It's Wednesday, and today I discuss a recently published analysis that has found that Australian…
Scam merchants come in many forms. We keep getting ‘official’ requests fir bank details from E-mails that wouldn’t pass a primary school spelling or grammar bee. Creeps prey on old people to rip them off in ‘essential’ house repairs that are neither essential or actually repaired once the money changes hands. Fake charity impersonation is another. The sad and lonely regularly get duped on dating and romance WWW sites. Employers often pay below legal wages and conditions. Banksters fake loan documents and push credit onto the ill-prepared and vulnerable. The ratings agencies corruptly provide AAA ratings for money. And it goes on. And then we have the European Commission. This is one hell of a scam agency. They regularly conduct expensive ‘reviews’ or whatever, hosting meetings with fine food and wine for the Euro in-crowd, and swan around Europe between fine hotels on generous expense accounts. Out of all this come ‘grand statements’ full of motherhood statements, such as the 2005 “Priority” statement: A deeper and fairer economic and monetary union. Then we had the 2015 – The Five Presidents’ Report: Completing Europe’s Economic and Monetary Union – which inspired zero confidence that anything was about to change. Reform proposals come out of Europe on a regular basis but none get to grips with the problem – the euro itself! And the latest scam from the European Commission is their self-named roadmap for – Completing Europe’s Economic and Monetary Union – policy package. Scams come in many forms. This is one of them. The really sad part is the Europhile Left think that the latest statement is a mostly a ‘step forward’ and that there is hope. Sorry. One word. Germany. This is Part 1 of a two-part blog analysing the latest ‘proposals’ from the European Commission.
On September 13, 2017, the European Commission President Jean-Claude Juncker delivered his – State of the Union Address 2017 – in Brussels.
All the Europhiles were probably hanging on every word looking for the slightest hint that the Commission might offer some path to reform the dysfunctional structure of the monetary union.
They would have been disappointed although such is the level of delusion that they probably actually think this is a step forward.
There was just more of the same motherhood stuff from Jean-Claude Juncker – “I proposed a positive agenda to help create – as I said last year – a Europe that protects, a Europe that empowers, a Europe that defends.”
None of that corresponds in any meaningful way to the reality. The current European Commission agenda – the ‘austerity-internal devaluation approach’ is almost the opposite.
It doesn’t protect the vulnerable states, communities or individuals.
It takes power away from democratic processes.
It exposes nations to economic chaos rather than insulating them from crisis.
Juncker played on the ridiculous – ‘the sun is shining at present’ so now is the “time to build a more united, a stronger, a more democrative Europe for 2025” line that even the Europhile Left has fallen prey to.
First, I don’t see much sunshine.
10 years on:
1. Essential productive infrastructure has been decimated by austerity and needs substantial fiscal injections – way beyond anything the European Commission would ever countenance – please see – Massive Eurozone infrastructure deficit requires urgent redress.
2. The fact that Greece and Spain have endured youth unemployment rates above 40 per cent since the September-quarter 2009 (Spain) and the March-quarter 2011 (Greece) is one of the most shocking signs of a failed monetary system.
3. Most Eurozone nations have experienced a rise in youth unemployment since 2008. Please read my blog – Europhile Left deluded if it thinks reform process will produce functional outcomes – for more discussion on this point.
4. Rates of poverty have risen substantially across Europe.
5. The median income in many countries (most EMU nations) has fallen sharply since 2008.
6. Juncker claimed that “Unemployment is at a nine year low” but remains above 9 per cent overall and over 20 per cent in Greece and over 15 per cent in Spain. But the really shocking statistics is that broad labour underutilisation (unemployment and underemployment) stands at 18 per cent – nearly 1/5 of the willing labour force who desire work (or more hours) is currently underutilised in the Eurozone.
7. Many banks are still in zombie state and will crash if stress levels rise marginally.
Not a lot of sunlight filtering in to that scenario.
Second, the plan to build “a more united, stronger, and more democrative Europe for 2025” is mostly hot air.
Just the fact that the goal is 2015 – another 8 years – after already a decade of total dysfunction tells you about expectations of change in the Eurozone.
But really, the plan outlined by Juncker was a pathetic response to the problems facing the Eurozone that have been created by its deeply flawed original design and the adjustments they have added to that poor base since 2001.
So it was no big shock to read the latest grand statement from the European Commission issued on December 6, 2017 – Completing Europe’s Economic and Monetary Union – policy package.
There is a repetitive trail from the 2015 Five Presidents’ Report – through to the so-called ‘reflection papers’ in early 2017 – Deepening of the Economic and Monetary Union and the Future of EU Finances.
Talk a lot. Do not much. And what you do is not much also.
There is always a lot of superficiality about the European Commission – paint. But the walls are rotten and they sit on rotten foundations.
There is no hint that the foundations will be ‘reformed’ any time soon. That is the reality. Get used to it.
When the French (foolishly) rejected Jean-Luc Mélenchon in favour of the pretender, Emmanuel Macron there was renewed hype about how things would now change in Europe.
He would push the monetary union into new territory – a federal fiscal capacity, a federal finance minister.
Well he soon got his orders, didn’t he?
He joins his predecessors Nicolas Sarkoyz and François Hollande who only had to wait for Germany’s response before they abandoned their reform agendas and toed the line.
Please read my blog – France has received its orders from the masters – for more discussion on this point.
The German election impasse has, of course, meant that Macron is now starting to sound like he holds the cards. For the moment, Angela Merkel is not looking dominant but you just have to see the statements being made behind the scenes by Acting German Finance Ministers or the German FDP representatives in the European Parliament to realise not a lot has nor is going to change.
A recent report (September 26, 2017) – After German election, France’s Macron paints sweeping vision for Europe – quoted a spokesperson for the German Free Democrats (FDP) as opposing even the creation of the ESM bailout fund.
You don’t strengthen Europe with new pots of money … The problem in Europe is not a lack of public funds, but the lack of reform. A euro zone budget would set exactly the wrong incentives.
So cancel that plan!
Statements by the current acting Minister of Finance, Peter Altmaier were hardly any more encouraging.
Angela Merkel may no longer hold all the cards in Germany as she did when she summarily dismissed the ideas of Macron’s predecessors.
But she still holds power and her possible coalition partners are clearly not enamoured with the plans of Macron. I dismiss the mad statements of the SPD’s Martin Shulz last week about a ‘United States of Europe’. That was just the posturing of a delusional failed leader.
While a ‘grand’ or ‘loose’ coalition between the CDU and the SPD is still highly likely in Germany, the conservatives didn’t take long to dismiss the ‘US of E’ idea.
The acting Minister of Finance, Peter Altmaier was quoted in the German press as saying that Schulz’s idea was “unrealistich” (no translation required) (Source):
Dieser Vorschlag hat mich genauso überrascht wie sicherlich auch viele Sozialdemokraten.
(The proposal surprised me as well as many of Schulz’s Social Democrats).
Die Diskussion, ob Europa ein Bundesstaat, ein Staatenbund oder Vereinigte Staaten sein sollte, ist eine für Wissenschaftler und Journalisten – nicht für die deutsche Außenpolitik.
(The discussion of whether Europe should be a federal state, a confederation or a United States is one for the academics and journalists – not a topic for German foreign policy).
He said the proposal would just transfer more power to Brussels, something that could not get any majority support across the Member States (“Dafür wird es in vielen EU-Staaten keine Mehrheiten geben.”).
More pointed was the statement from the Bavarian Christian Social Union (CSU), which partners with Merkel’s CDU (that covers the conservative voice in the remaining fifteen German states).
Wir sind begeisterte Europäer, wir wollen ein funktionsfähiges Europa, aber wir möchten nicht den Superstaat Europa haben, in dem am Ende Deutschland eine Verwaltungseinheit der Brüsseler Kommission wäre.
(We are enthusiastic Europeans, we want a functioning Europe, but we do not want to have European superstate, where in the end Germany would be an administrative unit of the Brussels Commission).
Bild published the results of a Emnid Poll (taken on December 6, 2017) where German respondents were asked: “What you think of the proposal to rebuild the European Union into the United States of Europe by 2025?”
– 48 per cent opposed.
– 22 per cent unsure or did not answer.
– 30 per cent supported the idea.
That is not a groundswell in Germany for any major shifts in structure of the European Union or the monetary union.
And that was all going on as the European Commission released its new “roadmap” for reforming the EMU.
The ‘roadmap’ has five components:
1. “A proposal to establish a European Monetary Fund”.
2. “A proposal to integrate the Treaty on Stability, Coordination and Governance into the EU legal framework”.
3. “A Communication on new budgetary instruments for a stable euro area within the Union framework”.
4. “A proposal to strengthen the Structural Reform Support Programme and a proposal to mobilise EU funds in support of national reforms”.
5. “A Communication on a European Minister of Economy and Finance”.
Which in effect mean there are four areas of possible reform being entertained.
1. The European Monetary Fund.
2. Making the Fiscal Compact EU Law via Treaty integration.
3. A Eurozone ‘budget’.
4. The European Minister of Finance.
Nothing will be advanced until the European Council meeting in June 2018. That is the way the snail-like European dialogue proceeds.
They are in no hurry as another cohort of unemployed teenagers enter adult life without ever having worked.
Two of these ‘reforms’ are nothing of the sort – at present they are just ‘Communications’ – a vague statement that something ‘might be’ discussed or ‘could be’ agreed at a sequence of well-catered for future talk fests.
The European Finance Minister
The Macron motivated “European Minister of Economy and Finance” proposal would see a EU Commissioner (“possibly a Vice-President) merged with the “President of the Eurogroup”.
This is interesting because the informal Eurogroup, which is comprised of the 19 Finance Ministers in the Eurozone, is a creature of the European Council and meets the day before the Council meets.
While it was legally embodied in Protocol 14 of the Treaty of Lisbon on December 2009 it operates with minimal oversight, despite having vast discretionary power to set Eurozone economic policy.
It is an exemplar of the way in which the evolution of the Eurozone has denied democratic accountability to the citizens of 19 Member States.
This Euobserver article (May 6, 2015) – The rise of the untransparent ‘Eurogroup’ – provides support for that view:
The Eurogroup has emerged as a key body in the EU’s evolving economic governance, playing a major role in the current dispute with Greece over further bailout money, yet it is democratically accountable to no one …
… the Eurogroup president, is “not obliged” to appear in front of any parliamentary body nor does he have to worry about any “consequences” if the Eurogroup makes a bad decision.
In the Transparency International EU article (April 6, 2017) – No matter what happens to Dijsselbloem the Eurogroup needs an overhaul – the issue of conflict of interest between the President of the Eurogroup acting according to a charter to advance the interests of his/her particular Member State opposed to seeing decisions made that advance the interests of the Eurozone as a whole is raised.
Further, the President is not accountable in any way to the European Parliament, which though a weak expression of democracy in Europe, is the only broadly elected body at the European level.
So the creation of a European Minister of Economy and Finance would appear to overcome some of these issues. But then it would pit the European Council against the European Commission, and history tells us that the two key institutions of the European Union have come into legal conflict in the past over enforcement of Treaty Law.
Further, and I discuss this in Part 2 tomorrow, the President of the Eurogroup is the chair of the European Stability Mechanism Board of Governors, which “is the highest decision-making body of the ESM”.
At present, the ESM is what is known as an intergovernmental institution – which means it is not embodied in European Union law (the Treaties) but was an agreement between the 19 Member States to absorb the European Financial Stability Fund (EFSF) into a more permanent bailout fund.
This means it is not under the direct control of the European Commission. And as control freaks that irks them.
So the suggestion to (possibly) create this position in this guise is a sign that the European Commission wants control of the proposed EMF (see in Part 2 tomorrow).
The other interesting aspect of the proposal is the language used – we read that the new role “could be combined”; “would operate”; “could be pursued”; and “could be established” – but as purveyors of the English language know – this is all non-concrete conjecture.
There is no detail as to what the Minister would actually do or who he/she would be responsible to other than to the European Commission.
The reality is that this ‘proposal’ is just a float to satisfy Macron, when the reality is that Germany will never let that happen unless they control it.
The Fiscal Integration Communication
The European Commission’s other ‘Communication’ was about the creation of “new budgetary instruments for a stable euro area within the Union framework”.
The word ‘reform’ is liberally spread throughout the Commission’s description of this proposal but you would be hard put to call anything they list under this heading a ‘reform’.
We know that the Commission has already eschewed the creation of a federal fiscal capacity, the only real reform that would give the Eurozone any hope of surviving a crisis intact – without mass unemployment and rising poverty.
Jean-Claude Juncker made it absolutely clear in his State of the Union speech (see citation above) that:
We do not need a budget for the euro area but a strong euro area budget line within the EU budget.
Once again, Commission control motivations are at the centre of the maneuvering.
Apparently, this “budget line” will be to “support structural reforms”, be a “dedicated convergence facility of Member States on their way to joining the euro”; a “backstop for the Banking Union”; and a “stabilisation function … to maintain investment levels in the event of large asymmetric shocks”.
That is a lot of ‘budget line’ responsibility.
This might become a reality in the “post-2020 Multiannual Financial Framework”, in other words, not any time soon.
The idea is that Member States will be offered financial incentives to accelerate so-called ‘structural reforms’ – which effectively means further internal devaluation initiatives in the unified race-to-the-bottom.
When the European Commission talks about convergence they are really talking about this race – convergence on miserable conditions for workers, pension cuts, precarious work, and the suppression of domestic demand in favour of ‘exports’.
Not a pretty picture. And, one that will fail given the social instability it is already creating.
The on-going ‘structural adjustment to the lowest common denominator internal devaluation’ model that the European Commission is pursuing is never going to deliver sustained prosperity and will eventually undermine the whole European Project.
But there is more craziness about this floated idea.
Proponents of a European-wide unemployment insurance scheme have been rebuffed by the Commission. No way Jose!
Proponents of a European fiscal authority to render a true federation have been rebuffed. That would be too constructive for the Commission to consider – after all it would challenge their austerity bias.
In the official communication (December 6, 2017) – Communication on new budgetary instruments for a stable euro area within the Union framework – COM(2017) 822 – we read that the stabilisation function would be:
1. “Neutral over the medium-term and not lead to permanent transfers between Member States” – so they do not propose creating a federation at all.
2. “… there would be strict, pre-defined eligibility criteria based on sound macroeconomic policies in order to access the stabilisation function” – so just like the bailout funds, if you haven’t played the ‘internal devaluation scorch the earth’ game there will be no funds.
3. “should allow for overall net payments of at least 1% of Gross Domestic Product”
Emmanuel Macron had previously argued that the stabilisation function should warrant a Eurozone ‘budget’ allocation of several points of a Member State’s GDP.
But, the European Commission Budget Commissioner Günther Oettinger, put this into perspective at the presentation:
I know that for some member states, doubling or tripling payments into the European budget would never happen.
So, even if this gets off the ground, and Germany, along with Finland and the Netherlands are fiercely opposed to any permanent transfers between Member States nor any significant temporary transfers (which will have to be paid back), the amount the European Commission are suggesting is so trivial that you wonder whether it is a joke.
But even being able to get agreement from Member States to hand over some of their funds to create this stabilisation balance will prove quite a challenge.
Listen to Oeettinger – he was echoing the reality while the Juncker was just providing hubris.
This is no reform worth considering.
Tomorrow I will consider the two ‘concrete’ proposals – to formalise the Fiscal Compact within EU law and the morphing of the ESF into a European Monetary Fund.
Be prepared for more smoke and mirrors.
That is enough for today!
(c) Copyright 2017 William Mitchell. All Rights Reserved.