The Eurozone Con Game Just Keeps Cracking
Wolf Richter www.testosteronepit.com
“European leaders have not been able to meet their responsibilities,” French Prime Minister Jean-Marc Ayrault said about Germany and some other countries that are reluctant to pile more taxpayer money on Greece, whose economy is grinding to a halt, and whose government, deprived of the flow of bailout funds and cut off from the financial markets, can no longer fulfill its promises.
And Greeks are leery of new “structural reforms” currently fought over by the coalition government. They oppose more cuts in salaries, pensions, and health care. On Wednesday, they will attempt to bring the economy to a halt with a general strike and demonstrations in Athens and Thessaloniki. Meanwhile, Germany and other countries are wondering how Greece can possibly “reform” if the government can’t agree on the reforms to inflict on its people, and if the people aren’t willing to suffer them.
To his French compatriots, Ayrault defended the Fiscal Union treaty, which, after having been silenced to death, has come under blistering attack from the far right and the far left ahead of the parliamentary debate. They’re clamoring for a referendum, something the government wants to avoid at all costs—the people might well kill it, as they’d killed the European Constitution in the referendum of 2005 [read.... A French Rebellion Against Unelected Bureaucrats: “European Coup D’Etat And Rape Of Democracy”].
“This treaty doesn’t damage the budgetary sovereignty of parliament,” he said. “There is no transfer of sovereignty.” THE issue with that treaty. Even the German Constitutional Court acknowledged that it transferred sovereignty to the European Union. “There must be much more,” Ayrault told his listeners. “The reorientation of Europe” would continue, he said. “Europe is a combat.”
Indeed. A melee broke out in Madrid on Tuesday between protesters trying to occupy Parliament and riot police with batons. In Barcelona, Artur Mas, President of the Catalan government, announced that he’d hold early election on November 25 to initiate Catalonia’s path to “self-determination.” Another blow to the central government, which strongly opposes the early elections and categorically opposes any form of independence by Catalonia. Political turmoil just when Spain is teetering near the financial abyss [read.... Catalonia Cries for Independence, Spain Might Break Apart, And Its Military Threatens To “Crush” The “Vultures”].
The same day, ECB President Mario Draghi headed to Berlin for a charm offensive. His meeting with Chancellor Angela Merkel focused on “the economic and monetary union” and on preparations for the next EU summit in October, the 22nd such summit to solve the debt crisis once and for all. Then at the Conference of German Industry, he defended his plan to purchase “unlimited” amounts of government bonds from countries like Spain and Italy. There was really no alternative to his program, he said.
Alas, rumors began swirling around that legal experts at the Bundesbank have been vivisecting every syllable of the EU treaties that govern the ECB to determine the amount and duration beyond which these purchases might violate the treaties. Apparently, the Bundesbank, which has vigorously opposed Draghi’s plan, is preparing for a complaint before the European Court of Justice.
Still, Draghi patted himself on the back. “The Eurozone makes progress, investors acknowledge it,” he told about 1,000 managers. The ECB had succeeded in rebuilding confidence, he said.
Yet, confidence is in short supply among the very managers he was talking to. The Ifo Business Climate Index fell for the fifth month in a row. Particularly hard hit were expectations for the next six months which dropped to a level not seen since mid-2009, when the Federal Republic was emerging from the worst GDP collapse in its history.
Part of the problem: German industry has been highly skeptical of the bond-buying program, declared Hans-Peter Keitel, President of the Association of German Industry (BDI). He warned against relying on the ECB to deal with the debt crisis—thus fully backing Bundesbank President Jens Weidmann. Politicians should use the ESM bailout fund and structural reforms, he said, though the ECB’s printing press would be the “seemingly more comfortable path.”
So, to use the words of the French Prime Minster Ayrault, what are the “responsibilities” of the “European leaders?” Bailing out banks. Particularly German and French banks whose basements are full of decomposing paper from periphery countries. And bailing out investors of all stripes. Certainly, no one has yet bailed out the Greeks themselves, those who’ve lost their jobs or had their salaries cut. They don’t figure into the equation when politicians and unelected bureaucrats plot their next moves.
Jan Bennink, a columnist and self-described anti-EU populist, muses: “guys like me, who make films, sing songs, and publish stuff, suddenly have a lot to worry about from those grey mice in Brussels with their newspeak and absolute power.” And he wonders, “Is there anything more frightening than bureaucrats with a dream?” For his fantastic and troubling article, read.... The New Great Dictators Are Gaining Momentum In Europe.
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