Within a couple of days German Chancellor Angela Merkel and French President Nicolas Sarkozy will present their “Grand Plan” to save Europe to a formal hearing on EU debt.
Their plan is on the death-bed already, but it does not officially die until formal votes in May as noted in Eurozone Treaty Changes to be Finalized in March, Then a Vote in May, Then Country-Specific Referendums, Then?
Merkozy Dog-and-Pony Show is Nothing but Fleas
As with grand plans for the EFSF, still not finalized, the Merkozy plan has morphed into nothing but budget rules that the EMU will not be able to enforce because Sarkozy would not cede fiscal control to the EU. Merkel will not accept Eurobonds, because she can’t, by German supreme court ruling.
By any reasonable standard, the Merkozy dog-and-pony show is in reality neither dog nor pony but rather all fleas.
Loose Cannons and No Credibility
Steen Jakobsen, chief economist for Saxo Bank asks Where have your standards gone, Europe?
This week is being touted as the make-or-break week for the Euro and its Euro-zone – we did not get a Grand Plan in Cannes as Sarkozy had promised us, so now it seems we will get a Desperate plan instead.
The EU will always create ‘something’ which they believe they can sell as progress, but the problem is one of moral and political standards, or rather the lack thereof. Yes, you can buy time by printing money, you can try to fast-track changes to EU treaties, but you simply cannot run away from the dilution of standards from these desperate actions.
This weekend it dawned on me (and yes I am a bit slow) that the real issue here is not whether Europe gets a deal by late Tuesday night, rather it’s about how the EU can maintain any shred of credibility on its long-term ability to move the agenda beyond “saving Europe” to the longer term challenge of creating the next upswing in employment, growth and optimism.
This is not a question of the need for a crisis, though I do believe it’s the only way we get true progress, it is more about an alarming decline in standards of behaviour by those in power. Simply put, they have become loose cannons. The IMF can lend thousands of per cent of its SDR quotas, the FED can print trillions of dollars if they deem it necessary and soon it appears EU political shenanigans will see the ECB printing money in exchange for politicians in Europe doing what they should have done in 1999.
At its core, perhaps this is what the “occupy” movement is all about: it’s a protest against the violation of standards of behaviour by the ruling class, not just against the decisions they have made. And if that is the case, then I agree! We need debt brakes to stop the fiscal bloodshed, and we certainly need standards for how far central banks and politicians can devalue our hard earned, after tax salary by printing money.
This week, the EU’s Merkel/Sarkozy will try to force the move toward fiscal union using article 126 in the EU treaty, which basically gives the decision making forum of the EU Council the power to move and strengthen fiscal oversight.
The problem here is that it will be seen, ultimately as what it is: a total dilution of the originally intended standards of EU behaviour and indirectly it also puts us on the road to of transitioning from Euro-17 to perhaps the Euro-10.
I still have the feeling we are about to add a third new low point in the history of the EU history. The first was breaking the original stability-and-growth pact, the second was the ECB’s intervention in the peripheral sovereign debt markets in May of last year. Now we have the third and perhaps final straw: no limits, and no accountability to voters, the investors and the future.
So the risk is that the EU wins the battle this week, only to lose the war down the road.
Please let me be wrong.
Reader Andrea emails …
My comment (and I think I am not alone in Europe): This is a Franco-German agreement drawn and agreed between France and Germany without any involvement or contribution of any kind at any level of the other 25 countries.
Why the hell should the other 25 countries (parliaments or people) approve that?
Irritation, even rage against the Franco-German tandem deciding for everybody is mounting quite fast in other European countries.
The odds to get this plan approved are basically 0.
Mike “Mish” Shedlock
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