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Surprise! It’s not the eurozone crisis anymore. Welcome to the EUrozone crisis

Angela Merkel is offering her latest vision for a “federal Europe”. That “vision” still consists of few details other than a promises that it will be a slow process that will take years, if not generations. Apparently Merkel thinks that a vague “long-term vision” is the only thing that can placate nervous markets freaked out over the imminent insolvency of major member states. There’s also talk of a publicly elected president of the EU commission, so there are at least some signs that the voters would have some direct say in the new halls of power. More immediately, the new regional banking supervisor is possibly going to get implemented as soon as next year, so that might placate the markets. And a new pan-european army is being bandied about. Markets do seem to like war, death, and bloodshed, so that might help. But that’s a long ways off. The banking union will have to do for now:

Washington Post
Germany offers vision of federalism for the European Union

By Anthony Faiola and Michael Birnbaum, Updated: Wednesday, June 27, 1:44 PM

BRUSSELS – Political posters in Rome are comparing her to Hitler. A popular British magazine dubbed her “Europe’s most dangerous leader.” But could German Chancellor Angela Merkel – the frugal physicist foisting tough austerity on the region’s hard-hit economies – really be the most pro-European leader in Europe?

Merkel arrives here Thursday for a European Union summit, with the stoic 57-year-old raised in East Germany again seen as the chief stumbling block to a shock-and-awe response to the region’s debt crisis. Jealously guarding the purse strings of Germany – an anchor of economic might and stability in a region adrift in financial trouble – the leader nicknamed “Frau Nein” by the European press is resisting calls to roll out a bevy of measures seen as possible quick fixes to the crisis.

But especially in recent weeks, Merkel and her top ministers have been spelling out a far grander, German alternative to convince markets the euro is here to stay. What they envision would mark a radical step forward in European integration through a “political union” in which countries in the region would act more like American states, , sharing an elected president and even a pan-European army.

Such visions are hardly new, but the Germans are nevertheless building a fresh case that integration is the only way to shore up the foundations of the euro, albeit one that could take years, if not generations, to see through. Part of the summit here will be dedicated to debating the first steps of such a path, including the creation of a regional banking supervisor that, in about a year, would have the power to do something long considered taboo in the fiercely independent nations of the euro zone: override the authority of national governments.

Plans also being discussed call for the establishment of a sort of European Treasury down the line, vesting central authorities with broad powers over national budgets. Yet for many in Europe, the holdout by Germany for a grander plan is being seen as suspicious and highly damaging.

In a more deeply integrated Europe, Berlin could emerge as the most powerful single voice, particularly sending chills down the spines of the French. At the same time, critics charge that Merkel’s call for a bigger – and slower – solution is simply a cover for German unwillingness to take costly and critical stopgap measures. They warn that there could be no euro zone left to integrate if the region acts on Berlin’s timetable.

The German leader’s tough talk has not helped her case. Merkel told the German Parliament on Wednesday that collective debt for Europe – seen by many economists as a vital weapon against the crisis – is “economically wrong and counterproductive.”

But the Germans are digging in their heels, dismissing the charges emanating from corners of Europe that Berlin is trying to orchestrate a new model for the continent in which it is the one largely calling the shots. “Maybe the fears of other nations in Europe are related to World War II and history,” said Sebastian Dullien, senior policy fellow at the European Council on Foreign Relations in Berlin. “But it could also be they are simply afraid of losing power.”

The Germans have yet to fully spell out what they mean by a political union, but it largely involves the surrendering of more national authority to the region’s administrative capital in Brussels. Merkel’s influential finance minister, Wolfgang Schaeuble , last week re­inforced calls for a directly elected president of the European Commission, as well as a new finance minister for Europe capable of overruling national governments. German Foreign Minister Guido Westerwelle called a forum of his peers together last week to float notions including the integration of European defense into a single, standing army.

“Only a long-term perspective for Europe will restore the confidence that we also need to come out of the debt crisis now,” Westerwelle told the Financial Times.

Hmmm…this new-ish ‘vision’ still sounds rather contentious. Good thing it only involves the eurozone and not the entire EU. Especially the plans that are intended to be implemented in the near term, like the regional banking union that’s supposed to get implemented next year. If something like THAT was intended to oversee whole EU, that would pretty much guarantee an giant political trainwreck. And it would be a total disaster if this new pan-EU banking supervisor actually led to lighter banking regulations in small member states. The smaller the state, that greater the need more control over their banking systems than their larger brethren require due to the risks of “hot money” flooding in and out of their small economies. That could turn those smaller EU members into financial boom/bust zones. At least that’s not part of the ‘vision’:

Eastern EU members attack bank plan

By Michael Winfrey and Robert Muller

PRAGUE | Wed Jun 27, 2012 11:31pm IST

(Reuters) – The Czech government and Bulgarian central bank stepped up criticism of proposals for an EU banking union on Wednesday, raising new obstacles to agreement at a summit this week.

Changes to EU banking supervision are seen as important for resolving the euro zone debt crisis and are up for discussion at a summit that is already set to be heated as Germany faces off with Italy, France and Spain over how to save the currency bloc.

Some states outside the euro zone, including economic heavyweight Britain, fear EU-wide banking rules could rob them of sovereignty and damage their economies.

Czech Prime Minister Petr Necas said his government would not accept initial proposals circulated so far.

“Some proposals like the banking union could have an extremely damaging impact on the Czech economy,” he said, adding that he did not expect any major conclusion from the summit.

Bulgarian central bank governor Ivan Iskrov expressed concern over any proposal to extend banking supervision across the European Union, rather than just to the euro zone, and said small states would find that hard to support.

A failure by all EU members to agree on EU bank regulation would undermine prospects for any changes which could in any case take years to implement.

The particular worry of the Czech Republic and some other eastern European countries is that their banking systems could be undermined by lighter EU-wide regulation.

Many banks in eastern European countries are owned by those in bigger states. The fear is that under EU regulation, less well capitalised parent banks could drain the capital of their healthier subsidiaries in other countries.

European Council President Herman Van Rompuy released a seven-page report this week envisaging an “integrated financial framework (that) should cover all EU states”.

Oh my. That’s not going to go over well with a larger EU. Well, fortunately there’s the elected EU Parliament that might help give the the smaller states and non-eurozone members some additional say over how this new banking supervisor is managed and other too-be-decided sovereignty surprises. The power of the veto is not to be underestimated:

June 27, 2012, 11:46 a.m. ET
Dow Jones
EU Parliament Head: Willing To Forego Veto Rights On Measures To Save Euro
Frances Robinson

BRUSSELS–The European Parliament is prepared to give up its right to veto legislation as part of streamlining the decision making process in Europe, its President Martin Schulz said Wednesday.

“We need to be able to act immediately,” he told reporters. “We’re living in exceptional times which require exceptional reactions.”

Schulz said an inter-institutional agreement between the European Commission, European Council and European Parliament would enable legislation to help resolve short-term problems.

“Let me tell you something exceptional for a parliament,” Mr. Schulz said. “We are ready to renounce, if necessary, our right of objection so as to adapt, in the shortest time possible, decisions which regard solving problems with the euro, financial stability, or employment.”

Under the EU’s Lisbon treaty, ratified in 2009, the European Parliament gained co-decision powers on a broad range of economic policy issues. As a result, there have been long negotiations between parliament and EU member states on a number of crisis response measures delaying their implementation.

Speaking alongside Mr. Schulz, European Commission President Jose-Manuel Barroso said that while an agreement between EU institutions could be important, decisions must be made via the so-called community process–and that all countries should be on board.

“Germany has rightly been insisting on fiscal discipline,” he said. “But we also say to some, let’s call them the AAA countries, you have to commit to solidarity.”

He added that while the summit wouldn’t “miraculously” calm markets, resolving the current crisis “depends on both the short term and longer-term decisions” leaders will take.

Short-sighted long-term perspectives are quite a sight to see.


13 comments for “Surprise! It’s not the eurozone crisis anymore. Welcome to the EUrozone crisis”

  1. Not one bank needed a bailout? Deposits exceed loans? No dependence on international lenders to keep the country running? Banking system dominated by international subsidiaries that are forced to play by local rules that are for more stringent than the banksters are used to? That’s definitely going to have to change:

    Czechs Oppose EU Banking Union Plans as Risk to Local Banks
    By Peter Laca and Krystof Chamonikolas – Jun 27, 2012 7:46 AM CT

    The Czech Republic opposes plans to create a banking union in Europe as such steps would pose a threat to the country’s financial industry, Prime Minister Petr Necas said.

    The government is also against a possible weakening of regulatory powers held by the Czech central bank, Necas told reporters today. Some of the proposals put forward by the European Union present “substantial” risks to the Czech financial stability, central bank Governor Miroslav Singer told a conference today in Prague.

    A 10-year road map, released yesterday by four officials led by EU President Herman Van Rompuy, centered on common banking supervision and deposit insurance and a “criteria-based and phased” move toward joint debt issuance. It also suggests that the EU could impose upper limits on annual budgets and debt levels of nations that use the euro.

    “My mandate, approved by the government, stipulates not to accept those proposals that have been so far circulating in the media,” Necas said. “We clearly stated that some parts, such as a banking union, could be very damaging to the Czech economy, where 95 percent of the banking market is operated by subsidiaries of foreign institutions.”

    The Czech Republic’s banking industry is controlled by units of western institutions including Erste Group Bank AG (EBS), KBC Groep NV (KBC) and Societe Generale SA. (GLE) It opposes efforts to transfer banking supervisory powers to a multinational level.

    “For this country, for its financial stability, some of the things that have been proposed on the European level in the past two weeks present a substantial medium-term risk for the financial stability,” Singer said.

    The Czechs didn’t have to bail any banks during the global financial crisis as the amount of toxic assets accounted for less than 1 percent of all assets, according to central bank data. Deposits in the country’s banks exceed loans, protecting them against a funding freeze from their western owners which are selling assets and raising capital to meet more stringent regulatory requirements.

    Posted by Pterrafractyl | June 29, 2012, 11:55 am
  2. Good article insofar as it is able to deal with these issues within the strictures of an irrational economic system whose financial sector has been turned from a necessary mechanism for capital flow into an incubator of endless parasitical forces that feed on the putrifying industrial sector which it is supposed to serve. What we get from the media subsidiaries of the corporations is nothing more than increasingly delicate apologetics to convince us that such a system is ultimately tenable. Something akin to theology: “a whole boatload of sensitive bullsh*t”, to use Allen Ginsburg’s phrase. The EU countries need to re-federate around a common plan to reshape the industrial sector into a social tool that realistically addresses much-neglected social, environmental, and technological realities. Such a plan can only be implemented by a thoroughgoing revolution in which class-conscious industrial workers are in the leadership. This was the revolution that Nazism was designed to derail.

    Posted by Burton | June 29, 2012, 1:46 pm
  3. It’s looking like Mario Draghi, the head of the Eurpean Central Bank, is going to be a more in keeping with his ‘Super Mario’ nickname. He’s getting new powers to regulate banks and sovereign debt purchases. So the head of the ECB is going to be even more of a central figure in the ongoing (and future) eurozone debt crises. One of his selling points is apparently his willingness to be a hardass in ways that create profound real world consequences just to make a point about his hardassness. At least that’s what the article below suggests, with his unwillingness to drop rates in early June when Spain was about to spiral into insolvency in the midst of an interest rate spike being suggestive of his commitment to “structural reform” (Keep in mind this was using Spain as an example, a country run by one of the most pro-austerity governments in Europe). And one of the first areas Mario is expected to use his new powers is on the clean up of Spain’s financial system.

    When you’re already at the top of the power pyriamid, the only way to fail-up is to get more power, usually via constitutional “structural reform”:

    NY Times
    Europe’s Banking Chief Wields New Power in Crisis
    Published: July 2, 2012

    BERLIN – The spotlight in the European debt crisis has now shifted decisively toward the influential leader of the European Central Bank, Mario Draghi, who emerged from the recent summit meeting in Brussels with new powers and stronger backing to address the Continent’s financial woes.

    Political leaders took significant strides toward making the central bank more like the United States Federal Reserve, giving it authority to oversee the euro zone’s largest banks and, once that new regulator is in place as soon as the end of this year, a likely role in rescuing Spanish banks with capital directly from the European rescue funds.

    Many of the longer-run plans under discussion, like European deposit insurance, would mean shifting further responsibilities toward the bank, arguably giving Mr. Draghi the most influential executive powers in Europe.

    In terms of unelected people, he is by far the most powerful in the democratic world,” said Franklin Allen, a professor of finance and economics at the University of Pennsylvania’s Wharton School. “He’s going to have huge influence over bank supervision and over the purchase of sovereign debt, whether he’s the head of the committees in charge or not.”

    It remains to be seen how the missing details from the summit meeting could undermine his discretion, how much power he would have over the bailout funds, for instance, or how an E.C.B. banking authority would relate to national bank regulators. Mr. Draghi’s new powers also do not address what many analysts see as the biggest structural question facing the euro zone: how to reduce the heavy debts of many of the region’s economies at a time of severe economic weakness.

    One thing is certain: The financial and monetary integration in Europe continues to outpace the deepening of political and fiscal ties, risking an angry reaction from German taxpayers who could find themselves on the hook for more and more liabilities. A German constitutional court is wary of allowing too much latitude to Mr. Draghi and other European officials, threatening to strike down steps that violate Germany’s Basic Law.

    But for now, Mr. Draghi’s already significant influence seems only to have grown. One official who works closely with Mr. Draghi said he still enjoyed the support of Germany’s chancellor, Angela Merkel, who understood well his carrot-and-stick method.

    Analysts expect the bank to cut its main interest rate to 0.75 percent on Thursday from 1 percent, the lowest ever, in a further attempt to unblock credit.As evidenced by his decision at the beginning of June to leave interest rates unchanged, despite signs that Spain was sliding toward the abyss, they, and euro-zone leaders, would be well advised not to underestimate his nerve.

    His stance was widely perceived as a warning to political leaders that he was willing to play hardball to get them to adopt the policies he wanted. Mr. Draghi’s years of working in the Italian Treasury as it struggled to reduce deficits in order to meet the criteria to join the euro have taught him that politically unpopular changes are never accomplished without pressure.

    His nickname, Super Mario, does not seem to fit him. Mr. Draghi, 64, has no obvious flash or flair; an economist in a dark suit and glasses, he has just enough of a knowing smirk, a gentle irony, to avoid seeming dull, more monetary Machiavelli than video-game hero.

    Mr. Draghi in turn has urged politicians to do more, dismayed by the way they eased up on their reform drives once the flood of cheap loans to banks calmed markets for a few months. The lesson was that big injections of cash from the European Central Bank produce little more than a sugar high unless they are accompanied by fundamental reforms to the currency union’s architecture, changes that would convince investors that the euro zone is built for the long haul.

    “Mario Draghi is going to be damned if he does and damned if he doesn’t. Damned if he does because he’ll be seen in Germany as caving in to irresponsible and profligate countries in the periphery,” said Philip Whyte, a senior research fellow at the Center for European Reform in London. “If he doesn’t cave in, it’s difficult to see how Greece can stay inside the euro zone.”

    The guy that really really really wants austerity“structural reform” is now going to have even more say over the purchasing of sovereign debt and the disbursement of bailout funds. And he’s already shown a willingness to push countries off a financial cliff to make a point about his earnest desire to see “structural reform”. And from what we know about the nature of the bailouts being proposed, there’s going to be “bailout funds” disbursed for decades, thus allowing an endless stream of opportunities to not disburse the funds or buy eurozone member nation bonds in a pinch in order to teach entire nations a lesson in the awesomeness of “structural reform”.

    Sounds super.

    Posted by Pterrafractyl | July 3, 2012, 12:04 am
  4. As regards Schulz’s comments regarding surrendering the veto and renouncing the right of any objection…

    The phrase “Enabling Act” springs to mind.

    Being British and being characteristically awkward and embarrassed of that fact (surely, we are the Woody Allen of Western Nations), we have been taught and told for an awfully long time that it’s just simply not the done thing and very bad form to make any reference back to the European History of the 1930s and 40 to Europeans of other nationalities for fear it might risk embarassing them. Or more still that they might find it offensive.

    Only the British are so embarrassed by winning or being actually in the right.

    It’s a well-known, 70 year mantra known universally as “Don’t mention the War”.

    As if a German invasion of Poland (and the Sudentenland, and Alsace-Lorraine, and the Danzing Corridor, and Austria, and Czechoslovakia) was something we were to blame for in some sense and should be ashamed that finally so many of the weaker new independent states we had pledged to protect and guarantee had been subjugated , enough was enough…

    It’s not as if we didn’t try really, REALLY hard not to have that war and not get involved in the slaughter of it…

    Don’t mention the war…. I’m sure they said that to Chamberline most days. That would’ve been the first line of Joe Kennedy’s every briefing memo.

    I just saw footage yesterday from RUssia TV of a German EULEX EU Federal Policeman in full riot/battle gear in Kosovo (even though Kosovo is not in the EU, does not pay it’s dues to fund the EULEX force and to my mind and the mind of most people who’ve studied the problem is not an independent state, nor has much legitimate claim for independence and is nothing more than a lawless bandit sanctuary for laundering Euros and the mass importation of herion and sex-trafficked Russian girls in enforced prostitution, all under EU, NATO and UN protection (most of the peackeepers were Italian Army, ex-P2 and friends of Berlesconi)) beating an unarmed Serb protester with an enormous long-armed baton, screaming “Ja, voll!!”whilst his colleagues spray down both him and his fellow unarmed Serb rioters liberally with Bear Mace cannisters, held around 3 inches in front of their faces.

    Serb men may be militantly nationalist and have an alarming knife fetish that gets invoked on a hair trigger in the name of national self-defence when they percieve they are being threatened, but I can understand why.

    What they’re doing over there with EU taxpayer’s money – my money, in part – while they bleed Greece white, just 70miles away from the lawless organised crime free-for-all in Kosovo… That’s just not okay anymore…In response to the direct threat to the Republic

    They are begining to test my last nerve…

    Posted by Spike1138 | July 8, 2012, 8:59 am
  5. @Spike1138: Considering the extent to which the psychic scars from the US Civil War still haunt my own country (case in point), it’s hard to imagine just how deeply the scars of WWII (and all the previous wars) must still be felt across the continent. It’s really too bad to see the eurozone turn a giant fascist trap. In spite of all the stupid historical rivalries in the US, the general sense that “we’re all in this together” has been an invaluable source of social cohesion and it would have been nice to see Europe continue down that path. At the end of the day, the whole planet is going to have to adopt a “we’re all in this together” mentality ASAP if we’re going to avoid the prospect of a leaving today’s toddlers witha a hopelessly broken world and if Europe couldn’s accomplish this in spite of decades of effort that really doesn’t bode well for our planet. And given how many Europeans in every country have really tried to heal those scars it’s just so sad seeing how rapidly those efforts have dissipated at the first whiff of crisis.

    Part of what’s so unsettling is is how blatantly intentional that shared sense of identity has been destroyed by the likes of Merkel and all the politicians pushing the “lazy Southerners” meme while they blatantly push policies that exacerbate the underlying crisis. This should have been transparent and yet it’s not. And what’s really unfortunate is how the German public seems to love Merkel for doing everything she can to impose what amounts to junk economics on the continent. As an American, I’ve seen what happens when a populace embraces junk economics (i.e. the “Reagan Revolution” all the way up through the Tea Party). It’s hard enough for a culture to unlearn those junk memes when its their own country getting gutted by them. Rhe US is still largely captive to the “tax cuts solve everything, government is the problem” mentality in spite of all the damage to the US economy and society over the last 30 years. But this is a whole new ball game in Europe because the damage from these junk economic memes is being done to neighboring countries. Ok, it’s not exactly a “new ballgame” since countries have always been attacking each other’s economies. But I can’t think of many examples like the eurozone that are all in the same boat, and yet still distinctly separate. I guess it’s analogous to the “beggar thy neighbor” policies between states in a single nation where one state attempts to attract the industries from their neighbors with promises of reduced labor laws, lower pay, tax breaks, and so forth. But at least in that case the entire nation ends up feeling the impact like stagnant wages, more pollution, growing poverty, and a “race to the bottom” dynamic.

    If the wealthier “states” in the envisioned eurozone aren’t forced to economically feel the pain of their poorer neighbors one of the most important feedback loops in its economy is going to be destroyed. But what we seem to be seeing in the eurozone is an attempt to create a nation state that specifically blunts that shared pain and instead channels the pain of the weakers states into real benefits for the stronger ones. It’s a model for colonialism, not a “United States of Europe”. That’s part of why it’s so distressing to see the German public backing Merkel’s madness. The German public is too damn important and educated to fall for the economic nonesense getting peddled by the Bundesbank and yet they appear to be falling for it in spades (I understand that hyperinflatino in the 1920’s really sucked, but there have been a lot of other economic lessons leared in the world too). I can’t imagine the bulk of the German public is being intentionally cruel to its neighbors…they’re just responding old stupid bigotries and the garbage their elites are feeding them like everyone else (wouldn’t it be nice to find a country that isn’t captive to group-think? Still looking…). But if Merkel’s favorability ratings are really going through the roof right now I’m having a hard time seeing how anything can be salvaged with the eurozone. At least not for another generation. A society’s common-wisdom is really hard to change, even when it’s deeply foolish. Let’s just hope that, when this whole mess shakes out and all the damage has been done, we don’t find ourselves in a situation once again where the seemingly unforgivable has transpired. And if we do find ourselves in that situation, let’s all hope that forgiveness can be mustered anyways. This cycle of rivalries and conquest has got to end ASAP. Most of the rest of the world is whistling past the graveyard and on a collision course with eco-collapse. Humanity and the biosphere do not have the time for more of this madness.

    Posted by Pterrafractyl | July 8, 2012, 7:18 pm
  6. Well this should make the eurozone’s austerity-driven quest for labor market “competitiveness” in the PIIGS even more ‘interesting’:

    Merkel pushes EU, Southeast Asia free trade pact

    (AFP) – July 11, 2012

    JAKARTA – German Chancellor Angela Merkel on Wednesday said Europe must step up its efforts to establish a free trade pact with booming Southeast Asia.

    “I am deeply convinced that Europe has to hurry up in setting up a free trade agreement with this region if it wants to be able to compete,” she said during a visit to Jakarta.

    The 10-member Association of Southeast Asian Nations (ASEAN) and the European Union in May 2007 agreed to start free trade agreement talks after years of wrangling over human rights abuses in Myanmar.

    The EU has begun negotiating agreements with individual ASEAN states, including Malaysia and Singapore. Myanmar in April pushed for an EU-ASEAN agreement, citing major reforms in the country.

    ASEAN as a whole represents the EU’s third-largest trading partner outside Europe, with more than 206 billion euros ($253 billion) of trade in goods and services in 2011, according to the European Commission.

    The EU is ASEAN’s second-largest trading partner after China, accounting for around 11 percent of ASEAN trade.

    ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

    Interesting times indeed.

    Posted by Pterrafractyl | July 12, 2012, 9:26 pm
  7. The paper at that second link is a masterpiece of understatement and academia-speak and parts of it are unintentionally droll. Dave has given us a good background on, specifically, the Japanese model and mindset of government and it seems to apply to other Asian nations as well. It’s a Western cultural shock to encounter the way the underworld is melded so smoothly with corporations, government and military in Asian nations. We forget that the East never had their Enlightenment and so never experienced a wholesale cultural rejection of feudalism. The communist experiment in China was more a method of national unification against foreign incursion than it was any serious attempt to embrace the concepts of social justice, equality or democracy. There are exceptions, of course, but on the whole, Asia does not aspire to these things. The proof is in how quickly and quietly China relapsed to the feudal model in very recent history. A more important eastern preoccupation is with harmony and its corresponding fear of social chaos. Hence, although Asians may work for some specific non-systemic changes, they are generally resigned to the totalities of the current hierarchies.

    This passage from that paper needs no deep analysis. It’s a shameless celebration of the fact by Western transnationals that there are no deep-rooted traditions of democracy or human rights to break down in Asia prior to turning whole nations and populations into commodities on the free market. Over there they were fascist before fascist was cool.

    “Confucian traditions of respect for authority, deference and seniority seem to be inconsistent with democratic principles and to conflict with classic Western models of democratic political
    culture. At the same time, it is argued that many of these same cultural traits may be more
    compatible with the marketization of East Asian economies.

    Acceptance of authority is consistent with the capitalist economic model of the firm. Close family and community ties provide alternative models of economic financing and ‘corporate networking’ in East Asia. In short, there appears to be less tension between Confucian values and the marketization process in East Asia, which may explain why markets are being embraced even in nations without much democratization.”

    Posted by Dwight | July 13, 2012, 8:08 am
  8. @Dwight: On of the lessons I took from that paper was that few people seem to even be thinking about the implications of an EU-ASEAN on democracy or much else. Maybe I’m just using the wrong search-engine terms, but that paper was just about the only thing I could find that didn’t fixate on the “look at how much more trade there will be!”-angle to the story.

    If any can find some good links on the topic please post them here. This whole topic was off my radar until now. A transcontinental Free Trade Agreement on this scale is one of those things that could lead to a global rush to “catch up” by other regions with their own agreements. This could be a really big deal that acts as a catalyst for something even bigger.

    Posted by Pterrafractyl | July 14, 2012, 6:45 pm
  9. A quick note to Angela: It doesn’t really matter if you refuse to give ground when it’s crumbling beneath your feet:

    Merkel Gives No Ground on Demands for Oversight in Debt Crisis

    By Patrick Donahue – Jul 15, 2012 5:00 PM GMT-0500

    Chancellor Angela Merkel gave no ground on Germany’s demands for more central control over euro member states in return for joint burden-sharing as the region struggles to contain the debt crisis.

    The German leader said yesterday she hadn’t softened her stance at last month’s summit in Brussels and that a so-called banking union involving a bloc-wide financial overseer will have to include joint oversight on a “new level.” She chided member states who had sought to slow moves toward greater central control “since the first summit” in the 2 1/2-year-old crisis.

    “All of these attempts will have no chance with me or with Germany,” Merkel said in an interview with broadcaster ZDF in Berlin.

    Two weeks after a European Union summit aimed at bridging differences over crisis resolution, euro leaders are still squabbling over details of how to lift the bloc out of the turmoil. Merkel hardened Germany’s position that any attempt to share burdens in Europe — such as jointly issued euro bonds or common banking bodies — must first be met with greater cooperation and a handover of some sovereignty to Brussels.

    The euro fell to its lowest level against the U.S. dollar in more than two years last week, sliding to as low as $1.2163 on July 13. Europe’s most credit-worthy government bonds climbed, with German two-year note yields down to a record minus 0.052 percent, as investors sought havens from the euro crisis.

    Diverging rates and capital outflows within the 17-member monetary union signal that the single currency is “slowly unraveling,” Stephen Gallo, senior foreign-exchange strategist at Credit Agricole SA in London, told Bloomberg Television’s “The Pulse” in a July 13 interview.

    “The whole project is unraveling, that’s what’s essentially happening now,” Gallo said.

    While Merkel said that Europe is on the “right course” toward putting an end to the crisis, euro-area leaders “haven’t solved the problems conclusively.”

    German lawmakers will interrupt their summer vacations and return to Berlin on July 19 to vote to approve 100 billion euros ($122 billion) in rescue loans to Spain. After Spanish Prime Minister Mariano Rajoy last week announced 65 billion euros in welfare cuts and tax increases, Merkel reiterated yesterday that financial assistance would not be doled out without conditions.

    “Whoever receives assistance and where liabilities are taken over, there has to be control,” Merkel told ZDF.

    Klaus Regling, who heads the euro’s bailout funds, told Welt am Sonntag yesterday that governments could avoid liability for bank rescues under proposals for a regional supervisor. That contradicts German Finance Minister Wolfgang Schaeuble, who said July 9 that he expects governments to guarantee loans even if they go directly to banks, Welt said.

    Surrendering Sovereignty

    Merkel said leaders hadn’t yet reached an agreement on the terms for bank rescues.

    German Bundesbank President Jens Weidmann said euro leaders had caused damage by failing to define more clearly their conclusions at the summit. He told Dutch newspaper Het Financieele Dagblad on July 14 that euro nations “should discuss giving up sovereignty with the same openness as the question of how to resolve the debt problem collectively.”

    As governments in Spain and Italy struggle under the burden of higher borrowing costs, Weidmann, Germany’s chief central banker and a European Central Bank Governing Council member, told Boersen-Zeitung that Italy’s higher yields don’t justify a request for bailout assistance. Euro bailout funding should be deployed only as a last resort, he said.

    Posted by Pterrafractyl | July 15, 2012, 9:58 pm
  10. In the wake of the global financial and debt crises, the EU began to adopt measures for centralizing governance mechanisms and coordinating fiscal and economic policy. Most notably, in December 2011, EU leaders agreed to the formation of a so-called fiscal union. Twenty-five EU countries–all but the UK and Czech Republic–signed on to the German-engineered fiscal pact (Reuters), which would allow the EU to dictate the national budgetary policies of participating nations. the Czech republic is monetarily sovereign with complete control over the Czech koruna. They STILL do not need the bank leeches of the EU.

    Posted by bambi | July 18, 2012, 9:08 pm
  11. EU leaders are hailing the big new EU banking union that will give the ECB immediate oversight over the biggest EU banks but also give the ECB the power to step-in and regulate any eurozone bank if it so chooses. Also, as per Britain’s request, all non-eurozone members should be able to counteract most – but not all – ECB decisions and challenge cross-border banking rules. And as a concession to Germany, the must be unanimity amongst all member states contributing to any future bailout fund before any bailouts can proceed. So, basically, a new financial regulatory system was just passed with a whole bunch of check and balances and loopholes that have yet to be determined:

    NY Times
    E.U. Leaders Hail Accord on Banking Supervision
    Published: December 13, 2012

    BRUSSELS — E.U. leaders gathering here Thursday for their year-end summit meeting hailed an agreement to place euro zone banks under a single supervisor, calling it a concrete measure to maintain the viability of the currency as well as a step in laying the groundwork for a broader economic union.

    The pact was hashed out in an all-night session of finance ministers that ended Thursday morning after France and Germany made significant compromises. Under the agreement, between 100 and 200 large banks in the euro zone will fall under the direct supervision of the European Central Bank.

    A round of talks a week earlier broke up amid French-German discord over how many banks in the currency union should be covered by the new system.

    In a concession to Germany, the finance ministers agreed that thousands of smaller banks would be primarily overseen by national regulators. But to satisfy the French, who wanted all euro zone banks to be held accountable, the E.C.B. would be able to take over supervision of any bank in the region at any time.

    The agreement by the finance ministers, which still requires the approval of the European Parliament and some national parliaments including the German Bundestag, made it possible for E.U. leaders arriving here later Thursday to gather in a spirit unity.

    “It’s a good day for Europe,” said François Hollande, the French president. “The crisis came from the banks, and mechanisms have been put in place that will mean nothing is as it was before.”

    Angela Merkel, the German chancellor, said the agreement was “a big step toward more trust and confidence in the euro zone.” The summit meeting could now focus “on strengthening economic coordination” and “set out a road map for the coming months,” she added.

    A series of compromises were needed for finance ministers to reach agreement on banking supervision.

    Initially, France and the European Commission had asked that all 6,000 banks in the euro area should be closely regulated by the central bank. But in a concession, France agreed that only banks holding more than €30 billion in assets, or assets greater than 20 percent of their country’s gross domestic product, would be directly regulated by the E.C.B.

    Germany, facing pressure from a powerful domestic banking lobby trying to shield many small savings banks from closer scrutiny — and seeking to make the E.C.B.’s job more manageable — sought a reduced remit for the bank. But Germany agreed to let the E.C.B., at its discretion, to step in and take over supervision of any euro zone bank.

    The Germans and Swedes also had concerns that the central bank could be tempted to alter its decisions on monetary policy to make its supervisory job easier. As a compromise, member states are to be given greater scope than originally foreseen to challenge central bank decisions.

    Britain, which is not a member of the euro zone, sought assurances that the new banking supervisor would not have influence over British banks operating abroad or banks operating in the City of London. Britain agreed to a formula that should allow it and other E.U. members outside the euro zone to counteract most — but probably not all — rulemaking by the E.C.B. These countries will also be able to challenge E.C.B. decisions pertaining to cross-border banking.

    For countries including Spain and Ireland, the supervisor is a prerequisite for a new European bailout fund, the European Stability Mechanism, to provide aid directly to their troubled banks. That would allow those governments to avoid weighing down their national balance sheets with yet more debt. Those countries, along with France, successfully lobbied for direct recapitalization of banks to be mentioned in the agreement.

    But in a concession to Germany, wary about spending more money on bailouts ahead of national elections in late 2013, and to assuage similar concerns by the Dutch and Finns, the agreement underlined the need for unanimity among states contributing to the bailout fund before any such measures can go ahead.

    While the above article notes that Germany’s banks lobbied to limit the ECB’s oversight to only the largest banks, Germany’s largest banks didn’t really share that view. They wanted the ECB to have oversight of ALL the eurozone banks regardless of size. They also suggested that the ECB could delegate powers to the former national financial watchdog agency as “national offices” to check on the smaller banks. So, basically, the big last minute “compromise” for the new EU banking union that gives the ECB direct oversight over the biggest banks and optional oversight over the smaller banks is pretty much what the big German banks asked for months ago :

    Big German banks tout ECB watchdog power grab

    FRANKFURT | Tue Aug 21, 2012 10:21am EDT

    (Reuters) – Germany’s private sector lenders want to give broad watchdog powers over all euro zone banks to the European Central Bank to eliminate interference by politicians in banking supervision.

    The BDB banking association, which represents big lenders like Deutsche Bank (DBKGn.DE) and Commerzbank (CBKG.DE), says placing national bank supervisors under ECB authority would promote consistent regulation and could be put in place quickly.

    “The influence of national politics in supervision would be removed,” the BDB said in a paper laying out its proposal for future bank supervision.

    The BDB hopes its ideas will feed into the thinking of the European Commission, which is preparing sweeping changes to the way banks are supervised — including giving oversight to the ECB — after a series of melt-downs at banks in the financial crisis.

    European Union leaders agreed at the end of June to set up a single banking supervisor in Europe as a pre-condition to letting the euro zone’s rescue funds directly inject cash into struggling lenders, without lending to a government first.

    It is part of a wider EU effort to stop the banking and euro zone debt crisis feeding each other.

    The BDB’s demand that the ECB regulate all 6,000 euro zone lenders contrasts with the views of Germany’s public sector and cooperative banks, who say central supervision is needed only for the 25 big banks that pose a threat to the financial system in the currency bloc.

    The ECB would need to set up an independent unit for banking supervision to maintain a clear separation from its monetary policy duties, such as setting interest rates.

    Although the ECB would have sole responsibility for supervising all euro zone banks, it could use the former national watchdogs as “ECB country offices”, delegating powers to make checks on smaller banks, the BDB suggested.

    However, there were some problems that would still need to be sorted out, such as the lack of administrative law giving the ECB powers to enforce its decisions over banks, and a mechanism for banks to redress ECB rulings they found unfair.

    The BDB also suggested that the ECB could take over the voting rights of its member countries in organisations such as the European Banking Authority or the Basel Committee of bank supervisors, a move that would give the central bank extra heft relative to outsiders such as the UK.

    With the big German banks seeming to view a powerful ECB as an ally in this new regulatory environment the clarification of the yet-to-be determined rules on the banking union is going to get interesting.

    Posted by Pterrafractyl | December 13, 2012, 12:42 pm
  12. Not sure how to interpret this (is this real or ‘real‘), but still, yowza:

    Washington Post
    Cameron Warns That Britain Could Leave European Union

    Published: January 18, 2013

    LONDON — Prime Minister David Cameron, who canceled a long-anticipated speech because of a hostage crisis in Algeria involving Britons, planned to deliver an explicit warning that Britain might leave the European Union if changes in its administration were not made, according to excerpts from the speech released Thursday and embargoed until Friday.

    According to the excerpts, Mr. Cameron would have said that without changes in the European Union, “the danger is that Europe will fail and the British people will drift toward the exit” — a statement that drew an admonition from President Obama telling Britain not to jeopardize its membership in the European Union, British newspapers reported.

    In the excerpts, Mr. Cameron planned to warn that there was “a gap between the E.U. and its citizens which has grown dramatically in recent years and which represents a lack of democratic accountability and consent that is — yes — felt particularly acutely in Britain.”

    “If we don’t address these challenges, the danger is that Europe will fail and the British people will drift toward the exit,” Mr. Cameron planned to say. “I do not want that to happen. I want the European Union to be a success, and I want a relationship between Britain and the E.U. that keeps us in it.”

    “People are increasingly frustrated that decisions taken further and further away from them mean their living standards are slashed through enforced austerity or their taxes are used to bail out governments on the other side of the Continent,” he was to say, according to the excerpts.

    “And yes, of course, we are seeing this frustration with the E.U. very dramatically in Britain,” the excerpts said. “Europe’s leaders have a duty to hear these concerns. And we have a duty to act on them.”

    But according to the news agency Press Association in Britain, which published the excerpts, they did not reveal whether he intended to commit himself to a referendum offering Britons a yes-or-no response to continued membership.

    Note that, if Cameron does choose to hold the referendum, it’s very unclear how it will go:

    The Economic Voice
    Public divide on in/out EU referendum narrows in lead-up to Cameron speech

    January 17th, 2013
    Author: Economic Voice Staff

    The proportion of the British public who say they would vote to leave the EU if a referendum were held has fallen, while the percentage of people who say they would vote for Britain to stay in the EU has risen, according to the latest YouGov poll.

    Asked how they would vote in an in/out referendum on Britain’s membership in the European Union, 42% say they would vote to leave, 36% would vote to stay and the rest are either unsure (17%) or wouldn’t vote at all (4%).

    In November, 51% of Britons said they would vote to leave the EU, but that number fell to 46% in a poll conducted January 2-3rd and now stands at 42%. In the November poll the percentage of people who said they would vote for Britain to remain an EU member stood at 30%, but rose to 31% in the earlier January survey and now sits at 36%.
    Different referendum questions

    A majority (59%) of the British public support holding a referendum on Britain’s membership in the European Union, while only 21% are opposed and 20% are unsure, according to our latest poll for the Sunday Times.

    Asked to imagine if David Cameron renegotiated the UK’s relationship with Europe and said that Britain’s interests were now protected, and recommended that Britain remain a member of the European Union on new terms, and 50% say they would vote to stay in the EU, while 25% say they would still vote to leave, and the rest are either unsure (20%) or wouldn’t vote at all (5%).

    Posted by Pterrafractyl | January 18, 2013, 12:30 pm
  13. Uh oh, the “sick man” is still ill. A miracle sure would be helpful. Grover Norquist-like policy solutions that actually work would be nice too. Since neither scenario is very likely, Grover Norquist-like policies that never work coupled with a wish and a prayer are probably the best we can hope for:

    France’s Economic Plan: Hope for Miracles
    Apr 9, 2014 12:50 PM EDT
    By Marc Champion

    Any time a European government announces tax cuts without saying where all the money will come from, or mentions the word “efficiencies,” hold on to your wallet.

    So it is with the recent announcement from new French Prime Minister Manuel Valls of lower taxes on labor and corporations. He has proposed adding something in the region of 11 billion euros ($15 billion) to the tax cuts already promised under President Francois Hollande’s existing “Responsibility Pact,” without upping the 50 billion euros of spending reductions (20 billion euros of which would come from efficiencies) that were outlined for that deal.

    Failing a miraculous spurt in growth and tax revenue, Valls is unlikely to be able to pay for this and at the same time reduce the budget deficit to its target of 3 percent in 2015, from last year’s 4.3 percent. He said he’ll be asking the European Commission to reconsider the balance between deficit control and growth. He also called on the European Central Bank to loosen up on monetary policy.

    So plus ca change, plus c’est la meme chose: France once again looks as if it will try to wriggle out of deficit obligations mandated by the European Union.

    Valls is right, though, on both deficit targets and monetary policy. For European economies that suffer from 10 percent unemployment, as France does, and essentially stagnant growth, as France does, and are lumbered with an overvalued currency, as France is, structural reform is what matters. Growth will follow effective reform and help to solve the deficit problem — so long as the global recovery continues and the attempt to chase the tail of deficit reduction doesn’t kill any expansion at birth.

    Valls is right, too, about the ECB. Regardless of France’s particular issues, the ECB should be loosening its monetary policy. It is undershooting its inflation target by a wide margin and producing an overvalued currency that is helping to weigh down economic recovery.

    The question for the Commission and France’s euro area partners is whether they believe Valls when he says he’ll deliver the structural reform and spending cuts that France needs to make the economy competitive. They need to believe, too, that when growth returns France will keep slimming the size of the state, and run a budget surplus. I doubt either will happen, but they should suspend their disbelief for lack of better options.

    Yes, since France can’t control the value of its currency anymore and is forced to use an overvalued euro that harms the ability to export its way out of troubles and France can’t really control its own budget anymore and has to submit it to the European Commission for approval, France is left with the only option the European Commission wants it to have: “structural reforms” in the form of austerity and permanently shrinking the size of the government.

    And it’s so important to the people running Europe that the “structural reform” continues that the European Commission needs to be convinced that France will continue with the austerity policies even if the economy starts growing again. Yes, as a result of the EU’s decision to just spontaneously lobotomized itself with the ‘Fiscal Compact’ and effectively permanently handed budget “review” powers to the European Commission, Grover Norquist is basically the permanent unelected head of the European Commission with the powers to review and make demands of national budgets. Miracles may not be a regular occurrence, but anti-miracles in the realm of economic policy are like a daily thing (it’s like matter and anti-matter, but in reverse where the anti-miracles end up dominating).

    So as we can see, bloodletting isn’t the only medieval medical practice making a metaphorical comeback. Economic trepanation is all the rage too. Not that the bloodletting is getting old. Trepanation and bloodletting go hand in hand. Plus, like a vampire, some things never get old:

    French lawmakers approve multi-year deficit reduction plan

    By Alexandria Sage

    PARIS Tue Apr 29, 2014 3:34pm EDT

    (Reuters) – French lawmakers voted on Tuesday for a 50 billion euro ($69 billion) savings plan meant to let the euro zone’s second-largest economy meet deficit-reduction targets, but a high abstention rate betrayed dissent within the Socialist majority.

    The 2015-2017 “Stability Program” passed by 265 votes to 232 in the National Assembly, the lower house of parliament. The program can now be submitted for approval to the European Commission, which has already granted France two extra years to bring its deficit below EU-mandated limits.

    “It’s a decisive vote that deeply emphasizes the advancement of our country,” Prime Minister Manuel Valls told parliament before the vote.

    Sixty-seven lawmakers declined to vote, including 41 Socialists, a high rate pointing to resistance ahead as Valls tries to push through reform to revive the economy and spur growth while also meeting deficit-cutting goals.

    The abstentions from Socialists came even after Valls made last-minute concessions to appease concerns that the plan’s welfare spending freeze would hurt the country’s poorest.

    While the Greens party and the left-wing Front de Gauche voted in the majority against the plan, the centrist UDI party mostly abstained. A few members of the opposition UMP party, which overwhelmingly voted against the plan, also abstained.

    “It’s a real failure, a real fissure in the majority,” said Christian Jacob, leader of the UMP deputies.

    Besides clamping down on public spending, the savings plan freezes pensions and welfare benefits for a year and keeps most civil service pay frozen until 2017.

    But economists are skeptical as to whether the plan will allow the Socialist government to meet its goal of lowering its public deficit to 3 percent of output by the end of 2015, and there is internal Socialist opposition to any austerity drive.

    Voters have sent the approval ratings of President Francois Hollande to record lows given France’s sluggish economic growth and rising joblessness that he has been unable to stem.


    On Monday, Valls ceded to pressure from rebellious rank and file lawmakers within his majority to exempt low-income pensioners from the welfare spending freeze.

    Valls’ concessions point to the difficulty of selling the painful savings measures to the electorate, which has indicated it will push back against attempts to whittle away at France’s cherished welfare system. One union has already vowed a one-day strike next month to protest the civil servant wage freeze.

    On Tuesday, official data showed that consumer confidence dropped in April below economist estimates due to households’ growing dismay over joblessness and deteriorating finances.

    The government hopes to tackle unemployment with a plan to phase out 30 billion euros ($41.5 billion) in payroll tax on companies over the next three years in exchange for committing to hiring targets.

    Notice how a French voters don’t appear to actually want to see their welfare state dismantled but that doesn’t really matter because the European Commission does want it dismantled. Also notice how stimulus spending is clearing frowned upon by the European Commission but tax cuts (and further austerity to finance those cuts) is just fine! Isn’t Norquist-style “democracy” in the era of the Fiscal Compact fun?

    Well, it’s about to get more fun, and maybe even a little more democratic. For the first ever, the upcoming EU parliamentary elections will include expected party “presidents” if that party wins. So voters won’t be voting directly for the head of the European Commission, but they’ll have a better idea of who that person might be. That’s a big change from the current ways, where backroom deals select the EU Commission president. Although it’s important to note the that changes don’t bind the EU parliament to select the parliamentary “winner” as the new Commission president. The voters’ preferences are still just a suggestion…a suggestion the current EU Council president (which gets to nominate the Commission candidates) doesn’t want to hear:

    Schulz, Juncker tell Van Rompuy ‘the old days are over’
    23/04/2014 – 08:42

    The two lead candidates in the race for the European elections have reacted vigorously to statements by Council President Herman Van Rompuy, who scorned the parties’ attempt to put forward candidates for the European Commission’s presidency.

    Martin Schulz and Jean-Claude Juncker have denounced Van Rompuy’s statements over the weekend, saying he cannot circumvent voter choice, and that the new Commission President will need a firm majority in the next Parliament.

    According to Jean-Claude Juncker, the former Luxembourg Prime Minister campaigning for the centre-right European People’s Party (EPP), “the democratic toothpaste is out of the tube with the election of a lead candidate”.

    “The old days, when a Commission president was elected by diplomats in backrooms are finally over,” he told the Süddeutsche Zeitung.

    Earlier, Van Rompuy had scorned the parties’ attempts to put forward a lead candidate for the European elections in a bid to win the top seat at the Commission. “The difference between the Parliament and those who really decide is very clear to citizens,” the Belgian said.

    The next president of the EU executive will be nominated by EU leaders, but the European Parliament will elect him or her through a vote, a novelty brought about by the Lisbon Treaty (article 17.7, TEU).

    Over the past months, Van Rompuy has consistently objected to the procedure, in what is a surprisingly militant position for an otherwise abiding diplomat.

    Martin Schulz, the candidate for the Socialists and Democrats, told the Süddeutsche that Mr Van Rompuy’s declarations were the expression of his “own opinion, based on his interpretation, to fit his job description. Many in the European Council see this issue [of a common candidate] differently. Most importantly, the European voters see this differently.”

    “We were disappointed to hear this message from Mr Van Rompuy,” said Julian Priestley, the former secretary general of the European Parliament who leads Schulz’ campaign. “It seems he continues to deny the will of Europe’s voters and dismiss the democratic legitimacy of the upcoming elections,” Priestley told EurActiv.

    So will EU Council president Herman Van Rumpuy succeed in thwarting these new democratic ambitions? We’ll see! We’ll also see if the choice for EU Commission president really makes a difference because whole idea behind the Fiscal Compact is that it forces a budgets cuts on governments whether they want it or not. Once you put on that straightjacket, your options are pretty limited regardless of your sanity and it’s very unclear how a more direct election of the EU Commission president removes that fiscal compact straightjacket.

    Oh well, at least with the some new people in charge we might see a more creative implementation of the Fiscal Compact anti-miracle. Although, given that Jean-Claude Juncker is currently the favorite, let’s hope the future head of EU Commission doesn’t get too creative!

    Posted by Pterrafractyl | April 29, 2014, 6:52 pm

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