Personally I covered many episodes where I saw this close up, like the European constitution which I covered in the Convention when they drafted it. It was initially supposed to restore civic faith in the Project — and remove the EU from the `nooks and crannies’ of national life — after the rejection of the Euro in Scandinavian states and a whole lot of anti-EU riots. The idea behind this was to bring Europe closer to the people, but in fact it was completely hijacked by the Euro elite. and on the presidium. Those who brought forward proposals saying, well, we don’t think the EU should be doing this, that these matters should be left in the hands of the nation states, they were overruled and treated with contempt. The convention was hijacked and eventually when the document came through, there were referenda as you know all over Europe. It was rejected in France, was rejected by an even bigger majority in the Netherlands.

It should have died then, but instead it was brought back. It was Angela Merkel who brought it back as the Lisbon Treaty, and I have never forgiven her for this. They pushed it through by Executive order. At that point France had a new government and Sarkozy decided for internal political reasons he’d go along with it. They ran it through the Lisbon treaty without a vote, and the one country that had a vote was Ireland, and Ireland said no. So they just told Ireland: you are disqualified, go and vote again, this is intolerable.

They simply ran roughshod over the popular will of Europe. And it is one thing to slip through these treaties without a vote the way they always used to do, but do so after a clear categorical rejection by the people in the referendum, to ignore this then to push it through without a vote is shocking. This is what they did. They pretend it is a different document, but by 99pc of the Lisbon Treaty it is the same damned thing as the European Constitution. And the crucial point is that this treaty creates a much more powerful European Court of Justice; it turns the ECJ into a Supreme Court. It makes huge areas of the EU law justiceable before the EU court.

This has far reaching implications and that is why Britain is withdrawing from all of this, from all the justice and home affairs stuff, we are pulling out of the whole thing. We had an opt-out when the Lisbon treaty came in, precisely because of these dangers. We are now exercising it; we’re getting out of it. Britain is in effect leaving the EU and so, and to get back to your point, I was, I used to be in favour of it, but having followed it very closely, within the belly of the beast, I’ve seen how it works. I just felt that it was endlessly pushing and pushing and pushing, acquiring power without first securing popular support from within the member states, going beyond any sensible distribution of power between Europe and the nation states. I totally opposed this idea of political union. It is a terrible idea. And I know in Germany it is motherhood and apple pie, that everybody is in favour of a political union, but Germans should be careful because it could prove terribly destructive for Germany itself.

Germany has got a very successful democracy; it is a beacon of inspiration, it has got a constitutional court that is the only remaining body defending civil liberties in Europe any more, holding the European Court in check. Nobody questions the authenticity and vibrancy of German’s democracy. It is a tremendous success story, so why would you give it up?

My view is that we should challenge this assumption that a political union in Europe is good; it is not, it is very bad, it’s destructive to the achievements of Germany. Of course, in my own country, in Britain, we have a parliamentary system that goes back centuries. It has worked well and badly, but when it has worked badly we’ve been able to change it. It is not a bad record over time, so why would we give that up?

And then it is an absurd idea — that we need a leap forward to complete a new constitutional structure, that we need a constitutional revolution, and it is also passé, sort of twentieth century this idea that you can’t have medium sized democracies trading with each other in an open cooperative way, you have to have some sort of super state structure, it’s ridiculous.

The tyranny of the EU

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Ambrose Evans-Pritchard, who was born in 1957, is the international business editor of the British newspaper The Telegraph. He was the Telegraph’s Washington bureau chief in the 1990s. In 1997 he wrote a controversial book about the Clinton administration, “The Secret Life of Bill Clinton: The Unreported Stories” (Regnery Publishing). In the same year he left Washington. Until 2004 he served as the Telegraph’s EU correspondent in Brussels. Before joining the Telegraph, he has worked for The Spectator (in Washington under Reagan/Bush I) and The Economist (in Latin America). Mr. Evans-Pritchard attended Malvern College, Trinity College, Cambridge University, and La Sorbonne.

There appears to be an emerging consensus that the euro will survive, especially now that Mario Draghi has apparently grasped the nettle and persuaded his colleagues that the ECB is prepared to initiate unlimited purchases of national government bonds in order to underwrite their solvency.  Of course, as usual
with the ECB, there’s a sting in the tail, the sting being additional “conditionality” (for which one can read more fiscal austerity) as a quid pro quo.  It’s like dealing with Hannibal Lecter.

Greece is the implied fate of anybody who dares to flout the rules.   Maybe the country isn’t washed down with a Chianti and some fava beans, but it’s getting pretty close.  And whilst nobody wants to appear to be the triggerman who finally kills off Greek membership in the currency union, the country is increasingly being placed in an untenable position, which will almost certainly set it up for future failure.

The problem is that the currency union is only as strong as its weakest link. Lopping off the weakest part of the Eurozone is not akin to removing a cancerous lesion from an otherwise healthy body, but more like the puncturing of an important blood vessel, which could well destroy the patient. True, Greece has been historically ridden with corruption and tax evasion (a recent report from the organisation, “Global Financial Integrity” – suggests that the Greek economy lost US$261 billion to crime, corruption, and tax evasion from 2003-2011).

But the country has more recent made strenuous efforts to cut its deficit is by cutting public sector wages and pensions, a step that has exacerbated the size of its public deficits by decreasing incomes and employment. Were Greece to leave the Eurozone, it is almost certain that speculators would move to pick off another member country—Portugal, Italy, or Spain— all of which could face the same metaphoric fate as Hannibal Lecter’s victims. And so it goes.

Of course, the idea at this stage isn’t to rescue Greece. It is to provide an abject lesson to any other country which in the future considers flouting the country’s perverse rules. According to a recent report in the Guardian, the eurozone creditors are now saying the Greek government must tighten the universal neoliberal screws even further by imposing a six day work week and perhaps reducing wages as well, as a condition for the Greeks getting another “bailout.” Of course, unemployment and underemployment in Greece are rising rapidly, so it is hard to see how extending the work week for the already employed can be the kind of “tough love” that will create an increase in the total number of jobs or improve the economy. In the creditor’s eyes, however, that is unimportant; the real problem is Greece’s dysfunctional culture of work and profligacy.

So the neoliberal policy solution for turning around the Greek economy is to improve the culture of work is to introduce a kind of debt peonage by taking the Greeks back to the 19th Century. Arbeit macht frei? And what happens when the six-day workweek and wage reductions do not work, as they inevitably won’t? What comes next? Charles Dickens knew the answer — improve the culture of work by relaxing child labour laws to reduce wages further and/or privatize the Aegean islands, Delphi, and the Acropolis. No problem.

Greece, to be sure, has its share of self-inflicted economic problems, but austerity economics is pushing Greece into a death spiral. Europe is cutting its nose to spite its face as it convert one Eurozone economy after another into a barter state. One already sees that with Spain as well. As the Toronto Globe and Mail’s Eric Reguly has noted, Madrid is being mauled by a double-dip recession, imminent bank bailout, yawning budget deficit and soaring jobless rate:

“But things are even worse than they appear because Spain’s capital flight has quietly gone from bad to dire. Fortunes are fleeing the country as the economy deteriorates and as investors and bank customers worry that Spanish banks will not survive the onslaught. They also fear that the country’ use of the euro is not guaranteed. If you believe the peseta is about to make an inglorious return, you do not want your precious euros sitting in Spanish deposit accounts.”

That’s our old friend, the bank run, which still remains unaddressed. The ECB’s proposed bond buying program may ultimately address the solvency issue because it remains the only currency-issuing institution that can act like the federal governments in Canada and the US. But its means of enforcement is perverse:  it is as if the US threatened Mississippi with expulsion if the state didn’t learn to “leave within its means”, to employ one of the German Chancellor’s favourite “Merkelisms”.

As Bill Mitchell has noted, the likes of Jens Weidmann might be threatening to resign as the BuBa head if the ECB continues to run its Securities Market Program (buying trouble government’s debt on the secondary markets) but he cannot deny the reality that the SMP and other ECB fiscal-type interventions has been the only reason why the euro hasn’t vaporised just yet. One wonders, however, what kind of salvation this presents for those countries which endure the ongoing rigors of austerity.

Do Nothing and think Nein

Political Union must precede economic union, justly and democratically created, not enforced by fiat from Brussels.

Printing fiat Euros won’t solve Europe’s malignant problems.-J.B. Schuettler

ECB President Draghi Reaches for the Bazooka

By Stefan Kaiser in Frankfurt

AFP

A sculpture of the euro symbol stands in front of the European Central Bank headquarters in Frankfurt: The ECB is pulling out the bazooka to save the common currency.

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European Central Bank President Mario Draghi has taken a bold step this week to contain the euro crisis. The ECB is now planning unlimited bond purchases in order to prevent an escalation of the euro’s woes. The step marks a fundamental shift in efforts to save the common currency — and comes with plenty of risks.

No Limits

ECB President Draghi Reaches for the Bazooka

European Central Bank President Mario Draghi has taken a bold step this week to contain the euro crisis. The ECB is now planning unlimited bond purchases in order to prevent an escalation of the euro’s woes. The step marks a fundamental shift in efforts to save the common currency — and comes with plenty of risks.

Further to my previous post on Mr Draghi’s recent undermining of the Office of ECB President, Gavyn Davies of the FT penned the following line: ”It is risky for a central banker to acknowledge that the payments system on which the currency stands may not be fully credible. Mr Draghi could simply have repeated the old line that the operation of the Target 2 system is enough to ensure that the euro can never fall apart. By admitting the reality that the system is no longer 100 per cent credible in the eyes of the market, the ECB president has invited investors to ask whether his proposed interventions are powerful enough to deal with problem he has raised.” And, as I have argued, investors will inevitably come to the conclusion that they are nowhere near powerful enough. Put simply, the policy of having the EFSF-ESM use its severely circumscribed fire power, in conjunction with a limited bond purchasing program by the ECB, to push Spanish and Italian yields down, will fail as miserably as the combined efforts of the EFSF and the ECB failed in 2010/11 to prevent Portugal and Ireland from following Greece into the mire.  Continue reading →

First came the impressive declarations: The ECB will do whatever is necessary to ensure that those who go short on the euro, who bet on its disintegration, will lose. “And, believe me”, he added “it will be enough”. He also, rather significantly, uttered the term ‘convertibility risk’ (code-words for the risk that funds kept in some part of the Eurozone will be forcefully converted to some new, devalued, currency) and pledged to eradicate it. No wonder, the markets responded with considerable enthusiasm.

Then came the moment to put up or forever lose his credibility. Alas, probably under incredible pressure from the Bundesbank, he opted for the latter.
Read the Rest…