Euro zone member states are discussing dropping private sector involvement from the permanent bailout mechanism that is due to come into force in 2013, four EU officials said on Friday. The discussions are taking place as part of wider negotiations over changing the EU treaty to introduce stricter fiscal rules as Germany wants. Germany insisted that private sector investors -- banks and insurance companies -- bear a portion of the losses in the bailout of Greece. Euro zone states originally agreed to include clauses in the permanent bailout fund, the European Stability Mechanism (ESM), that would enforce private sector involvement. But the majority of the euro zone's 17 countries now want those clauses removed from the ESM and there is movement toward that happening, the sources said. "France, Italy, Spain and all the peripherals" are in favor of removing the clauses, one EU official told Reuters. "Against it are Germany, Finland and the Netherlands." Others said that while German insistence on retaining the clauses was fading, they would only be removed as part of a broader negotiation over changes to the EU treaty. Berlin wants full backing for changes to the treaty before it moves on other areas where member states want it to soften its stance, the officials said. 
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Friday, November 25, 2011
Euro zone member states are discussing dropping private sector involvement from the permanent bailout mechanism that is due to come into force in 2013, four EU officials said on Friday. The discussions are taking place as part of wider negotiations over changing the EU treaty to introduce stricter fiscal rules as Germany wants. Germany insisted that private sector investors -- banks and insurance companies -- bear a portion of the losses in the bailout of Greece. Euro zone states originally agreed to include clauses in the permanent bailout fund, the European Stability Mechanism (ESM), that would enforce private sector involvement. But the majority of the euro zone's 17 countries now want those clauses removed from the ESM and there is movement toward that happening, the sources said. "France, Italy, Spain and all the peripherals" are in favor of removing the clauses, one EU official told Reuters. "Against it are Germany, Finland and the Netherlands." Others said that while German insistence on retaining the clauses was fading, they would only be removed as part of a broader negotiation over changes to the EU treaty. Berlin wants full backing for changes to the treaty before it moves on other areas where member states want it to soften its stance, the officials said. 
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2 comments:
Yes, it's frightening. Can you take a bit more fear?
-Merkel's approval rate is high and climbing. Germans like the way she's handling it.
-The german constitutional court has already emphatically ruled that Eurobonds (or anything that impedes german budgetary sovereignty by imposing uncertain obligations on it) are unconstitutional. The german parliament is forbidden from passing a law that takes other countries debts onto the books.
http://www.bundesverfassungsgericht.de/pressemitteilungen/bvg11-055en.html
What the markets are slowly waking up to, in my view, is that capitalism in germany doesn't run the way they're used to. In german, "debt" and "guilt" are the same word (Schuld). People here in germany save until they've got a 30% downpayment before buying a house. That's why the Bundesbank was never a "lender of last resort", and why the german property market is so stable and dull.
If everybody is a saver, and debt=guilt, then there's no need for a "lender of last resort".
And the expectation that germany is going to throw its national creditworthiness on to the bond-market bonfire is just completely wrong. Germany takes international treaties seriously. Bailouts of other countries are forbidden under EU treaties.
And all the silly nazi comparisons in the world aren't going to make germans think that they're in the wrong on this. Because debt=guilt.
So many stupid, ill informed comments.
Why would Germany risk the trust of its people by offering to underwrite (which is what using the ECB to support them amounts to) , without limit, southern European countries where they retire earlier, work less, pay less tax, collect less tax etc.?
No German government can do that to its people without their explicit consent - it's called democracy, and it's written into their constitution. Even if they could, why would they want to? The risk is far too great that the high spenders, early retirers, inveterate tax avoiders, over-protected employees, would avoid any reforms to their feckless and indulgent ways at all.
Italy has very low private debt, much lower than Germany's - which means they have higher savings, in fact the country is awash with cash - in private, untaxed hands. Why then should German taxpayers bail the Italians out, or take the risk of underwriting their sclerotic, dysfunctional society? Its up to the Italians to pay up themselves.
As for all the fools still advocating some sort of Keynesian nirvana, by throwing more money at the situation, well Keynes only advocated that as a short term boost to stimulate growth, not as a route to hyperinflation or snowballing future piles of debt for the coming generations
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