France and Germany appear to have found a compromise on the scope of the ECB's
new supervisory powers. The sticking point has long been the threshold at which
the ECB would intervene - Germany argues that many of its regional banks are too
small to warrant ECB attention. The summit's chairman, European Council
President Herman Van Rompuy, will try to get a commitment to launch the SSM in
January 2014 at the latest. His vision for far-reaching eurozone integration is
set out in a report, which will be the focus of the discussions. The report
included input from the European Commission, ECB and Eurogroup - the finance
ministers of the 17 eurozone nations. While banking union is the immediate
focus, the report also proposes "contractual" arrangements between eurozone
governments and the Commission, to prevent governments delaying, or reneging on,
important economic reforms. The quid pro quo would be central financial
support for specific reforms - "solidarity" money from a new eurozone budget, to
which all eurozone members would contribute. Such a mechanism could in future
help to ease the kind of chronic unemployment that is afflicting Greece and
Spain. Only two EU members - the UK and Denmark - have formal opt-outs from the
euro. The others still outside the euro are committed to joining, and can sign
up to the banking union in the meantime. The leaders are likely to avoid any
measures that could trigger treaty change before the European elections in
mid-2014, because treaty change is nearly always a thorny issue for the EU. It
took seven years for the EU to adopt the Lisbon Treaty. Germany's
Constitutional Court has already flexed its legal muscles over eurozone
integration. There is strong opposition in Germany and other richer eurozone
nations to any further taxpayer-funded bailouts of indebted banks and
governments. Chancellor Angela Merkel insists that the banking union cannot be
rushed - and she does not want to jeopardise her chances in Germany's elections
next autumn.
Access Investments-Building Awareness - European Union-ROMANIA
Saturday, December 15, 2012
Agreement on a eurozon banking union ...
France and Germany appear to have found a compromise on the scope of the ECB's
new supervisory powers. The sticking point has long been the threshold at which
the ECB would intervene - Germany argues that many of its regional banks are too
small to warrant ECB attention. The summit's chairman, European Council
President Herman Van Rompuy, will try to get a commitment to launch the SSM in
January 2014 at the latest. His vision for far-reaching eurozone integration is
set out in a report, which will be the focus of the discussions. The report
included input from the European Commission, ECB and Eurogroup - the finance
ministers of the 17 eurozone nations. While banking union is the immediate
focus, the report also proposes "contractual" arrangements between eurozone
governments and the Commission, to prevent governments delaying, or reneging on,
important economic reforms. The quid pro quo would be central financial
support for specific reforms - "solidarity" money from a new eurozone budget, to
which all eurozone members would contribute. Such a mechanism could in future
help to ease the kind of chronic unemployment that is afflicting Greece and
Spain. Only two EU members - the UK and Denmark - have formal opt-outs from the
euro. The others still outside the euro are committed to joining, and can sign
up to the banking union in the meantime. The leaders are likely to avoid any
measures that could trigger treaty change before the European elections in
mid-2014, because treaty change is nearly always a thorny issue for the EU. It
took seven years for the EU to adopt the Lisbon Treaty. Germany's
Constitutional Court has already flexed its legal muscles over eurozone
integration. There is strong opposition in Germany and other richer eurozone
nations to any further taxpayer-funded bailouts of indebted banks and
governments. Chancellor Angela Merkel insists that the banking union cannot be
rushed - and she does not want to jeopardise her chances in Germany's elections
next autumn.
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European Commission President Jose Manuel Barroso (L) holds a news conference with European Council President Herman Van Rompuy (R) at the end of the first day of the European Council meeting at the European Council headquarters in Brussels, Belgium, 14 December 2012. Photograph: JULIEN WARNAND/EPA
European leaders wound up their final summit of 2012 on Friday in much the same manner as they started the year – kicking the euro crisis can down the road, playing for time, crossing their fingers, hoping the worst is behind them.
In almost three years since the Greek drama erupted in February 2010 and spread quickly around the fringes of the eurozone, the leaders have never quite managed to get ahead of the curve despite 22 summits and countless meetings of eurozone finance ministers.
This week's two-day summit in Brussels repeated the pattern. It was supposed to lay out a grand plan and timetable for reforming and stabilising the euro regime through a battery of federalising political and fiscal moves. In the event, the documents from the EU council president, Herman Van Rompuy, were shredded amid more clashes over fundamentals between Berlin and Paris, while an even more ambitious blueprint from the Commission president, José Manuel Barroso, was simply ignored.
"One wonders how these two gentlemen will enjoy Christmas," quipped Andrew Duff, the Liberal Democrat MEP and ardent European federalist.
Van Rompuy, who has had a very bad month, was told to come back in the middle of next year with a better, more modest plan. The mood was darkened further by German Chancellor Angela Merkel dismissing claims that the worst was over for the eurozone and stressing that the bloc faced two years of painful reforms, slow growth and high unemployment.
"The changes we are going through are very difficult and painful," she said. "We have tough times ahead of us that cannot be solved with one big step."
Despite the stalemate and the seeming complacency, leaders concluded their summit keen to list the year's achievements. And they do have things to brag about
In one way or another Germany will pay, because no one else can and certainly in the case of Greece, Greece cannot. Whether it is through economic reditribution funds, underwriting the debt or as a consequence of the default that will ensue Germany will pay. All we are discussing are the terms and arrangements for making that happen.
To put it another way. Greece cannot pay its debts, so Germany either cancels them or Greece defaults. It all amounts to the same thing. Just as Greeks and Spaniards are having difficulty coming to terms with economic reality our Angela is having difficulty explaining the economic facts of life to Germany. So Angela must puff and bluster about not paying for idle Greeks and Spaniards while she knows perfectly well that she cannot get blood from a stone. In fact austerity is contracting the Greek economy so its capacity to pay is reducing by the day. Of course the debts are distributed across europe. Greece owes a great deal to French banks, but as the biggest player and payer in Europe Germany must pay or underwrite the biggest share of any european rescue, whatever form it takes. At some point Angela will need to explain to an uncomprehending electorate in kitchen sink terms. You loaned too much to a spendthrift cousin who cannot repay, even if you starve him to death, your cousin cannot pay, you cannot have your money back and you know that loan for which you acted as guarantor, well he's not paying that either, so you must.
The recipients of loans, write downs and bale outs are strongly in favour of labour market reforms. They would like to have a market for labour.
There may be a ray of hope. What should have happened after the 2008 credit crisis was a root and branch reform of the international finance system. Obama passed it up in the interests of 'reconcilliation'. The UK govt. did not take on the City of London. German policy reminds me of the policies of President Hoover i.e. pre-Keynes.
The insistence on reducing deficits in a recession- or can we call it a depression by now- it's been going longer than any post war recession-is a bankers' policy.
There are several reasons for the euro crisis but bailing out banks is one of the major reasons, followed by large scale tax evasion by corporations.
The EU is trying to regulate banks and is also taking measures against tax havens. Richard Murphy's (tax research UK)figures may be disputed but it must run into hundreds of billions.
The Right are already talking about 'loss of sovereignty' by nation states. How much sovereignty does a nation state have (esp. a small one) in a globalised world? The sovereignty went when we bought into the present system whereby the 'markets' dominate political decision making.
In 1966 when we had an economic crisis we had five levers to control the economy.
1 we could control the exchange rate-that ended with the end of the Bretton Woods agreement in the early 70s
2 we could impose tariff controls as a temporary measure. The WTO would not allow that now.
3 we had capital controls. Abolished by the Thatcher govt.
4 Interest rate was set by the chancellor-no longer -that was Labour
5 we could vary taxes upwards, Now we are told it would drive away foreign investment and rich people.
The scarcely regulated banking system trashed the world's economy and austerity policies are making it worse. The motive of the banks is obvious-they don't want to lose out. They over extended themselves and could not survive without state help. Much of the bail out of Southern Europe is not to pay for essential services for the people, but to pay off the banks.
There is an issue of overspending by the govts. but it is not the main cause. Revenues collapsed in the wake of credit crunch. More were diverted to tax havens-partly due to inefficient government control.
We, the people, have little power over the likes of Goldman Sachs but we can vote for politicians who can construct a pan European policy to control the banks and go after revenues which are being diverted.
I agree that govts. should try to live within their income but not in the worse recession for sixty years.We need investment and it seems only the state is able to do so while the corporations sit on their money.
I would go further and suggest that the power to create money should not remain with the private banking system but I doubt if there is enough support for this-at present.
The fact is that taxpayers' money is not being diverted to bailouts. The banks are issuing money and it is being guaranteed by national governments.
If the Eu can implement some of these reforms, there is a chance we could get out of the mess. Is there another plan which would involve less suffering?
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