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:

Bloomberg
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.

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.

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
By NICHOLAS KULISH and JACK EWING
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.

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...

@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.

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.

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.”

@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.

A quick note to Angela: It doesn’t really mat­ter if you refuse to give ground when it’s crum­bling beneath your feet:

Bloomberg
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.
’Unraveling’

“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.
Banks

...

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.

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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.

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
By JAMES KANTER
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.

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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.

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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.

Not sure how to inter­pret this (is this real or ‘real’), but still, yowza:

Wash­ing­ton Post
Cameron Warns That Britain Could Leave Euro­pean Union

By JOHN F. BURNS and ALAN COWELL
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.

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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%).

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