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Guest Post: The Toothless 'Euro' Tiger And The Issue Of Fiscal Compliance
Submitted by Pater Tenebrarum of Acting-Man blog,
A topic we have frequently discussed in this pages has now made it into the mainstream press: namely the question in what way the new 'fiscal compact' is actually different from the Maastricht treaty when it comes to enforcing compliance. It turns out, there really isn't any difference, and it is for the very same reasons that stood in the way of countries respecting the Maastrich treaty's limits.
Der Spiegel reports:
„The EU plans to enforce its rules by imposing tough penalties in the future. But experience suggests it won't be able to gets its way against major EU countries. Even the much-vaunted fiscal pact pushed through by Chancellor Angela Merkel to underpin the euro is at risk of being watered down. When it comes to publicly urging greater integration, most European leaders aren't to be outdone.
"We need more Europe, not less," says German Chancellor Angela Merkel. "We don't need less Europe, but rather more intelligent integration," contends Luxembourg Prime Minister Jean-Claude Juncker. And French President François Hollande says: "We realize that the euro zone must have a common economic policy."
Herman Van Rompuy appears to take these affirmations literally. At next week's European Union summit, the EU Council President intends to present a bold concept to fundamentally restructure the monetary union. According to this proposal, the European Commission, the EU's executive, would gain the right not only to recommend amendments to national draft budgets, but also to enforce them. If a government resists, the Brussels-based institution would have the power to impose fines.
In many European capitals, though, Van Rompuy's reform plans are controversial. Indeed, many politicians have been put off by the numerous rules and regulations that Brussels has already used to intervene in the economic policies of crisis-stricken countries. Until now, the threat of EU sanctions has mainly been confined to smaller member states.
For instance, early this year the Commission threatened to suspend subsidies for Hungary. Shortly thereafter, the nationalist Hungarian prime minister, Viktor Orbán, gave in to Brussels' demands. After all, 97 percent of all public investment in his country is financed to a significant degree by the EU.
By contrast, large countries such as Spain, Italy and France have so far had little to fear. Olli Rehn, the European commissioner for economic and monetary affairs in Brussels, knows better than to antagonize certain countries by imposing sanctions.“
And that is precisely the reason why the Maastricht treaty failed so spectacularly as well. The fforst euro area member countries that failed to adhere to the treaty's limits were Germany and France when the early 2000d's contraction diminished tax revenues and invited a round of Keynesian 'stimulus' spending. In theory, they would have been eligible for penalties under the treaty. In practice, no penalties were imposed. They thereby lost the right to complain about treaty violations by others, and accordingly remained silent when they began to appear. This only changed when the sovereign debt problem morphed into an outright crisis. However, even now, neither Germany nor France have any moral standing on the issue: their debt-to-GDP ratios are approximately 50% above the limit. They are of course not among the nations requiring bailouts, as their debt has received the 'safe haven' treatment by desperate market participants. The fact remains though that they are so far away from the limits imposed by Maastricht and the new 'fiscal compact' that it is downright comical that they preach austerity for everyone else.
The new 'compact' won't materially alter this situation, no matter what Herman von Rumpoy thinks.
As the 'Spiegel' article concludes:
„The latest toy for euro fans is the fiscal pact, which still has not been ratified by all member states. In the future, this would only allow structural deficits of 0.5 percent of GDP. This regulation, which was primarily pushed through by the German chancellor, sounds hard and binding. But European politicians are already working to water it down.
Speaking before the National Assembly in Paris last week, French Prime Minister Jean-Marc Ayrault lobbied for support of the fiscal pact by saying that it would not limit the sovereignty of the French parliament. He then turned the pact's intention on its head: "The treaty imposes no constraints on public spending," he said.
(emphasis added)
Well, not that we have cleared this up... if there are 'no constraints on public spending', then why negotiate another 'fiscal pact' at all? As Philip Bagus has shown, the euro area is a good example for the 'tragedy of the commons'. Evidently that is not going to change until the monetary union simply falls apart.
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Life is like a boomerang,
It comes back with great accuracy.
They are still lobbying for their favorite "pet projects" for Christ's sake. I don't see a lot of leaders in the EU actually making anyone believe they want this fucking union in the first place. They all walk around spouting bullshit, spouting bullshit about "saving the EU", and the first chance they get they try and cut a deal that protects what they have whiile expecting others to take action. This is so fucking transparent as to be maddening. And yet the world stock markets listen to round after round of droning total drivel bullshit.
Who the fuck is going to say "enough!", take what they can get and watch the fucking EU spiral down the drain? Somebody, please.
Agreed, so what do you see in California?
45 separate blends of gasoline and people wondering why they can't get from A to B.
A fucking bullet train from Bakersfield to Fresno to facilitate the mandated Okey exchange program.
The central valley going dry so that some fucking minnow can spawn in your drinkign water.
Yada yada yada
You sir, have a voice. Welcome to the never ending catastrophe.
Guess things arent that bad yet. When they are, that minnow will take it on the fucking chin.
www.gutschein-cd.com
life is like a boomerang,
it hits you upside the head
until you smarten up enough
to either catch it or duck
Burma Shave
No one likes a diet, especially when those around them are eating well.
Isn't that just like everything else in life.
The rules are only enforced against the little guy.
"Crouching Tiger, Hidden Debt."
When these fucktards quit handing over control of their countries to a bunch of fucking bankers they may actually have a shot...oh wait...AMERIKA!
The burden of proof has always been on the EZ to show they want "together." The natural tendency is for Unions such as this to drift apart. Yet no one that I can think of has made this defense....that to stay together is always harder than breaking apart. And so the EZ breaks apart. For those who complain here "what's taking so long" the implications for such an Event are ENORMOUS.
Yes, possibly enormous implications, about which people are only guessing, if the euro-zone breaks up
Some assume it can be like Iceland, default, have a few months of panic then bounce back quickly
Other people on ZH write that it could be 10x the post-Lehman meltdown ...
Even people super-critical of the bankster system, like Jim Sinclair, think we could face global near-Armageddon because of hundreds of trillions nominal in derivatives, banking contagion etc. ... suggesting we are more or less doomed now to a slow ugly drama already near-unstoppable
ZH posters and commenters often 'assume' it won't be calamitous ... And it's a typical bankster scam to say 'everything will blow up if we don't keep this together'
But it seems everyone is only making a guess or assumption what will happen if Spain, Greece or Italy pulls the plug on this damned euro
For sure, tho, we need to stop impoverishing low-income workers and pensioners in the Mediterranean, to make them pay for bank bailouts ... that is destroying what is left of any moral stature for the EU
I think there would be a market panic, which would bottom out in under a year. Then, it would be the banksters who would be fucked. They'd either lose their job or a great deal of their compensation.
Actually, Iceland did not default, all the banks that went bankrupt were privately owned companies and went trough bankruptcy like companies that have been run into the ground usually do.
The Icelandic state did not take over the debts and liabilities of the banks, or any other company or provide any state guarantee. The whole thing was simply allowed to crash as it would have been madness to try to rescue it.
There were some mesures taken to save the banks in the first days by lending emergency loans from the currency reserves and the central bank was buing toxic garbage of the banks, but it soon became clear that the state would not be able to save the banks without destroying itself, so the choice was simple.
The politicians did what they could to ruin the country, but failed.
Unless the EU has its own army and is willing to invade a sovereign state, there is no way it can enforce these budget rules.
I better shut up before I start giving them ideas.
dareconomics.wordpress.com
Real fucking brilliant! If a government resists, the Brussels-based institution would have the power to impose fines.
Because we all know why the "non compliant" Government, is resisting. They're fucking penny less"banana republics", in the first place.
Time to get rid of the last pesky vestiges of democracy from the EU.
"we need more europe, not less." quote of the fucking century. peel away the beer, fancy pastries, etc. and europe is a giant, steaming shitpile. i amforced to spend 6 weeks a year there for work, it really is that bad once you get away from the tourist shit and in to "europe."
http://tinyurl.com/8wtyqlw
Nah... sorry, I just don't buy that rumor. I don't see Obama being that foolish to take such ridiculous action, unless he's really intent on handing over the White House keys to Romney even before the election.
Once the Obamanation is re-elected, look out he has nothing to lose.
If Obama gets re-elected I expect his plan to destroy this country will shift to high gear.
Throw the banksters into prison and quit goofing around. It is no longer funny.
The tragedy of the commons? Should be more the tragedy of the lack of commons...
Nice redressing, all in hope to hide that commons or not, the outcome is the same, as driven by 'american' economics.
more anti EUR nonsense