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VON JETZT AN EUROPA SPRICHT DEUTSCH

6 February 2012

What Bismarck and Hitler failed to achieve by military means – the unification of Europe under German hegemony –  a latter-day Prussian, Angela Merkel, Germany’s new Iron Chancellor, is aiming to achieve using Germany’s financial firepower.

Last Monday 30 January 2012,  25 of the 27 member states of the European Union – all bar the United Kingdom and the Czech Republic – succumbed to pressure from Berlin and agreed a treaty setting up a new fiscal union, inside the European Union, with a common financial regime involving the obligation to run balanced or surplus budgets.

Of the 25 countries signing the fiscal compact, the core group to which it applies as a priority are the 17 states, headed by Germany, that constitute the eurozone, ie those countries that have adopted the euro as their currency.

This means that the governments of countries which have signed up to the new monetarist regime will no longer have the right to run up Keynsian deficits to counteract economic recessions. The new regime will be policed by the European Commission and disputes will be decided by the European Union’s commercial court, the European Court of Justice.

At the behest of Germany and all singing to a German hymn sheet, the signatory countries have agreed to surrender control of their economies to a Berlin-dominated Brussels.

According to a Guardian editorial on 30 January 2012, this is not a fiscal union. It is “fiscal imperialism”. The newspaper comments: “The clear implication of the fiscal compact proposals…is that every country within the eurozone must turn itself into a version of Germany, with tough budgetary controls even amid severe recession.”

Writing in the Irish Times on 1 February 2012, commentator Vincent Browne maintains that the indefinite surrender of sovereignty to Brussels – implicit in the treaty – means that Ireland, an independent nation since its liberation from Britain, has become a province once again.

If successfully implemented  – the “if” is a big one – the treaty represents a quantum leap towards the creation of a European political union and ultimately a United States of Europe – with the text of the European Constitution dictated, under pressure of hard times, by Europe’s paymaster, Germany.

What is more, there will be no going back.

In the edition of the UK’s Guardian newspaper for 31 January 2012, Merkel is quoted as saying of the new treaty:

“The debt brakes will be binding and valid forever. Never will you be able to change them through a parliamentary majority.”

As Antigone1984 has not ceased to emphasize, this sinister remark typifies the default European Union attitude to democracy, ie they can do very nicely without it, thank you very much.

However, as this comment comes from the German Chancellor, we cannot help recalling that the Nazis used the term Tausendjähriges Reich – thousand-year Reich – suggesting that Hitler’s Germany would last for a thousand years.

We must state loudly and clearly that Angela Merkel is no Nazi.

Nonetheless, her words will give pause for thought to democrats everywhere.

Only last week the Germans demanded the appointment of an EU commissar or viceroy to oversee the Greek economy.

A leaked German document revealed in the Guardian on 30 January 2012 apparently called, in effect, for the appointment of an EU proconsul with the power to veto the Greek budget, saying Athens’s inability to meet fiscal targets had made the post a precondition of further rescue funds from its troika of creditors (the European Union, the European Central Bank and the International Monetary Fund).

“Budget consolidation has to be put under a strict steering and control system,” noted the document (according to the Guardian report). “Given the disappointing compliance so far, Greece has to accept shifting budgetary sovereignty to the European level for a certain period of time.”

The Guardian reported that, under the plan, European institutions would have direct control over Greek budget decisions in what would amount to an extraordinary depletion of a member state’s independence in conducting its own affairs.

The proposal sparked an outcry, not only from the Greek Government, but also from countries normally aligned with Berlin.

Helle Thorning-Schmidt, the Danish Prime Minister who is currently EU President, said that Brussels would defend Greece against any assault on its democracy.

Luxembourg Foreign Minister Jean Asselborn said: “It’s not in order that German politicians say that we need commissars and that Greece be put under supervision…Germany should be more careful.”

The Germans bottled out and withdrew the proposal in the teeth of this opposition, but what no one except for Antigone1984 appears to have realized is that the new fiscal compact will introduce for all signatory states precisely the kind of supervisory regime that the German leaked document was proposing for Greece.

However, we should remember that the treaty agreed on 30 January 2012 has only been adopted by 25 people, the elite EU leadership. In order to have the force of law, it must still be ratified either by national parliaments or by national plebiscites.

Merkel is jumping the gun.

She knows, of course, that on the basis of the normal ratification procedure in the EU, in 24 of the 25 signatory states the treaty will be rubber-stamped at the behest of the main political parties in tame national parliaments. In one country, Ireland, there may be a legal obligation to hold a referendum, although the Irish Government is doing its level best to avoid this. The last thing the Irish elite wants is the people poking their noses into matters which are none of their business (ie the economic independence of the country).

None the less, this treaty is of such far-reaching significance that it cannot be excluded that the German apple-cart may be upset in the course of the ratification process.

Normally a treaty of this importance would take two or three years in the drafting before it was submitted for signature to EU leaders. Texts would be drafted and re-drafted in national parliamentary committees as well as at EU level. The abnormally short text of the fiscal compact was cobbled together on the back of an envelope in the space of about a month. It must be open to question whether national parliaments, however stage-managed by the political parties that control them, will simply switch on the green light without more ado.

Then again it is possible that in countries, such as France and Germany, which have constitutional courts, these may intervene to pass judgement on the compatibility of the new treaty with their national constitutions.

What is more, one may wonder whether the European Court of Justice might not have its word to say about the new hybrid role – as court of last resort for both the European Union and the new Fiscal Union – that has been foisted on it by the treaty.

Finally, there will be massive opposition to the treaty from at least half of Europe’s economists. The fresh-water monetarists will be rubbing their hands in glee, but the salt-water Keynsians will not flinch in their opposition to a treaty which, in their view, deprives Europe of an essential economic tool – the ability to use government borrowing to pump-prime faltering demand in times of recession.

The Guardian editorial on 30 January 2012, already mentioned, points out that “austerity for all is not working”, adding:

“The credit-rating agencies, whose very spectre was enough to scare European governments into furious cutting, have made it clear they are as worried about growth as they are about the need to reduce debt burdens.

“Austerity isn’t even working for Germany, where growth faltered at the end of last year. Even the strongest economies within the single currency will naturally suffer if their neighbouring export markets dry up.”

The cultural and social implications of this move towards federation are also enormous.

The Germans have performed a near-miraculous feat in reconstructing an economic power-house out of the ashes of war. As commentator Simon Heffer said on the Daily Mail website on 17 August 2011: “Germany lay in ruins in 1945, but it then invested in manufacturing plant, developed first-class education, innovated, raised its productivity and competed on quality not price. Over the next 60 years it won the peace as comprehensively as it lost the war.”

But the Germans are not the only ones. The French too experienced an economic renaissance during “les trente glorieuses [années]” (1945-1975). And likewise the Italians. Each of these countries has done it differently on the basis of their different skill sets, traditions and natural advantages.

Moreover, German reconstruction in particular has come at a devastating environmental cost. Look at German city centres today, say the main drag in Karlsruhe or even romantic Heidelberg. The steamroller of reconstruction has turned them into identikit monocultural deserts with the same plate-glass department stores and fast-food chains stretching as far as the eye can see. Not that Germany has a monopoly of this kind of urban desolation.

The citizens of the nations of Europe need to ask themselves: “Do we all want to be like Germany? Do we want a monocultural Europe? Or do we want to retain our diversity?”

If the fiscal compact is implemented, these questions will no longer be relevant.

However, there is another scenario.

As we write, after four months, the Greek Government is still in negotiation with the troika on the terms of a new bail-out of €130 billion that needs to be agreed before 20 March, otherwise Greece will default on its sovereign debt. Now it appears that, in addition to the €130 billion, another €15 billion has unexpectedly to be found to plug “a newly discovered black hole in the country’s finances”. The Spanish and Portuguese economies are at death’s door. The Irish economy is limping along with the life-support of a troika bail-out.

In other words, regardless of the fiscal compact agreed at political level in Brussels, the health of the real economy and its repercussion in the markets may ultimately decide whether the eurozone survives or not.

It is still very much on the cards that the Greek bail-out negotiations will fail and that Greece defaults, at which point it is likely to be pitchforked ignominiously out of the common currency and back into the drachma. Some analysts are predicting a similar fate for Portugal. And who knows what will happen in Spain or Italy?

Nothing less than the future of the European Union – as at present constituted – is at stake and the outcome is too close to call.

WILKINS MICAWBER

Why the mad rush to conclude a fiscal compact at this point in time?

During the last decade, with the blessing of their governments and little official oversight, banks and businesses in a number of peripheral eurozone countries – in particular, Greece, Ireland, Portugal and Spain – took advantage of ultra-low eurozone interest rates to engage in an orgy of largely unregulated borrowing and spending, particularly on real estate. The bubble eventually burst in 2008, the loans turned sour, lenders and borrowers went bankrupt and the states in question ended up with huge deficits that they were unable to sustain. As a result, these countries came cap in hand to the EU and the IMF for bail-outs. In effect, as far as the EU is concerned, it is principally Germany, as the EU’s economic powerhouse and a rock of financial stability, that stands to bear the brunt of the rescue operation.

Moreover, Germany appears resigned, through gritted teeth, to bailing out these countries but only this once. In future, all the countries of the eurozone must adhere to the same fiscal and financial orthodoxy as Germany. Hence the fiscal compact signed on 30 January 2012.

It must be conceded that Germany has a point. Germans work hard – a cliché but true – put aside savings for a rainy day and spend prudently.

They personify the Micawber Principle (based on Wilkins Micawber, a fictional character from Charles Dickens’s 1850 novel David Copperfield):

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

However, Germany is not wholly blameless in the loans debacle.

The low interest rates which encouraged fiscal profligacy in the eurozone’s peripheral states were imposed by the supposedly independent Frankfurt-based European Central Bank in the interests of keeping the external value of the euro low so as to boost the export potential of Europe’s main export-based economy Germany.

Historical note:

The First Reich (The Holy Roman Empire)     962 – 1806

The Second Reich                                          1871 – 1918

The Third Reich                                              1933 -1945

The Fourth Reich                                             2012 –  …..

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