The liquidity tsunami that started in September of 2012 in the Marriner Eccles building and continued with the BOJ's own epic QEasing expansion three weeks ago, has so far provided the impetus for Europe to kick the can of its inevitable dissolution for a few more months, yet slowly but surely the market is starting to read through the artificial levels implied by Italian and Spanish bonds, driven by recycled ECB funding via bank and repo conduits and of course Japanese carry cash, and rumblings of a return to crisis conditions are back.
And as always happens, once the crisis talk is back, so is discussion of a fiscal union. Sure enough, earlier today Germany's Angela Merkel once again reminded everyone just what the stakes are in order to achieve a truly stable, and sustainable European union: nothing short of ceding sovereignty to Germany. And with that we are back to square one, because that has always been the trade off - want a unified, fiscally and monetarily, Europe? You can get it: just bow down to Merkel.
From Reuters [6]:
German Chancellor Angela Merkel said on Monday that euro zone members must be prepared to cede control over certain policy domains to European institutions if the bloc is truly to overcome its debt crisis and win back foreign investors.
Speaking at an event hosted by Deutsche Bank in Berlin alongside Polish Prime Minister Donald Tusk, Merkel also defended her approach to the crisis against critics who argue she has put too much emphasis on austerity, saying Europe must find a way to deliver both growth and solid finances.
The comments came two months before European leaders are due to gather in Brussels to discuss moving towards a so-called "fiscal union".
The punchline:
"We seem to find common solutions when we are staring over the abyss," Merkel said. "But as soon as the pressure eases, people say they want to go their own way.
"We need to be ready to accept that Europe has the last word in certain areas. Otherwise we won't be able to continue to build Europe," she added.
Two conclusions here: Europe will be "staring over the abyss" very soon once again, and where Merkel says "Europe" she means Germany.
This is confirmed by the immediate denial of precisely this, adding "it would be "dangerous" if other countries in Europe felt Germany was imposing its own economic model across the entire bloc."
Oh, ok then.
So just what is Germany's vision for "Europe":
"We don't always need to give up national practices but we need to be compatible," Merkel said. "It is chaos right now."
"We need to be prepared to break with the past in order to leap forward. I'm ready to do this," she said.
So... just give up national practices sometimes. And yes, Merkel is of course ready to head the asset-stripmined continent. The question is who else in Europe is willing to hand over their liberties to the next iteration of the German Reich?