Thursday 16 August 2012 Thursday 16 August 2012 Wednesday 15 August 2012
Interestingly, I left last night's piece with the Irish Times saying that Greece had to drop out of the euro, but this takes it a stage further.
I know we've said it before, but this really is end game territory. And young Daniel says that Britain should capitalise on this, leaving the EU to set up "a looser association of peripheral countries, linked to the core by free trade and inter-governmental collaboration rather than common political structures".
As always, he's behind the curve. It is the core which is collapsing and soon there will be nothing to coalesce around. Merkel was right when she said that the end of the euro is the end of "Europe". In the not too distant future, we will be looking at re-drawing the post-war settlement – the changes are going to be that profound.
The deepest of all ironies, though, is that it will be Germany, not Britain, which drags the project down. And the proximate cause will be the German Basic Law, which was drafted after the war with the help of British lawyers.
Central to the issue, as Deutsche Welle points out, is the "eternity clause" - a legal colloquial name for Article 79, paragraph 3 – which clearly limits the transfer of authority to a European level.
This clause stipulates which regulations in the Basic Law may not be changed, including the provisions in Article 20, which declare: "All state authority emanates from the people".
In our Harrogate Agenda, this is exactly where we are with our first demand, where we state: the people in their collective form comprise "the ultimate authority of their nations and the source of all political power".
And now, that provision is the Basic Law is going to prevent the German europhile élites handing over the last of the sovereignty to the EU, in the form of a fiscal and final political union. The power isn't theirs to give away.
Such issues were explored in detail in Frankfurter Allgemeine Zeitung over the weekend, where it was concluded that further demolition of the sovereignty of nation states was not the answer to "the state of emergency in Europe". On the contrary, what was needed was "its sharpening".
This is the dagger at the heart of the project. This is why we see a rush of politicians calling for a referendum. They need the people to assent to the transfer of power before fiscal union can go ahead - and it is doubtful even if that can be permitted.
Short of that, the dream is over. There is a lack of a European sovereign, and it is going to stay that way.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: Germany's trillion-euro liability
Throughout its brief life, what has sustained the euro has been the doctrine of ineivitability, but all that has gone, lost in the recriminations and squabbling of (largely) German politicians who dared to question the great secular religion of the age.
Latest of those trying to shore up the breach, however, is a blast from the past in the form of Gerhard Schröder, one time chancellor and earnest supporter of the project.
Bringing him out of retirement are the attacks of the FDP and the CSU against Greece. The "bashing" must stop immediately, he says. This is not conducive to the European idea and will not help the euro. "The continuation of Greece in the euro area is not easy but is possible, provided that there is solidarity and common effort", he insists.
In the German mainstream, though, a battle is shaping up between Merkel's coalition and the SPD, the representatives of the one arguing for a "stability union" while accusing the Socialist challengers of favouring a debt or "liability" union.
Enter SPD budgetary policy spokesman of the parliamentary group, Carsten Schneider, who is trying to turn the argument by suggesting that, whether left, right or centre, all parties are already lumbered with a debt union.
Says Schneider, talking to the Berliner Zeitung, the total exposure far more than the €310 billion Greek bailout funds, as the operations of the ECB have to be underwritten as well – the so-called "target II" balances, which Germany stakes to the tune of 27 percent. And there, Schneider estimates, the German liability now stands at a "breathtaking" €1 trillion.
Schneider also questions the assumptions on which the austerity programmes are based. If the Spanish package was transferred to Germany, he says, on a pro rata basis, that would require savings of about €250 billion, roughly the entire tax revenue of the federal government.
Such austerity would not be feasible for us, says Schneider. There would be a social uprising. The last major austerity package Merkel presented, in 2010, was only €80 billion, and that was spread over several years. And even now it has only been half implemented.
On that basis, the Spanish austerity plan is not realistic, and the Greek plan even less so, being much more extreme, at least on paper. To halt the death spiral, says the Irish Independent, Greece must leave the euro. The pain cannot go on much longer.
COMMENT THREAD
Richard North 16/08/2012 Eurocrash: "the current imbalances will blow Europe apart"
It was at that time that he admitted that a Greek exit from the euro had "lost its horrors", evoking a wry comment from Spiegel that some senior members in Germany's ruling coalition agreed with him. Now he's back, warning against "populism" in the euro debate, stressing the commitment of his party, the pro-business Free Democrats (FDP), to closer European integration.
He is also breaking ranks with the dissidents in the ruling coalition, picking on the likes of Markus Söder, Bavarian finance minister, who has called for a Greek exit. The Christian Social Union (CSU), Rösler says, needs either make party members moderate their views or it should isolate them.
This was after Söder had told Bild am Sonntag that "an example must be made of Greece … Everyone has to leave Mom at some point and that time has come for the Greeks". This had prompted from foreign minister Guido Westerwelle a warning: "The tone of the debate is very dangerous … We need to be careful not to talk Europe to death".
Rösler's comments also apply to the CSU general secretary, Alexander Dobrint, who is another to have called for a Greek exit. Rösler, himself no stranger to the genre, now echoes Westerwelle, declaring populism "extremely dangerous", contrary to European values, which include "the principle of give and take".
Nevertheless, Rösler concedes that, if reforms are not made Athens, there can be no third rescue package. We do not want Greece to become insolvent, he says, but if necessary we could deal with the consequences.
What has brought on this sudden outbreak of responsibility to this controversial politician is not clear, and nor is it clear that he is driven by electoral imperatives, even if next year's election is looming large and the FDP is not doing well.
There are indications, though, that the economy minister is adrift from the mainstream, as Greece has today announced truly appalling economic news, with the economy shrinking 6.2 percent in the last quarter, making this the fifth year of economic depression.
With nearly a quarter of the workforce (23.1 percent) unemployed, undermining efforts to meet revenue targets and reduce the budget, Athens is asking for more time to meet its austerity programme, evoking a favourable response from Westerwelle. He appears open to compromise, even if he is stating that there can be no substantial changes to the reform agreements.
On Monday last, Greece managed to sell €4 billion-worth of short-term (3-month) government securities, to meet its public sector payroll, but needs another €20 billion to keep it going. So it will all have to come out in the wash next week, when prime minister Antonis Samaras meets Merkel.
On the meantime, despite the political hyperactivity, the German people seem to be taking a relatively laid-back view of events. According to a TNS poll, eighty percent of the population want a "new economic order" and are not bothered by short-term goals.
People, we are told, have become accustomed to the crisis. Concerns triggered by the euro crisis are now replaced by other fears. "Health" is on the top spot, followed by "Satisfaction with personal life situation" and the "protection of the environment". Secure money and growth featured lowest on the list of wants.
Deutsche Welle however, doesn't share these priorities, asserting: "What we need is a new European economic policy, a new monetary union". "The current imbalances will blow Europe apart", it adds. "The deteriorating economic outlook is just a first small pointer. But there is still time to repair the damage. But the situation must be addressed decisively. And that is what is needed right now".
Richard North 15/08/2012
Thursday, 16 August 2012
In the years to come, it would not surprise me if we looked back on this summer as the time when the single currency passed the point of no return in its journey to obscurity.
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