“European leaders have not been able to meet their responsibilities,” French Prime Minister Jean-Marc Ayrault said about Germany and some other countries that are reluctant to pile more taxpayer money on Greece, whose economy is grinding to a halt, and whose government, deprived of the flow of bailout funds and cut off from the financial markets, can no longer fulfill its promises.
And Greeks are leery of new “structural reforms” currently fought over by the coalition government. They oppose more cuts in salaries, pensions, and health care. On Wednesday, they will attempt to bring the economy to a halt with a general strike and demonstrations in Athens and Thessaloniki. Meanwhile, Germany and other countries are wondering how Greece can possibly “reform” if the government can’t agree on the reforms to inflict on its people, and if the people aren’t willing to suffer them. But Ayrault declared that not giving Greece more money and time would create “a completely unmanageable situation.”
To his French compatriots, Ayrault defended the Fiscal Union treaty, which, after having been silenced to death, has come under blistering attack from the far right and the far left ahead of the parliamentary debate. They’re clamoring for a referendum, something the government wants to avoid at all costs—the people might well kill it, as they’d killed the European Constitution in the referendum of 2005.
“This treaty doesn’t damage the budgetary sovereignty of parliament,” he said. “There is no transfer of sovereignty.” THE issue with that treaty. Even the German Constitutional Court acknowledged that it transferred sovereignty to the European Union. “There must be much more,” Ayrault told his listeners. “The reorientation of Europe” would continue, he said. “Europe is a combat.”
Indeed. A melee broke out in Madrid on Tuesday between protesters trying to occupy Parliament and riot police with batons. In Barcelona, Artur Mas, President of the Catalan government, announced that he’d hold early election on November 25 to initiate Catalonia’s path to “self-determination.” Another blow to the central government, which strongly opposes the early elections and categorically opposes any form of independence by Catalonia. Political turmoil just when Spain is teetering near the financial abyss.
The same day, ECB President Mario Draghi headed to Berlin for a charm offensive. His meeting with Chancellor Angela Merkel focused on “the economic and monetary union” and on preparations for the next EU summit in October, the 22nd such summit to solve the debt crisis once and for all. Then at the Conference of German Industry, he defended his plan to purchase “unlimited” amounts of government bonds from countries like Spain and Italy. There was really no alternative to his program, he said.
Alas, rumors began swirling around that legal experts at the Bundesbank have been vivisecting every syllable of the EU treaties that govern the ECB to determine the amount and duration beyond which these purchases might violate the treaties. Apparently, the Bundesbank, which has vigorously opposed Draghi’s plan, is preparing for a complaint before the European Court of Justice.
Still, Draghi patted himself on the back. “The Eurozone makes progress, investors acknowledge it,” he told about 1,000 managers. The ECB had succeeded in rebuilding confidence, he said.
Yet, confidence is in short supply among the very managers he was talking to. The Ifo Business Climate Index fell for the fifth month in a row. Particularly hard hit were expectations for the next six months which dropped to a level not seen since mid-2009, when the Federal Republic was emerging from the worst GDP collapse in its history.
Part of the problem: German industry has been highly skeptical of the bond-buying program, declared Hans-Peter Keitel, President of the Association of German Industry (BDI). He warned against relying on the ECB to deal with the debt crisis—thus fully backing Bundesbank President Jens Weidmann. Politicians should use the ESM bailout fund and structural reforms, he said, though the ECB’s printing press would be the “seemingly more comfortable path.”
So, to use the words of the French Prime Minster Ayrault, what are the “responsibilities” of the “European leaders?” Bailing out banks. Particularly German and French banks whose basements are full of decomposing paper from periphery countries. And bailing out investors of all stripes. Certainly, no one has yet bailed out the Greeks themselves, those who’ve lost their jobs or had their salaries cut. They don’t figure into the equation when politicians and unelected bureaucrats plot their next moves.
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Martin Wolf has an interesting post in the FT regarding a possible German exit. To quote from it, he surmises that Germany's future in the EMU would imply "… years of conflict over “bailouts”, debt restructurings, structural reforms and unpopular adjustments in competitiveness now lie ahead. Maybe a painful divorce really would be better than that."
I have to agree. The real litmus test here will be whether Germany allows itself to be further entangled via Draghi's OMT.
Time for some hard decisions to be made…
What a complete FRAUD and FARCE Merkel, Hollande, the IMF, EU, ECB and Dragi are: The EU and all its criminal politicians who created this entire financial mess have gone "Scott-free" without any one of them being held accountable or found guilty of fraud, theft and incredible misdeeds!
Nothing will change in the EU with its corrupt politicians and Bankers and they will continue stealing EU citizen’s money, making the People the only ones responsible. Why has the EU Commission never asked Greek Politicians about the 200 billion Euros they have looted from the people and EU funds they stole and sent offshore and to Swiss banks?
Because the Bankers & EU Commission is in on this game and absolutely corrupt… It is Pathetic… Time to tear the system down and start over… Stop voting for these horrible Criminal Politicians & jail the Bankers for financial fraud & get back citizens money!
Many thanks Robert.
I feel as if you read my thoughts and those of undoubtedly many millions in the EU likeminded.