Monday, 21 November 2011

Euro reminders and solutions

Reminder: The Euro was created to promote intra-EU (intra EU Single Market) commerce & activity in general, not to become a tool for power games.

Reminder (2): The Euro was not created to make Euro members' exports and services like tourism less competitive & Japanese, US, Chinese etc imports more competitive.

Yet the obsessive pursuit by the ECB of the 2% inflation target led to high central interest rates that led a Euro that spent much of the decade at exchange rates that suffocated most if not all of the Eurozone economies.

So some members did benefit from lower rates in their sovereign bonds etc but the effect of the expensive Euro on Eurozone firms, exporters and services such as tourism was a heavy price to pay.

So are "internal devaluations" or even exit the solution?

IMO, No!

The solutions package should include:

a) Immediate: Banning of CDSs (Credit Default Swaps) on sovereigns and of any other speculative tools on sovereign debt (bonds etc). Requires political will by the EU 27 as well as the G20, or the kind of will that is also required for dealing with the issue of tax heavens in Europe and globally.

b) Immediate: An ECB inflation policy that takes into account the effects of the central ECB rate to the Euro exchange rate vis-a-vis the USD, the Yuan, the Yen and other currencies of the EU's main trade competitors.

Inflation curbing in the Eurozone and the EU can be achieved via more dynamic implementation of EU competition law and a much more effective approach towards a real EU Single Market (too many barriers still exist).

c) ASAP: A move to not just fiscal but full political union, that will include inter alia single laws in most if not all areas of policy, to facilitate the micros and SMEs as well as the average citizen.

Friday, 11 November 2011

I am not impressed by alleged 2 speed Euro "theories"

The alleged Merkel-Sarkozy plans for 2-speed Europe or Euro do not impress me.

Why?

They cannot change the EMU part of the existing EU Treaty (via a so called IGC - Inter-Governmental Conference) w/o giving in to Cameron's demands for "repatriation" of certain competencies from EU back to national (or just UK) level!

1) If they offer Cameron what he wants, then other EU members, eg one of the other 9 outside the Euro, but not anti-EU, may raise a veto, ie veto the whole IGC agenda.

2) If they plan a Treaty that works outside the EU Treaties (in a format similar to the original Schengen way/model), then the contents of such Core EU/Euro Treaty can it seems to me can only add, not amend, articles of the existing EU Treaty.

Hence there is a Catch22 of sorts.

So what on Earth are (allegedly) Merkel and Sarkozy talking about?

In an IGC, be it EU or Euro one (see above), all will have to agree, not only Merkozy & "German thinking" others!

Bottom line: Euro membership was/is irreversible, those who do not get that are the ones in denial of legal, technical and other factors!

In speech in Strasbourg, Sarkozy called such plans a mere "intellectual exercise". IMHO they are not a trick. They are just that. Nothing feasible about them.


Saturday, 5 November 2011

Zeus, Ulysses, Pericles, Merkel and central bankers

Read below my comments on "Modern Greece’s real problem? Ancient Greece" by George Zarkadakis in The Washington Post.

I disagree with most of the points of the article/opinion by Mr. Zarkadakis.

IMO the paradox is that Zeus and other Greek gods and goddesses, legends such as Ulysses and Achilles, real life ancient Athenians and mostly politicians even of the Pericles era would probably be considered more "unruly" and "less EUropean and EUROpean material/stuff" than modern Greece/Greeks, in the eyes of "purists" (to say the least) such as A. Merkel, central bankers, conservative US and European media, etc etc etc and of course "some" modern Greeks.

Eurozone moving forward outside the EU Treaty framework? What's new about that possibility?

In the Wintour and Watt blog today, Saturday 5 November 2011, in The Guardian, titled: "Britain turns on 'disreputable' Germany as relations sour over eurozone crisis", I read:

"David Rennie, who writes the Bagehot column in the Economist, has one of the most important scoops of the eurozone crisis this week. Rennie, who has just returned from Berlin, reports that German officials are so angry with Downing Street that they are threatening to draw up a treaty just among the 17 members of the eurozone. This is what Rennie wrote: ..."

What scoop? It seems that since May 9 Spiegel International had "scooped" the scoop, as I posted in early September: "it seems, according at least to my reading of the 09/05/2011 "Divide and Rescue: Berlin Lays Groundwork for a Two-Speed Europe" report in Spiegel Online International that the Treaty that will move the Eurozone towards political union (uniform labour laws, budgetary "unification" (to what extent we shall see), etc etc) will not be an EU one, but, like Schengen (when it was set up), "hors EU"! That means that the UK, unless it joins this 1st speed union (ultra highly unlikely), will not have a say in it or get to vote on it! Any referendums will be by the participating states! Bazinga?!"

Here is full part of my Sept. 7, 2011 post "EU: Who kicked the can down the road? (mach 2)"

"Now, we come to maybe the most interesting bit:

While Cameron supports closer integration if the Eurozone becauses he thinks that the needed EU Treaty changes will give him a chance to negotiate in return for allowing the Eurozone to move ahead, repatriation of certain "competemces" back to the UK (from "Brussels"), it seems, according at least to my reading of the 09/05/2011 "Divide and Rescue: Berlin Lays Groundwork for a Two-Speed Europe" report in Spiegel Online International that the Treaty that will move the Eurozone towards political union (uniform labour laws, budgetary "unification" (to what extent we shall see), etc etc) will not be an EU one, but, like Schengen (when it was set up), "hors EU"! That means that the UK, unless it joins this 1st speed union (ultra highly unlikely), will not have a say in it or get to vote on it! Any referendums will be by the participating states! Bazinga?!

That also raises the issue of the role of the European Commission, the ECJ, the European Parliament, the Council of the EU, etc, as well as the European Council in the operation of the "EU Mach 2". It seems that the Eurogroup plus other, new, bodies, probably lean, will be set up to do the "job". The EU institutions will continue to operate the affairs of the EU27 but the "EU Mach 2" will have its own institutions. Can there be another way considering that:

a) Cameron wants to use an EU27 IGC to get his way, thus a change in the EU Treaties must be avoided by the rest.
b) Not all members of the EU27 will be participating in this "closer union"?

To be continued!

PS. That would also mean that the "hors EU" Treaty of the core union cannot change the EMU/Euro aspects of the EU Treaty, ie exit from the Eurozone/Euro will continue to be not an option. That IMO means that all 17 of the existing EZ members will participate in the core union, unless they figure out a way of having a Euro member not be part of the core union and still have the who thing work! Does not look likely!

PS2. Times are beyond interesting. But at least there is a reversal of direction, from backwards to forward. Unless of course Angela Merkel and/or the CDU change their minds, yet again!"

G7 + G20 = 0

A main dynamic of the era is, alas, not economic cooperation but economic clash between countries, more so than between multinational corporations.

With that in mind, the G7/G8, the G20 and other bodies (including WTO) are of marginal at best real significance.

If one factors into the dynamics and systemics of the era the role of global finance, then that begins to show the chaotic nature of the times.
Share/Bookmark