There is a consensus in the corridors of power that if any eurozone member defaults or leaves, contagion and collapse are assured. This is a fairy tale designed to frighten voters into submission to bizarre government policies. It also ignores two historical lessons. ---GERMANS could vote in a referendum to decide whether to stay in the European Union, an ally of Chancellor Angela Merkel indicated last night. Wolfgang Schaeuble, Germany’s finance minister, said a poll may be needed to get agreement on moves towards closer economic and political union in response to the euro crisis. He suggested it could be held sooner than anyone expected – despite the fact that Germany largely outlawed referendums after Hitler’s misuse of them to manipulate public opinion in the 1930s. Mr Schaeuble’s outburst in a German newspaper, ahead of this week’s crucial summit of EU leaders in Brussels, has led to widespread surprise in Germany. They also sparked renewed calls at home for a referendum on Britain’s membership of the EU. Mr Schaeuble said: “Those who want a strong Europe also have to be willing to surrender decisions to Brussels.” He admitted this could strain Germany’s constitutional law and said such a change would require the German people to decide. Asked directly if the country could soon hold an EU referendum, he replied: “I assume that it’ll happen sooner than I would have thought a few months ago. I would have said, ‘In five years? Never!’ But now I'm not so sure.” Tory MP Douglas Carswell said last night: “If Germany can have a referendum despite tough rules limiting such votes, then why the heck can't we?” Paul Nuttall, a Euro-MP and deputy leader of the UK Independence Party, said: “Taking lessons on democracy from the Germans – isn't that a bit shaming, Mr Cameron?” EU leaders are due to discuss measures for closer integration for the 17 eurozone countries this Thursday, including a “banking union” and more centralized economic planning.
Reuters has now got hold of the document prepared for this week's eurozone summit. The report was compiled by European Commission President Jose Manuel Barroso, European Council President Herman Van Rompuy, European Central Bank President Mario Draghi and President of the Eurogroup Jean-Claude Juncker (pictured below with Draghi). According to the newswire, it suggests the eurozone could create a treasury for the single currency and issue eurobonds in the medium term as the final stage of a fiscal union. ---- Here are some other snatches from the report: In a medium-term perspective, the issuance of common debt could be explored as an element of such a fiscal union and subject to progress on fiscal integration. Steps towards the introduction of joint and several sovereign liabilities could be considered, as long as a robust framework for budgetary discipline and competitiveness is in place to avoid moral hazard and foster responsibility and compliance . The process towards the issuance of common debt should be criteria-based and phased, whereby progress in the pooling of decisions on budgets would be accompanied with commensurate steps towards the pooling of risks . Several options for partial common debt issuance have been proposed, such as the pooling of some short-term funding instruments on a limited and conditional basis, or the gradual roll-over into a redemption fund. Question is : Who is going to buy these fake bonds ????
I would just love to hear a banker explaining why it's better to get commercial banks to create money to lend the the US government, who then ends up paying $8.5 trillion in interest charges since 1988 (i.e more than half the entire US government debt), rather than just allowing the treasury to print its own money debt free like Abraham Lincoln and the Colonists.
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Reuters reports that eurozone governments are discussing removing the preferred creditor status from the ESM. Ambitious plans to be put before this week's EU summit – yes indeed, yet another crisis summit – to turn the eurozone into something much closer to a fiscal union make for easy analysis. On almost any level you care to take, they won't work.
As for the immediate crisis, it does nothing to address that. Wriggle and squirm as Europe might, it still remains hard to see how this crisis can end in anything other than an almighty pile up.
Greek economist Yanis Varoufakis has published an interesting interview in which he says his country's economy is "finished":
They cannot fix the Greek economy. The Greek economy is finished. The Greek economy is in a great, great depression. The growing social economy is in its long, long winter of discontent. There is no power, no force within the Greek economy, with Greek society that can avert – it’s like – imagine if we were in Ohio in 1931 and we were to ask: what can Ohio politicians do to get Ohio out of the Great Depression? The answer is nothing.
there are three steps to saving the eurozone:
• Unify the banking system, to have it being funded directly, not through national governments.
• Common European debt - eurobonds.
• An investment policy which runs throughout the single currency area
Italy faces another key debt auction today where it will sell as much as €9bn in six-month bills. Yesterday, the country paid 4.7pc to sell two-year paper, a new high since December, as investors expressed their doubt over whether this week's summit will deliver a decisive solution to the debt crisis.
Meanwhile, Mario Monti, Italy's prime minister, is expected to send a letter to European leaders today explaning the progress Italy has made with reforms.
07.35 Ahead of this week's EU summit, Angela Merkel and Francois Hollande will meet in Paris today to try to square their differences over how to tackle the crisis. Those differences were thrown into relief yesterday as Mrs Merkel ruled out jointly guaranteed eurozone debt for "as long as I live". Hollande supports the idea of eurobonds.
Before that meeting, Mrs Merkel will address the lower house of Germany's parliament later this morning.
Angela Merkel and Francois Hollande will meet in Paris today to try to square their differences on the debt crisis ahead of this week's summit, after the German chancellor ruled out eurobonds for 'as long as I live'.
At every turn, the eurozone crisis is deepening. The borrowing costs for Spain and Italy remain dangerously high. Cyprus has become the fifth eurozone country needing emergency help. More Spanish banks have been downgraded.
Many believe that Spain itself - not just its banking sector - will need rescuing. Greece wants to renegotiate the terms of its bailout agreement. Growth, for many countries, remains elusive.
At this critical time, France and Germany are on different pages. It has generally been true that the European project has been driven forward when France and Germany are in step. They are not at the moment. There is a deep philosophical and political divide between them.
It is not just that President Hollande has made growth rather than austerity his priority. He has openly challenged the German strategy of "austerity first". The two countries can skirt around these differences. The German Chancellor said on Friday that growth and stable finances are two sides of the same coin.
There are major opportunities in crises and defaults, such as the collapse of the Berlin Wall in 1989 which effectively doubled the number of global consumers overnight and resulted in a fifteen-year equity bull market and high growth in real income. Asia's financial crash in 1997 proved another. Today Greece's entire stock market is capitalised at $20bn, less than 5pc the value and 0.5pc of a single day's turnover in Apple. Italian opportunities are potentially greater. It is premature to place bets on the PIIGS today because of the EU's amazing record of dither and delay. Yet decision making has already passed to voters; the priority for national politicians is re-election so rapid changes are imminent. The result should be long overdue reform and economic renaissance, provided the dead hands of government incompetence are temporarily severed
European leaders will meet on Thursday to map a response to the eurozone’s troubles. Eurozone states will embrace further integration to save monetary union, starting with moves towards a banking union. In the coming months these steps will inevitably turn into big strides to closer fiscal union, with important implications for the UK.
Our coalition government has supported that shift and will continue to do so, knowing that the eurozone’s collapse would be disastrous for our economy. But we will defend the single market, on principle and because it is vital to UK prosperity and the 3m jobs that depend on it. In the lead-up to the summit, we must be wary of caricatures: that a “new thing” called banking union now threatens the UK, and that our government stands up for City exceptionalism and deregulation.
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