Wednesday, September 7, 2011

EU: Who kicked the can down the road? (mach 2)

This is a follow up (part or is it mach 2) of my September 5 post:
EU: Who kicked the can down the road? Merkel and Sarkozy or their predecessors?

First of all, one clarification. According to an article (September 7) in "Battle under way for soul of 'United States of Europe" it is not that clear after all if the German Minister of can be counted among the fans of a United States of Europe. According to the last 3 paragraphs of the article, he wrote a column in the Financial Times, in which he "laid bare "my unease when some politicians and economists call on the eurozone to take a sudden leap into fiscal union and joint liability."" According to the same article "... and that the answer to the crisis, despite it being politically painful, is for states to live within their means.".

In the meantime, the Council for the Future of Europe of The Berggruen Institute issued (September 6) a Statement by the Council for the Future of Europe: EUROPE IS THE SOLUTION, NOT THE PROBLEM" (PDF) The conclusions include:

"Supporting European integration is not a matter of solidarity but of enlightened self-interest. It is time to address the big questions in order to preserve the unique European balance of individual freedoms, market economy and systems of social protection. For us, Europe is the only solution."

"Them" includes Tony Blair, Jacques Delors, Felipe González, Mario Monti, Gerhard Schröder,
Matti Vanhanen, Guy Verhofstadt, Nicolas Berggruen, Mohamed El Erian, Niall Ferguson, Anthony Giddens (father of the "Third Way"), Alain Minc, Robert Mundell, Nouriel Roubini and Joseph Stiglitz (Nobel in Economics).

Yet as reports, "former prime minister Matti Vanhanen broke from the group's agreed statement and admitted: "I'm not so fond of federalism as such.""

Here is my POV. What Europe, the EU, the EU Single Market ie not only the Euro need is a single political entity, in federal form (eg like the US of America or the Federal Republic of Germany). The fiscal vs transfer union is IMO a pseudo-dilemma because political union means the creation of a federal budget financed mostly by a federal income tax (US style) on persons and companies, administered by a federal (IRS like) authority.

As I have argued before, in tweets mostly, it is actually the cheapest solution out of the crisis, for the average German, Finn, Dutch etc taxpayer. in that via a federal tax by a federal "Euro IRS" the burden will not be falling on "paymaster" countries and their taxpayers anymore but n=on high income earning persons and companies inside the federal union irrespective of nationality or state of residence within the federal union!

IMO Eurobonds alone are not the solution. Or fiscal or transfer union. Only full union. Clear and straight, to be understood by the citizens, without any of the traditional EU or member states' fuzz! For more on this, see my May 9, 2011, post "The EU's No. 1 problem is .....".

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!

Monday, September 5, 2011

EU: Who kicked the can down the road? Merkel and Sarkozy or their predecessors?

That is a favourite expression of some commentators re the stance of EUropean policy makers in the Euro crisis.

According to the Irish Times (September 3, 2011), Wolfgang Schäuble "reportedly told a parliamentary party meeting of the ruling Christian Democrats (CDU) that solving the euro zone crisis was not possible without a successor to the Lisbon Treaty, “even though we know how difficult a treaty change will be”".

It is envisaged that a new European treaty who have to handle far-reaching finance and fiscal powers to Brussels institutions.

Only a few days earlier, Helmut Kohl had this time publicly criticised his former right-hand-person and current German PM, Angela Merkel for her policies re Europe. So had Helmut Schmidt, Kohl social democrat predecessor in the Chancellory of Germany (ie former prime minister). Especiallu about a Germany others could not "depend on"!

In the Irish Times article mentioned above it is also reported that a new poll showed on September 2 that almost two-thirds of Germans say they want more common decision-making in Europe. 53% reject a “United States of Europe”. "Richard Hilmer of the Infratest/dimap polling agency said the results showed a clear aversion to looming euro zone rescue and reform measures. ...“But Germans remain at heart positively disposed to Europe and have nothing against further integration”"

A few hours ago (September 3), Gerhard Schröder, the social democrat German Chancellor (Prime Minister) from 1997 to 2005 (who succeeded Kohl), in an interview with Der Spiegel was kinder to Angela Merkel and spoke in favour of a United States of Europe.

What does this all mean?

In my opinion, it means that we are slowly picking up pace in reversing the current malaise in Europe and in taking the only road that is available, the road to political union in Europe. A US of Europe (or federal republic) that will stand tall next to China, the US, etc. (read Schröder's interview, in German).

Now, as I have written before (and tweeted many time more) the Maatricht European Summit (now European Council) which met in the form of an Inter-Governmental Conference to amend the EEC Treaty in Maastricht in December 1991 made a crucial error by deciding Economic and Monetary Union (the latter meant the Euro creation, the former is yet to materialise) without the foundation of a political union. In other words it decided to create a new currency but one without a country. I have also argued that political union and the single federal laws it comes with, see eg Fed Republic of Germany, a federal head of government (Germany) or state (USA), a federak income tax administered by a federal authority (in the US: the famous IRS), is a necessary foundation not only for a single currency but a single market as well (see the incomplete state of the EU Single Market 19 years after its launch on 1/1/1993).

Those public comments by no less than three (!) former heads of German government, two of which, Schmidt and Kohl, along with Mitterand, Giscard d'Estaing and others, are considered political giants of recent European history have come at a time when it is popular to accuse the current political leaders such as Merkel, Sarkozy, et al as lacking in leadership.

And, indeed, I must admit, reading the comments of Kohl reminded me of an era, not so long ago where one felt that political leaders were leaders and did not govern by looking at the opinion polls all the time or phobic of political cost.

Then I realised that it is some of those giants of European politics that did not manage to decide political union in 1991, when the EEC (then EC/EU) had only 12 members (thus in theory decision making was easier than then with 15, then 25 and now with 27). Who are the 12 heads or state or government that met in Maastricht in December 1991?

They were:
For The Netherlands: Prime-Minister, Mr. Rudolphus Lubbers.
For Belgium: Prime-Minister, Mr. Wilfried Martens.
For Danmark: Prime-Minister, Mr. Poul Schlueter.
For Germany: Chancellor, Mr. Helmut Kohl
For Greece: Prime-Minister, Mr. Constantin Mitsotakis
For Spain: President of the Council of Ministers, Mr. Felipe González
For France: President, Mr. François Mitterrand
For Ireland: Taoiseach, Mr. Charles Haughey
For Italy: President of the Council of Ministers, Mr. Giulio Andreotti.
For Luxembourg: Prime-Minister Jacques Santer.
For Portugal: Prime-Minister Aníbal Cavaco Silva.
For the United Kingdom: Prime-Minister John Major.

(source: General Secretariat of the Council of the European Union)

Chapter 8 of that contains an online version of Nicholas Moussis' well known book: Access to European Union law, economics, policies, shows that (IMO monstrosity) was devised at Maatricht as a compromise. Moussis explains: "... The compromise solution that was found there and then was the partition of European integration into two Treaties (one on the European Union and one on the European Community) and into three construction pillars: the European Community - the first and main pillar; common foreign and security policy (CFSP); and justice and home affairs (JHA)...". Oh my. A legal/institutional monstrosity, something which was/is alas not a new thing for the EEC/EC/EU in the effort to reach compromises, ie in "kicking the can down the road". Read more of Nicholas Moussis' analysis of how this mess of tied up via the next 3 EU Treaties!

So, who is kicking/kicked the can down the road? Merkel, Sarkozy et al or their predecessors?

The least those who are still able to, can do, is speak up now, explain to the public opinion, and thus help their successors lead Europe where it is destined to go.

Thursday, September 1, 2011

Speculators, liquidity, rainy days, capitalism, Marx, Rand, mobility

66% of 2011 gone. 8 months flooded with hyped up doom and gloom

Is there an economic system that is immune to barbarism?

Many years ago, my now late mother went to a stockbroker to sell my stocks (I think it was banks'). She indicated a range of prices she would be OK with, around the current price, and had to wait for days until a buyer was found. Speculators. We were told that they provide liquidity so that the rest of us can find a buyer or seller at any time, not have to wait for days like my mother did. Well, if that is indeed the contribution of speculators to the functioning of the financial markets (or even the real estate and other ones) then obviously what we have seen in recent years is a "runaway train". Not worth the benefit of liquidity my mother could not benefit from.

Now, on a related topic. People do need a way of storing value in days of :"sunshine" for "rainy days". Are the ones available nowadays via the current "version" of "Capitalism", suitable for that job?

How much of the funds speculated around the world every day are actually savings not entrusted to managers for greed, but for maintaining "nest eggs" for "rainy days"? In that sense is the European Social Model capitalism's biggest enemy? One that must be destroyed so that people will have to depend on that markets for "safekeeping" (!) their "savings" for "rainy days"? Oh my!


Key question: Do speculators speculate with their own money or using the money of people & orgs who have no idea what their money is used for?

Now, moving on:

Beyond Marxicm, Randism etc:

How much does 2011 capitalism have in common with 1850 capitalism? 1910? 1950? Even 1980? Please address the problems of 2011 capitalism!Using 2011 tools not 1850 or 1950 tools or even worse, antiquated economic & ideological dogmas!

Too financial times:

Do you realise how many people are sick and tired of financial and economic issues being at the forefront of current affairs? Many more than those who are sick and tired of party political news!

Politicians should stop offering voters simplistic models re what is happening & why! If they themselves don't know, should ask people who do.

Finally, ponder on this:

Bureaucracy does not like mobility (of people, workers, companies). Yet mobility, more of it, can help solve many public policy problems.