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.

...

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.

...

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.

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.

...

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%).

...

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:

Bloomberg
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.

REBELLION

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:

Eurac­tive
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!