Wednesday, February 01, 2012

Angie's dragon and its retreat

News is quickly emerging about how negative a reaction Germany's Chancellor Angela Merkel provoked with her proposal to appoint a financial dictator to run Greece. Die Welt reports (Merkel macht kehrt im Griechenland-Fiasko 30.01.2012) of Angie's proposal for putting Greece under a Gauleiter: "Das Land hätte damit endgültig seine Unabhängigkeit verloren – und vor allem: nicht de facto, sondern für alle erkennbar." ("The country {Greece} would have then finally lost its independence - and above all, not de facto, but obvious to everyone.") The accurate implication of that, of course, is that the current bankers' collection-agent government in Greece isn't really a democratic national government. But at least it maintains the formal conventions of an independent national government. Angie wanted to take even that away.

As I've said before, Angie seems to have been very impressed with Dick Cheney's foreign policy.

Martin Schulz: President of European Parliament, German Social Democrat and shameless Angiebot

Martin Schulz, the pitiful German Social Democrat who is President of the European Parliament is walking back his previous endorsement for Angie's Gauleiter proposal. But it sounds like the guy is a real Angiebot:

Und Martin Schulz, der neue Präsident des Europaparlaments, kann sich Herzlichkeit leisten: „Frau Merkel ist auch meine Bundeskanzlerin", sagt er. Schulz freut sich sichtlich, dass er an diesem Tag der erste auf der europäischen Bühne sein kann, der Angela Merkel seine Kritik überbringen kann – weil die Kanzlerin erst zu ihm kommt, danach zu ihren Kollegen. „Wir haben über unterschiedliche Auffassungen mehr gesprochen als über Gemeinsamkeiten", sagt er.

Und im Gehen, Merkel ist schon weg: „Es hat schon sinnvollere Äußerungen gegeben", sagt er zur deutschen Idee. Natürlich müsse es eine Aufsicht geben, aber das geschehe doch bereits. „Man sollte Begriffe wie Staatskommissar oder Sparkommissar vermeiden." Und er setzt noch einen hinterher: „Es gibt Leute, die dazu beitragen, die ohnehin angespannte Stimmung zwischen den Mitgliedstaaten noch zu verschärfen."

[And Martin Schulz, the new President of the European Parliament, can provide heartiness: "Frau Merkel is also my Federal Chancellor," he says. Schulz is visibly happy that he can be the first on the European stage on this day to bring his criticism to Angela Merkel - because the Chancellor comes to him first, then to his colleagues afterward. "We discussed more about different evaluations than about agreements," he says.

And in leaving, Merkel is already gone: "There have certainly been more sensible statements," he said about the German idea [Angie's Greek Gauleiter proposal]. Of course there has to be oversight, but that's already happening. "One should avoid concepts like state commissar or savings commissar." And he then adds: "There are people who would use that to intensify the already tense mood between the member states."
Duh, yuh think, Martin? Are those the kinds of insights you get from being one of Angie's poodles? I hope she scratches behind your ears for you.

But he's right about the need to avoid those kinds of expressions. "Gauleiter" or "dictator" would be more appropriate for what Angie proposed and for which this sad excuse for a democrat originally endorsed. And this guy is President of the European Parliament! That is just sad.

Carsten Volkery reports for Spiegel International on the negative reactions to the Greek dictatorship idea that Angie and her boy Martin Schulz proposed: Merkel Gets Her Fiscal Pact: EU Summit Marred by Fears of German Domination 01/31/2012.

The terms of the agreement are hard to parse from the news reports I've seen, probably because the terms weren't public until Tuesday when the "fiscal pact" was finalized. Also, a lot of the reporters are probably just being lazy in trying to understand and explain it. The spin from Angie's government and from the summit generally was that, hey, we're made great progress and the financial markets should love us. I guess that was to be expected.

But there doesn't seem to be an awful lot to this "fiscal compact". For one thing, the critical enforcement mechanism won't be decided until the scheduled March EU summit.

And what kind of "fiscal compact" is it? This piece from BBC Online, The eurozone: Another step by Europe editor Gavin Hewitt , leads the reader to believe that there is no treaty change involved. If you read the very closely, you might wonder if he doesn't mean there's no change to the EU Treaty. Or maybe he just means there's no treaty change for Britain involved, so who cares?

Here's the text of the thing, the "thing" being officially called Treaty on Stability, Coordination and Governance in the Economic and Monetary Union. The magic numbers are 3%, the maximum amount an annual deficit can be in relation to GDP, and 60%, the allowed ration of national public debt to GDP.

Article 3 designates a "fiscal compact" among the members, but this is an international treaty. It does designate the EU Commission as having an enforcement role in determining whether the countries involved are complying with the fiscal limits. The European Court of Justice is the juridical enforcement mechanism. This represents a compromise and, for Angie, a climb-down from her original proposal of having the EU Commission impose automatic sanctions on violators. It's not a good policy. But it does seem to avoid what in her original proposal would have been effectively a German veto over national budgets if the fiscal targets aren't met. The treaty does specify that "a correction mechanism shall be triggered automatically," though the mechanism in itself isn't defined in the text.

I don't claim any technical qualifications to interpret treaty language. But from the text and the commentary that I have seen, it appears that a shadow of Angie's original automatic enforcement mechanism survives. The EU Commission will decide on sanctions for violators unless a majority of the countries vote to oppose the sanctions. But the sanctions won't take effect until a case is brought to the European Court of Justice.

The treaty would take effect on January 1, 2013 if it has been ratified by 12 of the eurozone members.

It's a bad idea. And it's very doubtful whether it's even enforceable in this form. But it's not as bad as Angie wanted it to be. Plus, it's increasingly obvious to me that the eurozone members know that the Angie farce can't go on that much longer. I think the non-German eurozone members are basically playing for time, with everyone trying to avoid being the first country to bail out of the euro and everyone developing contingency plans for how to minimize the damage to themselves when this increasingly shaky house of cards collapses.

It's worth noting that the EU has always had some stringent budget deficit rules. And that they were often observed in the breach. (David Böcking und Florian Diekmann, Folgen des EU-Fiskalpakts.Kontinent der Schuldensünder Spiegel Online 31.01.2012) Although it was clearly Angie's intent to make the controls tighter and more effective, time will tell how much more effective they are. And, for the immediate future, as long the depression is going on, less effective will be a good thing, because the eurozone and the EU need more stimulative spending, not less. In an ideal "fiscal and transfer union", Germany would provide the bulk of the stimulus. But nothing run by Angela Merkel is going to be even close to ideal.

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