Bailout for Spain & Italy is a Prelude to ‘German Empire’

Topher Morrison
PurpleSerf.com

The London Telegraph’s Bruno Waterfield breathlessly reported as many other news outlets had that “On Thursday night, Italy and Spain plunged an EU summit into disarray by threatening to block “everything” unless Germany and other eurozone countries backed their demands for help.

 

How much “disarray” there in fact was is debatable.  Whether the “threat” to “block ‘everything’” had any real teeth or motivation is similarly – dubious.  The cynicism is due to the fact that in Europe all boats rise and fall together.  The German economy relies heavily on exports of which 60% comes from the Eurozone, conversely the Eurozone relies on a growing and healthy consumer base in Germany to buy their exports.

While German Chancellor Angela Merkel and her finance minister Wolfgang Scheauble have balked at mutualization of debt across the eurozone they have signaled it could become more palatable if stricter controls and robust accountability were imposed on individual countries’ spending and borrowing.  Who will decide those controls and regulations will undoubtedly be heavily influenced by Europe’s largest and most healthy economy why any centralization of power may lead to a new “German Empire”.

Motivating factors, however, have seemingly come into play and begun to melt German resistance to common borrowing and other similar proposals and may even lead Germany to rethink their own constitution, which precludes them from such activities.  Fox News reports many analysts:

“…think a downturn would force more Germans to recognize how much they depend on other European nations to buy their goods and support the German economy. They could become more willing to jointly accept the risks of backing weaker countries’ debts.”

Indeed as German business optimism fell in June due to a slowing in manufacturing, at the heart of their export led growth, look for more capitulation like the agreement reached on Friday to save Italy and Spain.

According to the Telegraph:

"Under the deal [reached at the EU summit on Friday], Spanish banks will be recapitalised directly by allowing a €100 billion EU bailout to transferred off Spain’s balance sheet after the European Central Bank takes over as the single currency’s banking supervisor at the end of the year."

The decision detailed in a seven-page document by the “Gang of Four” EU presidents aims at putting the Eurpoean Central Bank (ECB) at the center of a “effective single supervisory mechanism.”  The summit rationalized the move: “We affirm that it is imperative to break the vicious circle between banks and sovereigns.”  How yielding sweeping controls and expansive powers over to a central bank will address the underlying problem of competition, innovation and growth is not addressed in the document.

Relief for Spain was accompanied by promises to purchase Italian bonds using EU bailout funds in order to reduce Italy’s borrowing costs and to “examine the situation of the Irish financial sector” offering possible relief to Ireland by relieving the government balance sheet debt burden.

 

Herman Van Rompuy, the president of the European Council of EU leaders and one of the Gang of Four who crafted the European Federation document to be formally presented in December, lauded the agreement as an important step “to reassure markets and to get again some stability around the sovereign bonds of our member states.”

He did, however, warn the new aid measures would be reserved for “countries that behave themselves” by abiding by the EU’s fiscal rules and austerity measures, but without sticks so far and bailout after bailout seemingly without end these milquetoast threats have had all the credibility of a spoiling mother.   Considering the clear interdependency in the eurozone and the propensity to kick the can down the road one must wonder what “controls” and “accountability” will be incorporated later this year.  But if the economic conditions worsen, especially for Germany look for more bailouts and “draconian” control measures of which all will color the character of this new economic empire.

Gang of Four’s Plan to Enslave Europeans Under Economic Empire

Topher Morrison

PurpleSerf.com

 

“The euro is a protection shield against the crisis.”

—European Commission President, José Manuel Barroso, 5 February 2010

On Thursday and Friday EU leaders will meet to discuss the future of the Europe.  While some compelling speculations would suggest it is merely the beginning of the end for the Eurozone, arguing that ultimately “the wealthy nations of Europe [will be] unwilling to pay for the poorer ones” it is also important to note the summit may play midwife to the birth of an abomination.  It is, after all, forgivable to allow the rabble a place at the table if they pledge their financial subservience.

Dismantling the German Constitution (again)

On Tuesday the London Guardian obtained a shocking seven-page document drafted by the “gang of four” — a quartet of European presidents: Herman Van Rompuy of the European Council, Mario Draghi of the European Central Bank, José Manuel Barroso of the European commission, and Jean-Claude Juncker of the 17-country Eurogroup.

Within the seven pages there was not one mention of freedom, liberty or law, but no less than 25 times did it mention – “strength,” “strong,” and “stability.”   It should be clear this federation is not meant to free the people of Europe, but to enslave it.

Ian Traynor writing for the Guardian calls it a:

“…Radical plan to turn the 17 countries of the eurozone into a full-fledged political federation within a decade in an attempt to placate the financial markets by demonstrating a political will to save the single currency in the medium-term.”

The plan quickly establishes a new European banking union, giving the European Central Bank (ECB) authority over EU banks, proposes common resolution funds for “winding up bad banks” funded by a banking levy to spare EU taxpayers and a common deposit guarantee for Europe’s savers.  The EU’s new pemanent bailout fund, the European Stablility Mechanism (ESM), would provide a “fiscal backstop” for the proposed federation and recapitalization of troubled banks.

German Chancellor Angela Merkel on the eve of the summit echoed her fierce resistance to “mutualize” this liability across the Eurozone.

“Apart from the fact that instruments like eurobonds, eurobills, debt redemption schemes and much more are not compatible with the constitution in Germany, I consider them wrong and counterproductive.”

The question is then what conditions would need to arise that would force Merkel to undermine her constitution or change it.  As Europe’s leading economy the Germans have a lot to gain were this political federation to come to fruition.  Considering the rebuff is coming from a leader who backed bailouts for many nations in the first place it sounds as if Merkel is merely saving face, thereby avoiding a sticky political situation back in Berlin, but perhaps she’s just dutifully biding her time.

At the weekend Germany’s finance minister Wolfgang Scheauble proposed Germans should vote on a new constitution and argued it should be sooner rather than later.  To be sure, the rest of Europe agrees with billionaire financier George Soros that action needs to be taken immediately to save the union.  When Germany seizes the role it is destined to assume Soros has predicted “a German empire with the periphery as the hinterland” ahead.  In order to do that, however, they'll need to abandon their constitution.  The last time the Germans did so, it didn't work out that well.

Sweeping and Expansive Powers May Grow the Eurozone not Break it Up

While some are anticipating the European Union to crumble under its own weight, this author included, it may not happen now or in the near future if the central planners have their way.  In fact the proposed European federation may even become larger as the “gang of four’s” draft proposes that it should extend beyond the Eurozone.  Rather than spreading the wealth it seems all the One Europe crowd wants to spread the liabilities.

“An integrated financial framework should cover all EU member states, whilst allowing for specific differentiations between euro and non-euro area member states on certain parts of the new framework that are preponderantly linked to the functioning of the monetary union and the stability of the euro area rather than to the single market.”

The proposal further addresses Merkel’s mantra: “no liability without controls.”  As financial, budgetary and economic frameworks come under the dominion of Brussels the powers of the EU are magnified enabling the central authority to dictate and enforce a “robust framework for budgetary discipline” subordinating national decision-making on a wide range of issues previously excluded from the EU’s purview.  Changes in labor markets, taxes, budgetary allocations and civil services, will ultimately be approved by Brussels as well as control Military of the EU which eclipses in active military personnel even the United States.

Words Mean Nothing 

For all of the posturing and nay saying it is prudent to remember the persistent flip flops of the European Union’s leadership.  Here is a series of now ridiculous statements compiled from Open Europe by The Daily Capitalist:

“The Community shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project.”

—Article 104b, Maastricht Treaty, 1992.

“We have a Treaty under which there is no possibility of paying to bailout states in difficulty.”

—German Chancellor, Angela Merkel, 1 March 2010

“[Greek Prime Minister] Papandreou has said that he didn’t want one cent. The German government will not give one cent, anyway”.

—German Economy Minister, Rainer Brüderle, 5 March 2010

Who and what to believe at this point may be a futile exercise, but it is clear the European elite wish to keep markets as “stable” as possible and their dream alive.  To address fundamental issues for the long term at the expense of a few years in agony is out of the question.  Equally as abhorrent to them is abandoning their failed experiment in order to do so.  In the new inquisition of Europe it is heresy to speak of small states – to govern locally not globally.  The fact that Greece should be the first to possibly exit the euro is nothing short of poetic justice; Western civilization owes itself to Greek city states not grand unions.

Perhaps it is something more esoteric passed down from millennia of European struggle.  If in fact this modern monstrosity is achieved, albeit guaranteed to fail, and a European Superstate is constructed.   German, France, Spain, Italy and possibly England in their rotating roles as Presidents of the EU will experience a kaleidoscope of empire their predecessors could not achieve through centuries of military conquest.  Empowering the European people is not discussed in these machinations of ancient pedigree.