted in Berlin Lays Groundwork for a Two-Speed Europe
The chancellor is planning her next political policy reversal . Until very recently, she has insisted that she was firmly opposed to creating divisions within Europe. But under the pressure of the euro crisis , Merkel has recently been thinking about abandoning the concept of a unified EU -- and assigning a key role to [Belgian politician and president of the European Council] Herman Van Rompuy in the process.
A New Power Center?
Today, it is primarily Great Britain that is preventing the EU from growing closer together.
Merkel, though, has had enough -- and is now planning a two-speed Europe. It would mean tightly interlocking the countries of the euro zone, possibly by means of a separate treaty that would apply in parallel to the EU Treaty of Lisbon. This was the concept German Finance Minister Wolfgang Schäuble proposed last week to the leadership of his party, the center-right Christian Democratic Union (CDU). Merkel sees Van Rompuy, who already chairs the council of the 27 EU leaders, as the head of the new power center.
In addition to the club of 27 nations that primarily manages the common domestic market as it has done until now, Merkel envisions a tight alliance of the 17 euro-zone members -- one which would unify their fiscal, budgetary and social policies. This would create a two-class club, raising questions like: What happens to the European Commission? Will it still be responsible for economic matters in the euro zone, or will there be a new organization? The same questions apply to the European Parliament and the European Court of Justice in Luxembourg. Would all of these institutions have to be duplicated, meaning even more bureaucracy, effort and expense?
There are no answers yet to these questions, and there is already plenty of skepticism. The European Commission is just as opposed to Merkel's plans as most members of the European Parliament and many smaller EU countries are. They also have some within Merkel's own ranks raising their eyebrows. "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.
For starters, blaming this on the UK is absurd. The UK was smart to stay out of this mess.
The article continues ...
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.
Ireland refused to give up its tax advantages, and why should it? Indeed Ireland ought to tell the EU to stuff it right now and leave. Tax advantages are the only way Ireland has to grow out of this mess.
Part 2: A New Shadow Government for the EU
But that isn't enough for Merkel and Sarkozy. They want the 17 leaders of the euro zone countries to convene for a summit twice a year, with Van Rompuy serving as its permanent chairman.
The Belgian would also receive a bureaucratic structure for his new responsibilities, giving the Euro Group its own secretariat. According to initial ideas, the new agency would be appended to an existing European Council secretariat, so that the separation doesn't seem too obvious.
The group of finance ministers of the euro zone, which prepares the groundwork prior to meetings of heads of state and government, may also be strengthened. An idea being considered is to provide it with a full-time chairman, who would serve as a contact for Van Rompuy. Luxembourg Prime Minister Jean-Claude Juncker has taken care of the duties until now. The new chairman would be a former finance minister, making him more acceptable to a group of his peers.
While that is still in the planning stages, it has already been resolved that the working group of finance state secretaries will have a full-time chairman with his own team of employees. The body, with the cumbersome title Eurogroup Working Group, does the detail-oriented heavy lifting ahead of finance minister meetings.
In short, a kind of shadow government is currently taking shape in Brussels. But officials in Berlin have begun considering ideas which go even further. Merkel, for example, is thinking about introducing a right to file complaints before the European Court of Justice against euro-zone member states that violate the Stability Pact. Such a move would require an amendment to the Lisbon Treaty.
Merkel's Mind is Fried
Merkel's mind is clearly fried. How many years would it take to get agreement on something like that? Even two years is too long. She will be long gone.
It's time to start asking serious questions like ...
Is the Euro Worth Saving?
Regardless of what you or I may think, that question is where European voters come in. From that standpoint it does not look pretty.
German Chancellor Merkel, Spanish Prime Minister Zapatero, Italian Prime Minister Berlusconi, and Greek President George Papandreou will all be gone after the next set of elections.
French President Nicholas Sarkozy may bite the dust as well, and if he does it may be to a vehemently anti-Euro candidate.
All it takes is one government to say "to hell with this" and the whole mess unravels.
The current set of politicians all want to "save the Euro". But what did the Euro buy Greece, Ireland, Spain, or Portugal except misery?
Even German and Finland voters wonder it bought them.
Eurozone Breakup Inevitable
Merkel's half-baked proposal raises more questions than answers. The market (and voters) will not possibly wait for details of her proposal to get hashed out. If this is the best Merkel can come up with, a Eurozone breakup is inevitable.
Source: Global Economic Analysis
About Michael Shedlock
Michael Shedlock Archive
|04/11/2014||85% of Pension Funds to Fail in Three Decades||story|
|04/08/2014||U.S. Treasury Warns China Over Yuan Depreciation; Treasury Hypocrites; What If?||story|
|03/28/2014||Are You Minding the Curves? Sweet Spot Is Likely Not Where You Think||story|
|03/12/2014||High Frequency Trading Hails Its First Billionaire||story|
|03/11/2014||Book Review: The Money Bubble (What to Do Before it Pops) - Two Thumbs Up||story|
|02/24/2014||Monetarism, Abenomics, QE, and Minimum Wage Proposals||story|
|02/20/2014||Philly Fed Unexpectedly Back in Contraction; Weather Blamed Again||story|
|02/18/2014||China Fooled the World (But It Cannot Last)||story|
|02/11/2014||Facebook Fraud - How Much of Facebook’s Ad Revenue is Legitimate?||story|
|02/05/2014||CBO: Obamacare to Increase Unemployment Longer Term||story|