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Sarkozy pushes for constitutional reform, citing "deficit control" as the main reason
Well that didn't take long. After European Commission announced last week that centralized fiscal policy is the only reasonable way to achieve Maastricht defined deficits by 2013; French president Nicolas Sarkozy is, cited by Le Monde, saying constitutional changes will be needed if France wishes to achieve Commissions mandated deficit of 3% by 2013. Although not explicitly stated by Sarkozy; it is expected that said constitutional reform will include an amendment which will further facilitate the transition, of decision making power, from sovereign nations to a centralized meta-European financial body.
Unlike the Germans have done - they wrote in their constitution that they have until 2016 to reduce the structural deficit to 0.35% of GDP - Mr Sarkozy does not establish at this stage , a target figure. That would mean that each new government in early mandate to say what level of budget balance (difference between revenue and expenditure) it is five years.
France calls for serious and rigorous moves in deficit control, and the period set for achieving the goal, as defined by Maastrich deficit definition, is one electoral period shorter than Germany's. In my view this could only mean the following:
- Sarkozy feels France will be the next target of speculation and wishes to impose necessary measures before the situation spirals out of control [CDS market indicates that it might happen soon, since France is, more often than no, among daily wideners]
- Reduce the cost of future borrowing if Euro continues trading lower.
- Impose austerity measures to prevent speculation in the debt market without introducing a ban on naked derivatives, or changing accounting rules [done by Italy and Germany] in pricing EU bonds.
Point number three is, in my personal opinion, the most valid one given the following:
Regarding health insurance, the National target of insurance expenditure (ONDAM) will "bend" , Sarkozy said. It "will be set at 2.9% in 2011 and 2 8% in 2012 . It was 3.3% in 2009 and is set at 3% this year. The President of the Republic Mr Sarkozy wants the proposals in the report of Raoul Briet on health expenditure is implemented, including lowering the threshold warning: today at 0.75% must bear " 0.5% by 2012-2013 ". The mission led by Raoul Briet (Chairman of the Reserve Fund for Pensions and a member of the High Authority for Health) said that since the establishment of the national healthcare expenditure in 1998, overtaking the latter have reached 19.4 billion. It proposed to move within a year, review its committee warning hitherto published in late May to allow time for government to rectify the situation. Since 2004 and the establishment of this committee alert overruns have averaged 0.67%, and once the threshold has been exceeded 0.75% in 2007 (in total, the ONDAM has been met only once, the first year). If 0.75% margin of error seems a bit high, the problem is that of a total of about 160 billion euros of health spending, it now represents 1.2 billion euros. It proposes to condition certain expenses to respect the ONDAM.
This is some serious penny pinching, but not surprising at least given that:
To implement this "rule of balance" in public finances, the government will first proceed to a consultation in June it will then propose a constitutional bill.
The French public deficit is now equivalent to 7.5% of gross domestic product (GDP). It could reach 8.2% this year. The Government is committed to the European Commission to reduce it to 3% in 2013.
In light of last week threat that sustainable national fiscal policy will be achieved solely by centralizing the process of defining maximum, Maastrich defined, deficits; it is not a stretch of imagination to say that Sarkozy will be living under a microscope until said constitutional changes are written into law and observed in effect. My personal opinion is; stronger European nations will demand consolidation of their economies by not following Germany's example, but by imposing austerity measures and shifting fiscal policy to a centralized, decision making, body. Looking at that possible future dynamics from one angle, such political shift would make national ego irrelevant and fiscal measures would be achieved in a much timely manner, but on the other hand it might indicate an irreversible move in how politics is conducted in Europe and end, if not formally, then practically, the Age of Sovereignty. Although sets of rules and regulations, regarding various matters, were put forth by centralized bodies in Brussels and Strasbourg; no one has dared to touch into the taboo of "sovereign economic policy". If Greece decides to strategically default, and, subsequently exits the EMU, such centralization of economic policy may show to be beneficial for, both, the Euro and Europe as a whole.
It is also worth mentioning that Italy has suspended mark-to-market accounting on EU bonds. Such desperate moves only deepen the gravity of the situation in the EU debt market, and offer no new measures, nor positive signs, upon which the market could calm down and evaluate the situation in a more rational manner.
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Cheeky, the one thing disconcerting about the assumption that constitutional reform will culminate in a “centralized meta-European financial body” over the EU's sovereign nations is that I do not believe point man Sarkozy is negotiating in good faith. I believe that he is an agent for the central banker interests. And they clearly benefit from a Brussels-controlled Europe; French citizens not so much.
The fact is, Sarkozy is not a French patriot or a protector of the interests of European taxpayers and their standard of living. He is no Charles de Gaulle French patriot. Sarkozy will sell out his French countrymen in a Paris second and move whatever mistress or wife he has at the time to Greece, where his roots are, or to his alternate homeland—Israel.
“In an interview Nicolas Sarkozy gave in 2004, he expressed an extraordinary understanding of the plight of the Jewish people for a home: 'Should I remind you the visceral attachment of every Jew to Israel, as a second mother homeland? [H]e knows that if one day he will not feel safe in his country, there will always be a place that would welcome him. And this is Israel.'” -- Raanan Eliaz, The Austrian Jewish News (May 8, 2007)
Give me control of a nation's money and I care not who makes the laws. –Mayer Amschel Rothschild
Jews might want to look inward, and barring that, at the fingerprints all over the financial crisis, for reasons why they might not feel safe in the future.
No, no, non. In the 5 mins I had the volume up on CNBC today Ron Insana (you know the Legends fund guy) said all the Euros have to do is use ZIRP, cut austerity programs and use QE to reflate and solve their problems. Whew glad thats solved.
It must be hard work to get that many jackasses on one screen in a ten box.
Wow. What a bitch move for a guy that always plays the tough guy in public.
A peoples survival depends on their cohesion, which requires a sense of identity. The nationalist movement was thousands of years in it's evolution. There is Italian, German, and French art, music, opera, literature, language, etc. People are willing to die defending their nation. Or at least what they believe to be their nation. In the movie Casabalanca the French stand up to sing their anthem (La Marseillaise) in proud defiance of the rowdy Germans. People won't stand up and sing for the sake of stable European financial markets. They certainly won't be willing to die for them.
Nice avatar! Silver fang?
The EU is following the US book page by page. Any comment reporting a failure of the attempt must be put face to face to the US experiment. How is the EU project of a European people going to fail?
European countries were themselves very diverse before turning to a nation. So how?
Personally, I can explain how the EU is going to lead its project, what mechanics they are going to employ. So I can tell how they can succeed.
Once again, nothing new here. They are just following in the US steps. Anyone who read the Founding Fathers know that they feared this loyalty issue and set up to solve it.
To finish with, all I can say is that it is going to suck to be certain minorities (Black or a Muslim) in the EU.
ok probably my last post for the day, cause i'm not getting any responses that i like, lately. plus ZH server is busy and i should not contribute dumb stuff. bye bye†
do you know the only thing i understand when i read your various posts, comments or articles is the word naked? honest. CDS's what the heck batman. how can you be so obsessed with these things. credit default swaps, right?
i'm going to go play golf with men that are always looking for their balls and i really can help them out with that.
how do you think i would be received if i just took off my shirt and took a pic?
You might be...but I can't know until I see the pics ;)
Sure, the French will sit idly by while their sovereignty is sold down the river by a Hungarian dwarf.
My personal view is that the EU has learned its lesson from the US. Therefore national sovereignty might not be something of the past.
The US has thrived on a two level authority, allowing a very efficient ping pong game.
Quick example: the US signed treaties with Indians, all conform to US law.
This did not prevent settlers from moving on Indian lands, even if forbidden by US laws, crossing borders illegally. Indians were invited to follow the rule of law. Thus seeking assistance from the State level to solve the issue through law. State to answer"issue is not my department, federal department"
Indians therefore sent to plea to the Federal level. Federal level to answer "issue is my department, state department"
Meanwhile,time for fait accompli: the settlers had settled en masse and when Indians came to realize it was time to oust the invadors as repatriation through law was no longer an option, well, the US cavalry ('the Blues') were sent in to teach a lesson to savages who couldnt abide by rule of law.
I think that Europe will retain a national sovereignty level on economic decisions to implement the formula.
Protesters will be sent to the national level. When there, poof, passing the bucket, not national department, orders come from above, protesters sent to european level. Just to be said that nations retain a part of sovereignty, so not the European department until fait accompli; that is when the measure is passed and irreversible.
This will turn the area in a haven for politicians. National politicians will blame Brussells for any of the unpopular decisions they have to make while Brussels politicians will depict themselves as being simple advisors with little authority.
A fully centralized system has this weakness it concentrates power and thus can be an easy target to responsibility. The two level authority system allows dilution of responsibility, which is much better for people in power.
Good catch & concise analysis, CB.
France always goes beneath the surface just
like covering up of its banks (SocGen, BNP, et al.)
directly linked with its pension funds, and a
not-so-well budget deficit that is destined to
grow unless some serious adjustments being taken
as your analysis shows.
We'll see how Socialists and other oppositon (Francois Bayrou)
would take advantage of Monsier Sarkozy's serious shortcomings
and huge ego.
And naturally some form of mass protests should be expected
from them..
Cheers.
So just what was stopping their "serious and rigorous moves in deficit control" and following the EU rules before this crisis? Absolutely nothing of course just some will power to stop bribing the voters and say you can't just have more and more without consequence. For many years i have been expecting a call from the European gravy train politicians for tighter economic integration as soon as we hit hard times.
CB,
Great post as always. Query: How do you, in your opinion, evaluate the chances for success of the strategy you laid out? Which countries are in your basket of the "sttronger" countries that will shift fiscal policy to the centralized body?
Cheers and good show.
France is a bust as the UK, probably even more so with short-term debt.
The highly-coiffed Sarkozy just doesn't like admitting it, but for 'the glory of the Euro, La Belle France may make sacrifices..........'
Cheeky, for you:
http://2.bp.blogspot.com/_EgXqKP0XKGM/SvU-3ukMMCI/AAAAAAAABP4/wJf8w02t7U...
HA!
I was thinking about changing my avatar; guess you provided me with a worthy substitute.
morning, sunshine......£
NO, not a good substitute†
The words Bastille and storming spring to mind
cheeky bastille?