Charlemagne: Summit for one | The Economist.
Summit for one
The self-delusion of European leaders as they wrangle over yet another treaty
Jan 7th 2012 | from the print edition
“DINNER for one”, a 1963 British comedy sketch barely known in its country of origin, is Germans’ favourite television viewing on New Year’s Eve. Year after year they delight at the sight of Miss Sophie celebrating her 90th birthday with only her butler, James, for company. He is commanded to follow “the same procedure as last year”, going around the table impersonating each of the now-dead dinner guests, raising toast after toast and becoming ever more drunk.
As one awful year for the euro zone made way for another, the German television network ARD digitally retouched the original sketch to create a spoof of European Union summits. Angela Merkel was the bossy dowager. Nicolas Sarkozy was the faithful butler, taking on the roles of departed leaders: George Papandreou of Greece, José Luis Rodríguez Zapatero of Spain and, although he is still in office, David Cameron of Britain. (Italy’s Silvio Berlusconi is a tiger-skin carpet on the floor.) The joke was clear: summits are empty charades, only Mrs Merkel matters and Mr Sarkozy is her comical servant.
Read the full article here: The Economist
Sir Mervyn King: debt crisis is causing a dangerous ‘dependence on central banks’ – Telegraph.
Sir Mervyn King: debt crisis is causing a dangerous ‘dependence on central banks’
Sir Mervyn King has used his position as vice-chairman of Europe‘s “early warning watchdog” to warn that the developing debt crisis is causing a dangerous “dependence on central banks”.
10:24PM GMT 22 Dec 2011
Just a day after the European Central Bank (ECB) provided a record €489bn (£407bn) of cheap loans to banks, the Governor of the Bank of England said the crisis had been made worse by “negative interlinkages”. He added: “Dependence on central banks has risen and signs are intensifying that stressed financial conditions are passing through to the real economy.” Sir Mervyn was speaking in Berlin following a meeting of the European System Risk Board.
His comments were taken as a view on the ECB’s radical refinancing operation unleashed on Wednesday. The action, which saw 523 banks borrow nearly half a trillion euros, is known as the “Sarko trade” after French leader Nicolas Sarkozy said the liquidity would allow each state to “turn to its banks” for finance. Economists have warned that making banks buy risky sovereign debt will not help the crisis.
But European markets were buoyed by the liquidity injection. In France the CAC rose 1.36pc and German DAX ended the day 1.05pc higher. In London, the FTSE 100 climbed 1.25pc.
Sir Mervyn said the action would help in the short term but called for longer-term solutions, including getting the European Financial Stability Facility (EFSF), the so-called “big bazooka” bail-out fund, up and running.
Read the full story here: The Telegraph
European financial crisis: Is Europe a mess because Germans work hard and Greeks are lazy? – Slate Magazine.
Are Greeks Lazy?
Europe is a mess because Germans work hard and Greeks are shiftless. False!
Almost 150 years ago, the great English economic essayist Walter Bagehot pondered the problem of European monetary integration in the The Economist. At the time, Italy had just been unified in the wake of the Austro-Prussian War and it was clear that Germany, still divided into several separate political entities, was heading in that direction. How far would consolidation go, from an economic point of view? It was clear enough to Bagehot that a single European currency would never do, but two currencies might. Rather, he looked forward to a future in which “there would be one Teutonic money and one Latin money” and posited that “looking to the commercial activity of the Teutonic races, and the comparative torpor of the Latin races, no doubt the Teutonic money would be most frequently preferred.”
The language and reference to alleged racial differences between Latins and Teutons are outdated, but the basic economic claim remains.
Read the full story here: Slate Magazine
The Merkelization of Europe – By Paul Hockenos | Foreign Policy.
A European Germany has become a German Europe — and it’s all downhill from here.
BY PAUL HOCKENOS | DECEMBER 9, 2011
Not so long ago, France
was the political driver and Germany the economic motor of the European Union
. “Now,” remarked former European Commission president
Romani Prodi in February, it is Merkel “that decides and Sarkozy
that holds a press conference to explain her decisions.” This searing image could be embellished with the 24 EU members cowering in the press room — and Britain now
watching through the window.
Now that Britain has sidelined itself from the historic “fiscal compact” concluded in Brussels on Dec. 9, which provides the EU with new powers to enforce stricter discipline in national budgets, the community appears even more fiercely segregated within its own ranks. Pathetically, the Brits walked not because of the starkly deficient democratic procedure or the fact these governance changes wouldn’t adequately address the euro quagmire, but rather to protect London’s financial services industry from regulations that were part of the deal.
This isn’t the way European Union was supposed to work, not at all, and Germany’s one-woman show — ostensibly in Europe’s name — could well doom the continent’s beautiful project. Merkel may look like the big winner today, seemingly with Europe at Germany’s feet, but this turn of events could well prove to no country’s detriment more than Germany’s.
Read the full story here: Foreign Policy
Germany has to make a fateful choice – FT.com.
Germany has to make a fateful choice
By Martin Wolf
“Perhaps future historians will consider Maastricht a decisive step towards the emergence of a stable, European-wide power. Yet there is another, darker possibility. The effort to bind states together may lead, instead, to a huge increase in frictions among them. If so, the event would meet the classical definition of tragedy: hubris (arrogance); ate (folly); nemesis (destruction).”
I wrote the above in the Financial Times almost 20 years ago. My fears are coming true. This crisis has done more than demonstrate that the initial design of the eurozone was defective, as most intelligent analysts then knew; it has also revealed – and, in the process, exacerbated – a fundamental lack of trust, let alone sense of shared identity, among the peoples locked together in what has become a marriage of inconvenience.
Read the full story here: Financial Times
Euro Deal is a Pill, but Experts Doubt It Is a Cure – NYTimes.com.
Chronic Pain for the Euro
Published: December 11, 2011
VIENNA — The deal on Friday in Brussels to reformulate the rules of the euro zone has probably saved the shared currency for now — but there may be less to it than meets the eye.
At least four major issues still need to be resolved: how much money is needed to protect Italy now from speculative attack; whether banks will stumble because of the crisis; the isolation of Britain, which does not belong to the euro zone; and not least, whether the Brussels cure, prescribed by Germany, fits the disease.
Read the full story here: The New York Times
EU treaty: Britain wanted a deal – not a row – in Brussels – Telegraph.
EU treaty: Britain wanted a deal – not a row – in Brussels
The Foreign Secretary sets out why David Cameron was right to refuse to sign up to a deal in Brussels last week.
9:00PM GMT 10 Dec 2011
t is the duty of every Prime Minister to put the national interest first, even if it means sacrificing quick applause back home or refusing to please his peers in other countries. Not every Prime Minister passes that test but in the small hours of Friday in Brussels David Cameron again showed that he does. No matter how late the hour nor the pressure he is under he will do the right thing for Britain.
The eurozone crisis is having a chilling effect on our economy, our European neighbours’ economies and the world economy. It is in our interests to see it resolved as soon as possible. We support the eurozone countries in their efforts to resolve the crisis.
Obviously, crucial to that is finding a sustainable solution to Greece‘s difficulties, recapitalising the eurozone’s banks properly and convincing the markets with a credible firewall. The eurozone’s foremost countries have come to the view that eurozone countries also need stricter control over their budgets. That is understandable and may well be necessary but it is a considerable loss of national sovereignty that has profound implications for their national democracies. Decisions on national budgets will no longer be decided in eurozone national parliaments but become a matter of shared decision-making by eurozone governments.
Read the full story here: The Daily Telegraph
BBC News – Jacques Delors: Euro was flawed from beginning.
One of the main architects of the single European currency, Jacques Delors, has said the eurozone was flawed from the beginning.
He told Britain’s Daily Telegraph that the lack of central powers to co-ordinate economic policies allowed some members to run up unsustainable debt.
As head of the European Commission from 1985 to 1995, he played a key role in the process that launched the euro.
The comments come amid growing doubts over the viability of the eurozone.
In his interview with the Daily Telegraph, Mr Delors says the debt crisis stems not from the idea of a single currency itself, but from “a fault in execution” by political leaders who oversaw its launch
Read the full story here: BBC News
Eurozone leaders duck all the big issues – Telegraph.
Eurozone leaders duck all the big issues
The EU treaty agreement reached by eurozone leaders last week isolated Britain and proposed a new ‘fiscal compact’, but in reality it looks like just a ‘lousy compromise’.
If in doubt, ask a bookmaker. So much noise has accompanied the latest EU crisis summit that it’s easy to miss the main point. Is a eurozone break-up now more or less likely?
Prior to the bad-tempered Brussels meeting, William Hill had priced up the collapse of the eurozone before 2013 at 3/1. The odds post the summit? Also 3/1.
Read the full story here: The Daily Telegraph
Wonkbook: Germany’s high-stakes bet – The Washington Post.
Wonkbook: Germany’s high-stakes bet
For Germans, the question isn’t whether to save the euro. It’s when to save the euro. For the rest of us, the question is whether the Germans will wait until it’s already too late.
So to understand the German position, look at it from their perspective: Why in the world would Germany let up the pressure now? When they’re so close to amending the very treaty underlying the euro zone? When France has joined with them on a set of reforms? When the market is doing what the Germans never could?
I worry this makes the Germans sound like puppetmasters. They’re not. Many of their intended reforms are very sensible. The flaws they point to in the euro zone are, indeed, deep, structural flaws in the euro zone. They do envision a future that includes sacrifice on their part: eurobonds that raise Germany’s cost of borrowing and a bailout fund — excuse me, a fiscal stabilization fund — that they contribute heavily to.
So my concern isn’t that the Germans are selfish and calculating. It’s that, without quite realizing it, they have become reckless. They are trying to time the market, betting that they can, in essence, manage the run — that they can do just enough to keep the pressure on without letting matters get totally out of hand. They are like a doctor who, faced with an unhealthy patient presenting signs of a heart attack, demands to see the patient lose weight before they will administer the life-saving treatment.
In almost all of their arguments, the Germans are right. The euro does need to be fixed. But first it needs to be saved. The Germans are betting that this is their opportunity to do both. If they’re right, it will have been a remarkable play. If they’re wrong, it will have been a disastrous one.
Read the full story here: The Washington Post
See also: Germany’s calm in the face of Europe’s debt crisis