Sunday 19 August 2012 Sunday 19 August 2012 Sunday 19 August 2012
Eurocrash: September is the dangerous month
This is because, the paper says, the individual steps already agreed have not restored the confidence of the financial markets and the citizens in the eurozone. And the main concern is that, in Greece, the situation has deteriorated so much that Athens will be forced to re-introduce the drachma.
The paper then emphasises that, if the constitutional court rejects the ESM on 12 September, all plans become obsolete and the eurozone countries will have to devise a completely new strategy.
Of great importance also are the recommendations of the so-called troika - the ECB, EU commission and IMF - in September, as to the disbursement of aid to Greece. If it does not recommend more aid, Athens would probably have to return to the drachma. This deadline, though, may be postponed if the publication of the troika report is not until October.
In an earlier piece, Süddeutsche Zeitung spelled out another crucial date – 6 September. Then, the governing council of the ECB meets again, when a decision is expected on whether the Bank will again buy government bonds.
The situation here is very far from settled as president Mario Draghi has made it clear that a condition for intervention is Spain and Italy would be obliged to submit an application to the EFSF, thus subjecting them "austerity" reforms that have plagued Greece.
It could be, the paper adds, that the Council will wait for the EU commission, which in 11th September is expected to issue a first draft of a proposal for a European Banking supervisor, on which rests the possibility of making loans directly to ailing banks rather than to sovereign funds.
Then, two days after the constitutional court ruling, on 14 September, there is a meeting of the eurozone finance ministers in Nicosia, when the next steps in the crisis management are decided – or not. Probably, the Spanish banks then get to see a portion of the €100 billion they have been asking for - or not.
Altogether, things are stacking up quite nicely, except for the politicians who are now on holiday. "Caution - if you read this, you might not come back from vacation", writes economist Megan Greene about the September outlook. In fact, the politicians can rely only on one thing: The month of September is going to be stressful.
COMMENT THREAD
Richard North 19/08/2012 Eurocrash: drawing a line in the sand
The proximate cause is that funding gap in the Greek budget, already identified by the troika as €11.5 billion, has now been re-evaluated as €14 billion. The Schäuble-Kauder duo, therefore, are saying "enough".
Kauder, in particular, opposes any further payments or concessions, and both senior politicians are adamant that there should be no third bailout. "The Greeks have to keep what they have promised," Kauder says: "There is no more room [for manoeuvre]".
Kauder also picks up on the Issing theme, reflecting how influential this former ECB member is. He warns against changing the constitution in the midst of a crisis, and adds: "I want no United States of Europe".
Nevertheless, he calls for an independent authority to monitor whether national budgets complied with EU stability rules. This task could be done by "a special division of the ECJ or the European Court of Auditors".
The great europhile Schäuble, on the other hand, is focusing on the Greek debt. There are limits, he says, and the German government could not justify, "throwing money into a bottomless pit."
Schäuble is also critical of the debate on the "disintegrating eurozone". Defending his stance, he says, "If the euro does not stay together, we pay the highest price".
This is mirrored by eurogroup president, Jean-Claude Juncker. Predictably, he rejects what he calls "mind games". A Greek exit will not happen unless Greece "totally refuses" to fulfil any of its reform targets, he says.
In damage limitation mode, German EU Commissioner Günther Oettinger then warns of "unpredictable consequences" of a Greek exit from the euro. "If we can not keep a country with three percent of Europe's total debt in the eurozone, then we nowhere when it comes to solving the great problems of trust", he tells the Frankfurter Allgemeine Zeitung.
Oettinger also criticised statements made the Bavarian finance minister Markus Söder, who had demanded the exclusion of Greece. "We ought to keep Greece on board if at all possible", he says. The language being used about the EU and Greece is "absolutely inappropriate".
Austrian foreign minister Michael Spindelegger, however, reveals that he has, with his counterparts, discussed an amendment to the EU Treaty which will allow exclusion of euro-sinners.
As one might expect, Luxembourg's foreign minister, Jean Asselborn dismisses this as "completely the wrong direction". He says the EU "spirit" is to promote the integration, not division. Playing with eviction scenarios throws the whole existence of the EU into question.
The fact that this is even being discussed, though, tells is a great deal. The cracks are yawning into a chasm, and even the "colleagues" can't hide them.
COMMENT THREAD
Richard North 19/08/2012 Booker: Germany falling?
With that, the Germans have at last peered into the abyss that opens in front of them as a result of pouring all that money into the coffers of their eurozone partners. And to say that they don't like what they see is a wild understatement.
Reported daily in such papers as Die Welt, Handelsblatt and Der Spiegel, a succession of politicians, financiers and commentators have concluded that, with Greece about to go bankrupt and Spain and Italy to follow, enough is enough.
Most of them argue that Greece must be allowed to leave the euro, and there is popular support for the idea, Many would like to see Spain, Italy and others leave.
So dire has this crisis become – with one senior politician estimating Germany's potential liability at more than $1 trillion – that voices are now being raised to say that the only practical solution to this mess would be for Germany itself to abandon the euro.
This is by no means a new suggestion, but when it makes the front page of Handlesblatt, there is a sense that we have passed to point of no return. And with the German departure, the rest of the eurozone could be left to sink or swim with a currency which, without Germany's backing, would face a massive devaluation.
These are the issues which we have been following on the blog (go to the "archive" link, and then do a search for the keyword "eurocrash") but, as Booker points out, one of the oddest features of this crisis is how little it has been reported outside Germany.
However, we do not need to be too shifty about this. It is not only the British media that has gone AWOL. Most of the European media – and well as the US and the English-speaking world - has been ignoring a drama in Germany which has precipitated an unprecedented torrent over hostile coverage on the single currency.
This is partly because so much is fogged by the public show put on by other European players, notably the Commission and the head of the European Central Bank, to promote the idea that "the euro cannot be allowed to fail".
Without a firm grounding in the history of the project, it is easy to fall into the trap of believing the single currency is an economic project gone wrong, instead of the supreme symbol of the European project's overriding aim, to weld the countries of Europe together in full fiscal and political union.
Furthermore, without understanding the political issues, and that planned development require a major new treaty, with a further massive surrender of national sovereignty, it is easy to be misled by market signals.
However, the likelihood of such a treaty being ratified – since it would require a slew of referendums, several of which would probably be lost – is remote, and certainly not in time to affect the course of the crisis - as Otmar Issing points out in an earlier piece.
Crucially, such a treaty would have to be ratified by Germany itself, and next month her constitutional court will rule on whether the precursor step of the ESM would be a breach of her Basic Law, which forbids any surrender of sovereignty to an outside power.
Not only that, Angela Merkel, facing an election next year, cannot afford to ignore the evidence of the polls – that a vast majority of her people say they have had enough of being expected to bail out their failing neighbours indefinitely. Thus, Merkel herself concedes that the election will be fought over "Europe".
Without question, says Booker, this is by far the gravest crisis the "project" has ever faced. But it is one which it has hubristically brought on itself, with all the inevitability of a Greek tragedy. The gamble it took in the 1990s, to impose a common currency without first creating the political union without which (as was observed at the time) it could not work, is simply not paying off.
As telling as anything in this drama has been the silence of France, under its new president, François Hollande, who, if anything, sides with those who look to Germany to bail them out. Although the pair are to meet later this week, the "Franco-German motor" of integration appears to be dying – and with it the entire project it drove forward for 50 years.
As for us British, despite the "little England rhetoric" of those who argue that Britain can lead the way out of the mess that the EU has become, our politicians sit impotently on the sidelines, largely ignorant of the events occurring in German, and wholly irrelevant.
When the crash comes, though, it will draw us down with it, as in the coming months it makes front-page news across the world. But our politicians, and the "europlastic" community will be the last to realise – and completely unequipped to deal with the consequences.
The most likely outcome, it seems, will be that Britain will be the last country left in the EU, long after all the other members have departed, still obeying all the directives and regulations, and sending off our ministers to Brussels for their orders.
And the most likely trigger of the collapse will be Germany, a country which is finally recognising that membership of the EU is incompatible with democracy and, unlike the UK, looks set to do something about it.
COMMENT THREAD
Richard North 19/08/2012
Sunday, 19 August 2012
While attention in this country was focused on the "delights" of the Limpiks, writes Booker, almost wholly unnoticed here has been the extraordinary drama unfolding in Germany – portending a truly seismic shift in the history of the European Union.
Partly, also, the issue has been left to economics and business writers, who understand little of the politics, and rely far too much on market analysts who know little of the issues and less of the history.
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