German chancellor Angela Merkel and French President Nicolas Sarkozy proposed a “quick new stability pact” that allegedly will bypass the need for treaties. However, there is already disagreement over the role of the ECB.
Please consider Germany, France plan quick new Stability Pact
German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning more drastic means – including a quick new Stability Pact – to fight the euro zone sovereign debt crisis, Welt am Sonntag reported on Sunday.
The report, which echoed a Reuters report on Friday from Brussels, quoted German government sources as saying that the crisis fighting plan could possibly be announced by Merkel and Sarkozy in the coming week.
The report said that because it would take too long to change existing European Union treaties, euro zone countries should avoid such delays be agreeing to a new Stability Pact among themselves – possibly implemented at the start of 2012.
Excuse me! There does not need to be treaty changes because a subset of the treaty signers can agree among themselves to trash it? Exactly what kind of desperate logic is that?
Among the countries in the Stability Pact there would be a treaty spelling out strict deficit rules and control rights for national budgets.
The European Central Bank should also emerge more as a crisis fighter in the euro zone. The ECB is independent and governments cannot tell it what to do. But the expectations on the ECB are clear, Welt am Sonntag wrote.
“Based upon these measures, there should be a majority within the ECB for a stronger intervention in capital markets,” Welt am Sonntag said. It quotes a central banker as saying: “If the politicians can agree to a comprehensive step, the ECB will jump in and help.”
ECB to Jump in and Help?!
Excuse Me! Since when will Germany agree to that? Since when will the ECB agree to that?
The European Commission, the EU executive arm, put forward proposals on Wednesday to grant it intrusive powers of approval of euro zone budgets before they are submitted to national parliaments, which, if approved, would effectively mean ceding some national sovereignty over budgets.
This could lead to joint debt issuance for the euro zone, where countries would be liable for each others’ debts.
Germany strongly opposes the joint issuance idea fearing spendthrift countries would piggyback on its low borrowing costs – meaning no gain for the virtuous and no pain for the sinners.
Maastricht Treaty Trashed by Committee
I see Germany does not agree to that. Does the ECB?
What about other countries that might not like to see the Maastricht Treaty trashed because a handful of countries agree to do just that?
This is an incredibly slippery slope, and hopefully the German Supreme Court puts an end to the idea before it gets too much further along.
As a side note, Merkel has lost her mind.
Mike “Mish” Shedlock
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