Germany Cedes Some Ground in Steps to Bolster Euro

[Horn]

BRUSSELS — European leaders went a surprising distance on Friday toward restoring confidence in the euro (http://topics.nytimes.com/top/reference/timestopics/subjects/c/currency/euro/index.html?inline=nyt-classifier), taking a significant step toward economic integration and easing market pressure on Spain (http://topics.nytimes.com/top/news/international/countriesandterritories/spain/index.html?inline=nyt-geo) and Italy (http://topics.nytimes.com/top/news/international/countriesandterritories/italy/index.html?inline=nyt-geo), as what appeared to be a new coalition of forces pushed Germany (http://topics.nytimes.com/top/news/international/countriesandterritories/germany/index.html?inline=nyt-geo) to bend.

But questions quickly arose about how far they still had to go, leaving unresolved the most fundamental problems of the euro zone, its structural imbalances and lack of a lender of last resort. While Chancellor Angela Merkel (http://topics.nytimes.com/top/reference/timestopics/people/m/angela_merkel/index.html?inline=nyt-per) of Germany ceded some ground by agreeing to direct refinancing of banks, she did not yield on the issue of sharing debt burdens, which is highly unpopular with German voters but is seen by many economists as a necessary step in saving the currency.

“In a nutshell, we think that the Europeans have cracked open more doors than we thought, but they still have a lot on their plate,” said Gilles Moëc, an economist at Deutsche Bank in London. “The discussion on fiscal integration and debt mutualization has not started in earnest.”

At the latest all-night meeting since the beginning of the long euro crisis, the leaders made a breakthrough toward more central control over their banking system, a crucial aspect to the stability of the common currency. They also moved swiftly to grant their bailout funds more flexibility to come to the rescue of Spain and potentially Italy, the fourth- and third-largest economies in the euro zone, respectively, because they are too big to fail.

But the meeting also signaled an important shift in the foundation of the euro zone, with France (http://topics.nytimes.com/top/news/international/countriesandterritories/france/index.html?inline=nyt-geo), under the new Socialist president, François Hollande (http://topics.nytimes.com/top/reference/timestopics/people/h/francois_hollande/index.html?inline=nyt-per), breaking from the familiar lock step with Germany. Working more in partnership with Prime Minister Mario Monti (http://topics.nytimes.com/top/reference/timestopics/people/m/mario_monti/index.html?inline=nyt-per) of Italy than with Ms. Merkel, Mr. Hollande helped to isolate Germany and broker the deal for Italy and Spain, which breaks a previous German taboo on direct recapitalization of ailing banks, and makes a beginning, however small, toward pooling liabilities.

Financial markets rallied Friday, suggesting that the measures had exceeded admittedly low expectations. The president of the European Central Bank, Mario Draghi, who has not shied from criticizing political inaction, called himself “quite pleased with the outcome.” He added, “It showed the long-term commitment to the euro by all member states of the euro area.”

In return for allowing the direct recapitalization of banks by the bailout funds, Germany won agreement on a single banking supervisory agency, with the European Central Bank playing a major role, a shift bringing it closer to the powers of the United States Federal Reserve.
Agreement on the bank authority was “the major breakthrough” of the night and a crucial step in breaking “the vicious circle between banks and sovereigns,” said the European Council president, Herman Van Rompuy (http://topics.nytimes.com/top/reference/timestopics/people/v/herman_van_rompuy/index.html?inline=nyt-per). While the long euro crisis has been centered on excessive government debt, European banks have been weakened by their portfolios of government bonds, made worse in Spain and Ireland by a property bubble that burst.

Spain has asked for a bailout of up to $125 billion for its banks, but objected to that new debt being added to its national debt (http://topics.nytimes.com/topics/reference/timestopics/subjects/n/national_debt_us/index.html?inline=nyt-classifier), rather than directed to the banks themselves. Investors pushed Spanish and, in a ripple effect, Italian debt toward unsustainable levels. Italy’s total debt is about 120 percent of gross domestic product, second only to Greece in the euro zone.
The new deal will let the bailout funds lend directly to Spanish banks — although not until the new central bank supervisor is established — probably by the end of the year. Spain also would not get a lot of onerous new conditions because it, like Italy, is making serious strides to streamline its government and economy and cut its deficit. Also important to investors, in the case of Spain, the bailout fund will not be the first in line for repayment, in the event of default.

“We have taken decisions unthinkable just some months ago,” said José Manuel Barroso (http://topics.nytimes.com/top/reference/timestopics/people/b/jose_manuel_barroso/index.html?inline=nyt-per), the European Commission president.
Mr. Monti, who emerged a winner from the summit meeting, said that Italy had no immediate plans to seek help from the bailout funds, but might in the future. He and the Spanish prime minister, Mariano Rajoy, held up agreement at the meeting until the early hours of Friday, when they got a deal on the use of the bailout funds. Some of the leaders resented what they felt was blackmail, but others saw it as a hard-nosed negotiating tactic by Mr. Monti.

Prime Minister Enda Kenny of Ireland described the agreement as “a seismic shift in European policy,” after having won a promise that Ireland’s bailout for its collapsed banking sector could be adjusted as well.

In a research note, the international bank BNP Paribas wrote that while the agreement on using bailout funds to purchase debt was a positive development, it also noted that “the details are rather lacking” and warned that this fact “could temper the initial market enthusiasm.” The uncertainty was underscored on Friday when Mr. Hollande said that future bank bailouts could be authorized without the unanimous consent of the euro zone members, making such rescues far easier. But that interpretation was immediately disputed by European Union (http://topics.nytimes.com/top/reference/timestopics/organizations/e/european_union/index.html?inline=nyt-org) officials, who could find no such stipulation in the fine print.

Mr. Hollande, while speaking Friday of “no winners and no losers,” clearly supported Italy and Spain, no doubt concerned that France, with its total debt now approaching 90 percent of gross domestic product, might be next in line if the markets tired of speculating on Spain and Italy.
Some said that it was bad enough that Germany lost its semifinal soccer match to Italy on Thursday night in the European championship, suggesting that Ms. Merkel had also lost to Mr. Monti here.
Although the chancellor stuck by her argument that none of the basic principles demanded by Germany had been violated, the German news media were quick to call the deal a retreat from her previously tough position.
“Merkel caves in,” wrote the influential Bild newspaper. The online edition of the newsmagazine Der Spiegel titled its lead story on the talks “The Night That Merkel Lost.”

Ms. Merkel said that the new financing pact worked with existing mechanisms and that Germany had agreed only to more flexible use of the bailout funds in return for centralized supervision under the central bank.

“We have remained completely true to our existing model — performance, reward, conditionality and control,” she said Friday. “And so I believe we’ve done something important and remained true to our philosophy: no reward without performance.”
Yet she received criticism from some in her own party and from members of the opposition Social Democrats, who argued that allowing banks to tap directly into the bailout funds brought Germany closer to a common sharing of debt.

“It is not so easy for Ms. Merkel,” said Tanja Börzel, a political scientist from the Free University in Berlin. “She can’t simply charge ahead, but has to consider her domestic audience and the democratic and legal procedures we have in Germany.”
Still, her skill at diverting this meeting from discussing more sweeping issues like euro bonds should not be underestimated, said Holger Schmieding, a London-based economist at the Berenberg Bank of Germany.

“Merkel agreed to let common sense prevail by not asking Italy and Spain to potentially kill their economies through an overdose of austerity,” he said, while sticking to her guns on strict conditions for aid. “That Monti, Rajoy and Hollande are now happily selling this as a victory says a lot about the diplomatic skills of Ms. Merkel.”


http://www.nytimes.com/2012/06/30/world/europe/european-leaders-move-toward-deals-for-spain-and-italy.html?_r=1&pagewanted=all

[Xizang]

Just as it's unfair for California to ask the taxpayers in the other 49 states to pony up and help pay off California's debt, I don't think it's fair for Germany or any other European country to dig deep to cover the overspending of Greece, Italy, Spain or any others that failed to live within their means.

[Horn]

Strategic Issues: Germany's European domination almost complete

Tuesday 03 July 2012

It's taken Germany almost 100 years to achieve the aims of its early 20th Century rulers - effective control of Europe. And while Angela Merkel pretends that she got blind-sided, bullied and bamboozled in negotiations to support weak European countries, what she actually walked away with was nothing short of a back-door takeover of Europe by the creation of the nearest thing so far to a centralised European financial system.

As she left the European Summit in Brussels a couple of days ago, Angela Merkel's body language said it all: she had said that Germany was being pushed around, that Germany was being made to pay for the mistakes of other EU governments, that Germany could refuse to pump in more money and by doing so break the European monetary system and, potentially, break the entire European Union project.
It was bluster. And when she walked to her car, she kept up the scowl.

But her walk was simultaneously scurrying and triumphant. It seemed as if the only reason she was hurrying was to get in the car and out of public view before a huge guffaw would shake her - and the EU establishment - to their socks.

For what Merkel had done was to pull of the biggest coup of any German chancellor ever. Where military leaders had failed, indeed had brought the country to its knees in trying, Merkel succeeded in putting Germany right at the heart of European fiscal policy.

That sounds simple enough - and it might have been if there had actually been a European fiscal policy.
What Merkel did was divert attention from her real goals by fussing about the money, about bad governance and waste in other countries, about how her domestic politics was under threat in order to try to stabilise domestic politics in other countries.
But what she really focussed on was EU institutions and the centralised control of the money supply. In short, she has centralised, in Frankfurt, the control of the Euro and she has emasculated central banks in Eurozone countries.

Merkel and Gordon Brown had a shared vision of taxation: tax as much as possible in as many ways as possible. Although Merkel did not share - in public - Brown's approach to saving the world ( as he famously claimed he had done in a speech that had as much relationship to reality as US President Bush's claim that the "war" in Iraq had been won), as soon as Brown was out of office in the UK, Merkel changed her tune and encouraged the ideas he had presented. Were they tag-teaming the G20 and the EU? We will probably never know.

Merkel has made a career, in recent years, of being the strident voice from outside: always seeming to be the odd-one out, for some the voice of reason for others a dangerous hold-out.

Domestically, Germans took badly to the agreement on Sunday: they looked at the EU growth fund and saw more of their taxes going south: literally.

Merkel has made much of the "concessions" she was, she says, forced to make. And her position has been helped by the Italian prime minister, Mario Monti, who arrived at the summit saying he would not accept anything less than he demanded. It appeared as if there was a stand-off between the most powerful country in the euro-zone and one of its weakest. But it was a fake: for what Merkel got was a broad acknowledgement across Europe that countries need to reign in spending and direct lending to their banks by the (enhanced) ECB.

Pay no attention to the argument that direct lending was not what Merkel and the ECB wanted. That was posturing. They knew that governments wanted direct lending because it kept the cost of supporting their banks off their own balance sheets. In short, the banks were not supported at direct taxpayer cost and when countries showed their own debt, there would be, simply, no items related to bank bailouts.

There's another sly point: bank bailouts are rarely bank bailouts as such. They are ways of injecting liquidity into economies via the banks. So by pushing the money directly to the bank, it means that the governments do not have to raise their own capital for injection purposes.
What the deal has done, in one respect, then, is to put the banks back into a broader market for borrowing with their credibility being based on their own performance not that of their government.

In another respect, what the deal has done is to differentiate between moneys provided by e.g. the IMF and moneys provided by the EU. The distribution channels are different. And, crucially, so are the assessment channels.

In short, the Greek government may be a very bad credit risk but some Greek banks may be good credit risks.
But for the system to work, it means that the EU has to have credit assessment capability - and both regulatory and enforcement mechanisms. These cannot, in all practicality, be piecemeal: they must apply to the entire banking sector or not at all. The ECB fund cannot be, essentially, a holding company for bad banks and / or their debt.

But Merkel has one more obstacle to leap: despite the creeping power of Brussels, the proposed measures are not capable of implementation under the authority that Brussels has taken unto itself in the past two decades. Significant slices of the plan remain subject to scrutiny by national governments.

The plan calls for a huge surrender of national power. Further: it is only one small step from creating a mechanism for direct taxation on a federal level by the EU. But the EU countries, both at parliamentary level and even in referenda have a history of ignoring the "thin end of the wedge" argument only to complain that they are being bulldozed when the full import of their decisions becomes apparent.

Merkel and Brown concocted a plan for EU wide fiscal policy. The French have flip-flopped as to the desirability of this: they have a very different approach to tax to the simplistic high-tax model preferred by Brown and Merkel. It's still high-tax but the way taxes are designed, collected and spent is very different. By bringing the monitoring and enforcement of spending into the EU's capability, Merkel has taken a huge step in the direction of a unified fiscal system. Many will be displeased. It is by no means guaranteed that the plan will pass in its current form.

The plan will be presented as a do-or-die option for the EU, that accepting it is the only way to save Europe. There will be very little media effort, at least in the popular media, dedicated to asking the other, hard, question: is it actually worth saving Europe in its present form? Should it be allowed to fail? Or should this situation be taken as an opportunity to roll back the entire EU project to allow for a single market in goods, services and labour and to leave everything else to national governments?

http://chiefofficers.net/888333888/cms/index.php/news/strategic_issues/strategic_issues_germany_s_european_domination_alm ost_complete

[Glass]

Just as it's unfair for California to ask the taxpayers in the other 49 states to pony up and help pay off California's debt, I don't think it's fair for Germany or any other European country to dig deep to cover the overspending of Greece, Italy, Spain or any others that failed to live within their means.

I hope you read the next post because you don't seem to get it at all. Several of the PIGS conspired with TPTB and BANKS (also TPTB) to conduct a fraud. Some for the purposes of getting into the EU. Others to pillafe the countries concerned. Not a case of living beyond means. Outright fraud.

No one should be paying anything to anyone who participated in the fraud, govt's, banks and anyone else.

[Horn]

Europe's people rise up against centralised control



In the week where Angela Merkel (see story (http://chiefofficers.net/888333888/cms/index.php/news/strategic_issues/strategic_issues_germany_s_european_domination_alm ost_complete)) gets to put an EU deal before the people of Europe, a less high-profile issue has had to go through the same process. The EU has just found out that the heads of government might agree between themselves but that doesn't mean that the people will and that means that directly elected members of the European Parliament, concerned for their own seats, can decide in the interests of their electorate, not according to the will of a national government. The European Commission (basically the civil service) is now in direct conflict with the people of Europe and their representatives over the question of protection of intellectual property rights.

On paper, it all sounds good. The EU, 22 member countries and eight more countries signed what they termed "The Anti-Counterfeiting Trade Agreement."

In order for the treaty to become effective, signatory countries have to ratify it: in many countries, ratification requires a national vote. Ironically, the EU can ratify the treaty without a vote by member nations in an example of the concentration of power in the hands of the EU at the expense of member states.

But the EU does have a parliament of "MEPs" which are directly elected by the citizens of member states. While the Commission is, in effect, a committee of the heads of government, the EU Parliament is a democracy that gets much closer to the people.
The Treaty makes much of control of the internet and what appears on it. Taking on the world's social media has proved to be a bad idea. Pressure groups started up all over Europe, expanding to other countries. One, Avaaz, collected 2.8 million signatures demanding the rejection of ACTA. That's more than 10% of the current EU electorate.

MEPs cannot ignore that, nor the street protests that were supposedly spontaneous but are more likely to have been at least announced if not actively co-ordinated by some of the pressure groups.

Those who signed ACTA say that it is needed to standardise laws around the world to provide protection for intellectual property rights, including rights across borders.

But critics say that the agreement went far too far, providing opportunities for censorship, for passing the burden of publishing not just onto internet service providers but also onto the owners of individual websites to which third parties may post (which brings into question the entire future of "web 2.0" and social media).
Avaaz also argued that in order to comply with ACTA, ISPs would be forced to, in effect, "spy" on its customers, constantly checking what they and their visitors posted.

Although the USA signed ACTA, it is likely that, as with other treaties, it will not ratify it in its entirety. It will cherry pick. After all, several of the USA's largest businesses are, under US law, largely exempted from claims relating to copyright infringement and defamation over the internet. They will not want to give up that advantage. It is ironic that groups such as News International need that kind of protection for their internet businesses yet want to impose higher standards in relation to their own entertainment media businesses.

Also, the USA's interest in IP protection largely related to technology and entertainment media. Its protection of the written word is very, very weak and millions of websites are nothing more than copycat (either plagiarised or even automatically scraped) from sites where material originates. The US authorities do nothing about those and, indeed, argue that such use is permitted under "fair use" provisions which are legitimate in relation to genuine study but abused by those who simply want to get well written pieces on their rubbish websites and therefore steal any advertising revenue that might accompany it.

Although ACTA does not expressly provide for the creation of software patents, it does require that IP recognised in one state should be recognised in signatory states. According to End Software Patents, a pressure group, ACTA allows this in by a side-door due to the creation of "cease-and-desist" letters (a US concept) which puts a party on notice that a breach of rights has, in the opinion of the writer, taken place. Once that notice is served, the ISP (or other target) is deemed to be "knowingly in breach" and, in that case, the penalties are significantly increased. The end result is that ISPs may terminate accounts without warning or investigation just to cover their own backs.

The same group also points out that, under ACTA, infringement of a patent moves from being a civil liability to a criminal act.
The other countries that have signed the treaty are the USA, Australia, Canada, Japan, Morocco, New Zealand, Singapore, and South Kore. None have yet ratified it.

The Socialist Party in France was buoyant not about the particular issue but by the effective influence exercised by the citizenry: "For the French Socialists, the vote marks the first and foremost a new inter-institutional balance of power, with the active participation of citizens in the European debate," it said in a statement.

http://chiefofficers.net/888333888/cms/index.php/news/management/biz_law_central/intellectual_property/bizlawcentral_europe_s_people_rise_up_against_cent ralised_control

[Olmstein]

Watching this whole Eurocrisis play out over the last few months, I keep wondering why Greece, Spain, or any other country besides Germany and France would want to stay in the Euro. The single currency has crushed the Greek economy, yet most Greeks want to stay in the Euro, although they want better terms on the "memorandum". Don't they understand how much better off they would be if they went back to the Drachma and told their creditors to piss off? Are they suffering from Stockholm syndrome? WTF?

[Horn]

I keep wondering why Greece, Spain, or any other country besides Germany and France would want to stay in the Euro.

Kinda makes it obvious that Finance Ministers are running the countries as mouthpieces for the Banks, don't it?

IMO it's the Parlimentary form of democracy most the rest of the world runs on that only "austerizes" the status quo.

Same thing is slowly happening here.