“Germany offers assistance—yet is demonised by people who swindled their way into the monetary union and have driven it to the edge of the abyss. They are using the fine principle of solidarity as a means for extortion. The EU has no future as such an extortion community.”—Frankfurter Allgemeine Zeitung (Frankfurt), 14 February 2012
News From The People's Movement Éire - People.ie
Wednesday, 22 February 2012
Thought for the day
Tuesday, 21 February 2012
The EU Permanent Austerity Treaty
The Government seems determined to push ahead in the next few months with the ratification of two important treaties: the “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union” and the revised “Treaty on the European Stability Mechanism.”
The two treaties would make member-states of the euro zone into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, sustained liberalisation of markets, and the privatisation of public property.
It would really be more accurate to call the first treaty the EU Permanent Austerity Treaty and the second the Conditional Support Treaty. But whatever they are called, the two treaties represent a seriously dangerous threat, and democrats should be mobilising to resist them.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes,” to put Irish budgets under permanent and detailed euro-zone supervision, to make the existing subordination of Ireland’s interests to those of the “stability of the euro area as a whole” even more systematic and pronounced, to impose conditions of “strict conditionality,” without limit, for ESM “solidarity” financial bail-outs, and to require Ireland to contribute some €11 billion to the ESM fund when it is established later this year.
The European Commission and the European Central Bank are obsessed with “economic governance,” which would require smaller euro-zone states in particular to make themselves permanently amenable to a regime under which Germany and its allies would regularly and permanently vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.
When politicians like Enda Kenny urge us to stomach a particular draconian measure while claiming that it would help us to ultimately “restore economic sovereignty” they conveniently fail to mention that this is the sort of “economic sovereignty” they have in mind. For them, permanent austerity plus the IMF is “national shame”; permanent austerity minus the IMF is “national recovery.” The latter is what is on offer through the EU Permanent Austerity and Conditional Support Treaties.
Of course it is totally irrelevant to this Eurofanatical mindset that the draconian fiscal measures imposed on Greece have only worsened the problems of that country. Also conveniently ignored in this version is that Ireland in the euro zone had to adopt unsuitably low interest rates in the early 2000s, because these suited Germany at the time. In the immortal words of Bertie Ahern, this made our “Celtic Tiger” boom “boomier.” It of course inflated the property bubble.
The former Taoiseach John Bruton and others have contended that the failure of the European Central Bank to supervise adequately the credit policy of the national central banks in relation to the commercial banks in Ireland and various other euro-zone countries was significantly responsible for the emergence of asset bubbles in those countries in the early and middle 2000s, and thereby contributed hugely to the financial crisis they are now in.
And the then head of the European Central Bank, Jean-Claude Trichet, was probably engaging in a variety of “economic governance” when he told Brian Cowen and Brian Lenihan on 29 September 2008, at the time of the criminally irresponsible blanket bank guarantee, that Anglo-Irish Bank must on no account be allowed to go bust and that the foreign creditors and bond-holders must be paid every penny.
When the Irish people ratified the Maastricht Treaty in 1992, setting up economic and monetary union, and when they ratified the Lisbon Treaty, establishing the European Union on a new constitutional basis in 2009, they approved membership of an economic and monetary union whose memberstates would follow rules that would be enforced by a system of Commission surveillance, formal recommendations, and warnings for delinquent states, followed by sanctions in the form of compulsory deposits and fines of an appropriate size in the event of member-states persisting in breaches of these provisions.
The EU member-states adopted the rule regarding 3 per cent and 60 per cent of GDP to ensure that member-states of the euro zone would avoid excessive deficits and consequent borrowing, for that would affect all euro-zone states using the same currency. But the excessive-deficit articles were not enforced once Germany, France and others states broke the excessive-deficit limits in the early 2000s.
Recommendations of measures to repair excessive deficits were made by the Commission to a number of member-states, including Ireland, in the early 2000s, but when in 2003 France and Germany found themselves in violation of the excessive-deficit criteria the Council failed to take any of the other steps set out in the rules to remedy their breaches.
No proposal to impose sanctions for breaking the rules was ever put by the Commission to the Council of Ministers, and no sanctions were adopted against countries violating the rules. As a result, several member-states ran up huge annual government deficits and national public debts that were near to, or in some cases well over, 100 per cent of GDP.
Is debt always a bad thing? Obviously not in the private sector, as corporations regularly borrow money for expenditure they don’t want to meet out of retained earnings, while most households aim to have a long-term mortgage.
Public debt is not a burden passed on from one generation to the next. The stock of public debt is a problem only when its servicing—i.e. the payment of interest—is unaffordable, such as when, in times of recession, growth is nil or negative, or when the interest rates demanded by the financial market are soaring.
The question is, when is the debt sustainable?
Sustainability means keeping the ratio of debt to GDP stable in the longer term. If GDP at the beginning of the year is €1,000 billion and the Government’s total stock of debt is €600 billion, the debt ratio is 60 per cent. The fiscal deficit is the extra borrowing that the Government makes in a year, so it adds to the stock of debt. But although the stock of debt may be rising, as long as GDP is rising proportionately the ratio of debt to GDP can be kept constant, or may even be falling.
The rule is that as long as the real economy is growing by at least as much as the real rate of interest on debt the debt-GDP ratio doesn’t rise. This holds true irrespective of whether the debt ratio is 60 per cent or 600 per cent.
But there’s a catch. In a modern economy the public sector accounts for about half the economy. If a country panics about its debt ratio and cuts back sharply on public-sector spending, this reduces aggregate demand and may lead to stagnation or even recession. When a country stops growing, financial markets decide that its debt ratio may rise and so become more cautious about lending and may demand a higher bond yield, i.e. interest rate.
The gloomy prophecy of growing public indebtedness becomes self-fulfilling. The way out cannot be greater austerity.
What works for a single household or firm doesn’t work for the economy as a whole. A household can tighten its belt by spending less, saving more, and thus “balancing the books”; but an economy cannot. If everybody saves more, national income falls. As no euro-zone country can devalue, to ask each member-state to balance the books by running an export surplus is empirically and logically impossible.
The way out of the “debt trap” is the same as the way out of recession: if the private sector won’t invest, the public sector must become the investor of last resort. It doesn’t matter whether new investment is financed by more government borrowing, quantitative easing, or redistribution (some combination of the three would be optimal). What matters is growth.
Why there must be a referendum
The contracting parties must apply the balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.”
A majority of the Supreme Court in the Crotty case in 1987 (which found that a referendum was necessary to ratify significant changes to EU treaties) held that an organ of the state cannot agree to circumscribe or restrict any unfettered power conferred on it by the Constitution.
In the judgement Mr Justice Walsh said that the freedom to form economic policy was an aspect of the state’s sovereignty. This meant that article 3 (1) would have to be protected by article 29.4 of the Constitution, which ratified the Maastricht Treaty, if it was to be constitutionally valid.
However, article 29 refers to treaties of the European Union, whereas the proposed treaty will only be a treaty agreed between 25 of the 27 member-states, so it will not be covered by article 29.
These rules and policy conditions in turn provide considerable scope for financially hard-pressed member-states to be pressured to take steps against their national interest, including in relation to harmonising corporate taxes. Establishing this permanent enhanced fiscal architecture would be a major step towards an EU fiscal and political union—something that has been recognised in statements by leading EU politicians.
This implies a significant diminution of national state sovereignty, going well beyond the scope of the existing European Union and the monetary union that it embodies, which only the people themselves can agree to.
The absence of limitations on the “strict conditionality” that will mark financial disbursements from the proposed ESM fund—such as might have been set out in an accompanying protocol, for instance—emphasises further the dangers to the state’s interests that could arise from harsh or excessively onerous conditions attaching to financial assistance that might be offered to member-states seeking assistance from the fund.
From PEOPLE’S NEWS
News Digest of the People’s Movement
www.people.ie | post@people.ie
No. 64 18 February 2012
The two treaties would make member-states of the euro zone into regimes of economic austerity, involving deeper and deeper cuts in public expenditure, increases in indirect taxes, reductions in wages, sustained liberalisation of markets, and the privatisation of public property.
It would really be more accurate to call the first treaty the EU Permanent Austerity Treaty and the second the Conditional Support Treaty. But whatever they are called, the two treaties represent a seriously dangerous threat, and democrats should be mobilising to resist them.
The cumulative effect of being bound by both treaties would be an obligation to insert a balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes,” to put Irish budgets under permanent and detailed euro-zone supervision, to make the existing subordination of Ireland’s interests to those of the “stability of the euro area as a whole” even more systematic and pronounced, to impose conditions of “strict conditionality,” without limit, for ESM “solidarity” financial bail-outs, and to require Ireland to contribute some €11 billion to the ESM fund when it is established later this year.
The European Commission and the European Central Bank are obsessed with “economic governance,” which would require smaller euro-zone states in particular to make themselves permanently amenable to a regime under which Germany and its allies would regularly and permanently vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.
When politicians like Enda Kenny urge us to stomach a particular draconian measure while claiming that it would help us to ultimately “restore economic sovereignty” they conveniently fail to mention that this is the sort of “economic sovereignty” they have in mind. For them, permanent austerity plus the IMF is “national shame”; permanent austerity minus the IMF is “national recovery.” The latter is what is on offer through the EU Permanent Austerity and Conditional Support Treaties.
Of course it is totally irrelevant to this Eurofanatical mindset that the draconian fiscal measures imposed on Greece have only worsened the problems of that country. Also conveniently ignored in this version is that Ireland in the euro zone had to adopt unsuitably low interest rates in the early 2000s, because these suited Germany at the time. In the immortal words of Bertie Ahern, this made our “Celtic Tiger” boom “boomier.” It of course inflated the property bubble.
The former Taoiseach John Bruton and others have contended that the failure of the European Central Bank to supervise adequately the credit policy of the national central banks in relation to the commercial banks in Ireland and various other euro-zone countries was significantly responsible for the emergence of asset bubbles in those countries in the early and middle 2000s, and thereby contributed hugely to the financial crisis they are now in.
And the then head of the European Central Bank, Jean-Claude Trichet, was probably engaging in a variety of “economic governance” when he told Brian Cowen and Brian Lenihan on 29 September 2008, at the time of the criminally irresponsible blanket bank guarantee, that Anglo-Irish Bank must on no account be allowed to go bust and that the foreign creditors and bond-holders must be paid every penny.
When the Irish people ratified the Maastricht Treaty in 1992, setting up economic and monetary union, and when they ratified the Lisbon Treaty, establishing the European Union on a new constitutional basis in 2009, they approved membership of an economic and monetary union whose memberstates would follow rules that would be enforced by a system of Commission surveillance, formal recommendations, and warnings for delinquent states, followed by sanctions in the form of compulsory deposits and fines of an appropriate size in the event of member-states persisting in breaches of these provisions.
The EU member-states adopted the rule regarding 3 per cent and 60 per cent of GDP to ensure that member-states of the euro zone would avoid excessive deficits and consequent borrowing, for that would affect all euro-zone states using the same currency. But the excessive-deficit articles were not enforced once Germany, France and others states broke the excessive-deficit limits in the early 2000s.
Recommendations of measures to repair excessive deficits were made by the Commission to a number of member-states, including Ireland, in the early 2000s, but when in 2003 France and Germany found themselves in violation of the excessive-deficit criteria the Council failed to take any of the other steps set out in the rules to remedy their breaches.
No proposal to impose sanctions for breaking the rules was ever put by the Commission to the Council of Ministers, and no sanctions were adopted against countries violating the rules. As a result, several member-states ran up huge annual government deficits and national public debts that were near to, or in some cases well over, 100 per cent of GDP.
Is debt always a bad thing? Obviously not in the private sector, as corporations regularly borrow money for expenditure they don’t want to meet out of retained earnings, while most households aim to have a long-term mortgage.
Public debt is not a burden passed on from one generation to the next. The stock of public debt is a problem only when its servicing—i.e. the payment of interest—is unaffordable, such as when, in times of recession, growth is nil or negative, or when the interest rates demanded by the financial market are soaring.
The question is, when is the debt sustainable?
Sustainability means keeping the ratio of debt to GDP stable in the longer term. If GDP at the beginning of the year is €1,000 billion and the Government’s total stock of debt is €600 billion, the debt ratio is 60 per cent. The fiscal deficit is the extra borrowing that the Government makes in a year, so it adds to the stock of debt. But although the stock of debt may be rising, as long as GDP is rising proportionately the ratio of debt to GDP can be kept constant, or may even be falling.
The rule is that as long as the real economy is growing by at least as much as the real rate of interest on debt the debt-GDP ratio doesn’t rise. This holds true irrespective of whether the debt ratio is 60 per cent or 600 per cent.
But there’s a catch. In a modern economy the public sector accounts for about half the economy. If a country panics about its debt ratio and cuts back sharply on public-sector spending, this reduces aggregate demand and may lead to stagnation or even recession. When a country stops growing, financial markets decide that its debt ratio may rise and so become more cautious about lending and may demand a higher bond yield, i.e. interest rate.
The gloomy prophecy of growing public indebtedness becomes self-fulfilling. The way out cannot be greater austerity.
What works for a single household or firm doesn’t work for the economy as a whole. A household can tighten its belt by spending less, saving more, and thus “balancing the books”; but an economy cannot. If everybody saves more, national income falls. As no euro-zone country can devalue, to ask each member-state to balance the books by running an export surplus is empirically and logically impossible.
The way out of the “debt trap” is the same as the way out of recession: if the private sector won’t invest, the public sector must become the investor of last resort. It doesn’t matter whether new investment is financed by more government borrowing, quantitative easing, or redistribution (some combination of the three would be optimal). What matters is growth.
Why there must be a referendum
The contracting parties must apply the balanced-budget rule “through provisions of binding force and permanent character, preferably constitutional or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.”
A majority of the Supreme Court in the Crotty case in 1987 (which found that a referendum was necessary to ratify significant changes to EU treaties) held that an organ of the state cannot agree to circumscribe or restrict any unfettered power conferred on it by the Constitution.
In the judgement Mr Justice Walsh said that the freedom to form economic policy was an aspect of the state’s sovereignty. This meant that article 3 (1) would have to be protected by article 29.4 of the Constitution, which ratified the Maastricht Treaty, if it was to be constitutionally valid.
However, article 29 refers to treaties of the European Union, whereas the proposed treaty will only be a treaty agreed between 25 of the 27 member-states, so it will not be covered by article 29.
These rules and policy conditions in turn provide considerable scope for financially hard-pressed member-states to be pressured to take steps against their national interest, including in relation to harmonising corporate taxes. Establishing this permanent enhanced fiscal architecture would be a major step towards an EU fiscal and political union—something that has been recognised in statements by leading EU politicians.
This implies a significant diminution of national state sovereignty, going well beyond the scope of the existing European Union and the monetary union that it embodies, which only the people themselves can agree to.
The absence of limitations on the “strict conditionality” that will mark financial disbursements from the proposed ESM fund—such as might have been set out in an accompanying protocol, for instance—emphasises further the dangers to the state’s interests that could arise from harsh or excessively onerous conditions attaching to financial assistance that might be offered to member-states seeking assistance from the fund.
From PEOPLE’S NEWS
News Digest of the People’s Movement
www.people.ie | post@people.ie
No. 64 18 February 2012
Friday, 14 October 2011
Ireland requests protocols in line with second Lisbon Treaty referendum undertakings
It seems that the treaty changes will be implemented under Article 48(2) the self-amending clause.
Thursday, 13 October 2011
Fascinating overview of the financial crisis - An American viewpoint
Fred Magdoff presented a view of the European financial crisis at the Desmond Greaves Summer School in Dublin.
www.irishleftreview.org/2011/09/11/fred-magdoffdesmond-greaves-summer-school-2011/
This podcast is from the web site of Conor McCabe, author of Sins of the Father, his book on the background to the Irish financial crisis.
Conor will deliver the Raymond Crotty Memorial Lecture for 2011 in the Pearse Centre (27 Pearse Street), Dublin, at 2:30 p.m. on Saturday 15 October.
www.irishleftreview.org/2011/09/11/fred-magdoffdesmond-greaves-summer-school-2011/
This podcast is from the web site of Conor McCabe, author of Sins of the Father, his book on the background to the Irish financial crisis.
Conor will deliver the Raymond Crotty Memorial Lecture for 2011 in the Pearse Centre (27 Pearse Street), Dublin, at 2:30 p.m. on Saturday 15 October.
Wednesday, 12 October 2011
Emerging Economies to rescue Europe?
The emerging economies of Brazil, Russia, India, China, and South Africa—the so-called BRICS countries—which hold huge international reserves, are planning to come to the EU’s aid!
The Brazilian minister of finance, Guido Mantega, said that the BRICS states held a meeting on 22 September to discuss the co-ordination of an EU rescue plan. “We met in Washington to decide how to help the European Union to get out of this situation,” he said. The countries are considering substantially boosting their holdings of euro-denominated bonds in their foreign exchange reserves.
The Brazilian minister of finance, Guido Mantega, said that the BRICS states held a meeting on 22 September to discuss the co-ordination of an EU rescue plan. “We met in Washington to decide how to help the European Union to get out of this situation,” he said. The countries are considering substantially boosting their holdings of euro-denominated bonds in their foreign exchange reserves.
Tuesday, 11 October 2011
No cancer drugs for fiscal sinners
The reality of austerity
The European Commission has said that its austerity measures are not to blame for a decision by the pharmaceutical giant Roche to halt delivery of cancer drugs to Greek public hospitals. In a fresh example of how the EU austerity measures are having an acute impact on citizens, the Swiss firm has halted shipments of cancer drugs and other medicines to a number of public hospitals in Greece after years of unpaid debts. The company warned that Italy, Portugal and Spain might be next.
With Greek spending on health care accounting for 10 per cent of GDP, the EU, the IMF and European Central Bank have told the government to cut at least €310 million this year and an additional €1.43 billion in the period 2012–15. In February this year doctors and other health-care workers marched on the Greek parliament in protest over health cuts and scuffled with the police.
Meanwhile the European Commission is keen to wash its hands of the problem. “It’s a commercial decision from a company,” the Commission’s spokesperson on health, Frederic Vincent, said. “We would have to see if the countries make any specific request if this problem is conferred to Spain, Italy, Portugal,” he said.
It’s a question of budget management by the Greek authorities. “Greece has money,” he explained. “The financial assistance package decided one year ago covers the financial needs of the Greek state. Then how this is micro-managed is the full responsibility of the Greek authorities.” He added that the case would be the same if the drugs dry up in Spain, Italy, and Portugal—and presumably Ireland.
The European Commission has said that its austerity measures are not to blame for a decision by the pharmaceutical giant Roche to halt delivery of cancer drugs to Greek public hospitals. In a fresh example of how the EU austerity measures are having an acute impact on citizens, the Swiss firm has halted shipments of cancer drugs and other medicines to a number of public hospitals in Greece after years of unpaid debts. The company warned that Italy, Portugal and Spain might be next.
With Greek spending on health care accounting for 10 per cent of GDP, the EU, the IMF and European Central Bank have told the government to cut at least €310 million this year and an additional €1.43 billion in the period 2012–15. In February this year doctors and other health-care workers marched on the Greek parliament in protest over health cuts and scuffled with the police.
Meanwhile the European Commission is keen to wash its hands of the problem. “It’s a commercial decision from a company,” the Commission’s spokesperson on health, Frederic Vincent, said. “We would have to see if the countries make any specific request if this problem is conferred to Spain, Italy, Portugal,” he said.
It’s a question of budget management by the Greek authorities. “Greece has money,” he explained. “The financial assistance package decided one year ago covers the financial needs of the Greek state. Then how this is micro-managed is the full responsibility of the Greek authorities.” He added that the case would be the same if the drugs dry up in Spain, Italy, and Portugal—and presumably Ireland.
Monday, 10 October 2011
You are entering... tHe EuRo ZoNe...
Seven EU members that joined the European Union between 2004 and 2007 are concerned about an obligation to adopt the euro under the terms of their accession and could stage referendums to change their accession treaties, AFP has reported, quoting diplomatic sources.
Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania said the euro zone they thought they were going to join, a monetary union, may very well end up being a very different union, entailing much closer fiscal, economic and political convergence.
The new EU members that joined during the period 2004–07 are all obliged to adopt the euro under the terms of their accession treaties. Of these, Slovenia, Malta, Cyprus, Slovakia and Estonia have already joined the euro zone. Countries from previous enlargement waves are not obliged to adopt the single currency.
“All seven countries agree to state that a change in the euro zone’s legal status could change the conditions of their adhesion treaties,” which “could force them to stage new referenda” on adopting the euro, said a diplomatic source close to the talks.
Before the euro-zone crisis several new members that have been close to fulfilling the Maastricht criteria for joining the euro zone, including Poland and Bulgaria, had set themselves ambitious plans to speedily join the common EU currency. More recently, several Polish officials have stated that the country has shelved its plans for early accession to the euro zone, until it becomes clear what future should be expected for the common EU currency.
Last April, Hungary indicated that it would seek an opt-out from the euro. More recently the Czech president, the Euro-critical Václav Klaus, said that the EU currency club was a “failure” and that his country should get a permanent opt-out from its obligation to adopt the euro.
Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, Poland and Romania said the euro zone they thought they were going to join, a monetary union, may very well end up being a very different union, entailing much closer fiscal, economic and political convergence.
The new EU members that joined during the period 2004–07 are all obliged to adopt the euro under the terms of their accession treaties. Of these, Slovenia, Malta, Cyprus, Slovakia and Estonia have already joined the euro zone. Countries from previous enlargement waves are not obliged to adopt the single currency.
“All seven countries agree to state that a change in the euro zone’s legal status could change the conditions of their adhesion treaties,” which “could force them to stage new referenda” on adopting the euro, said a diplomatic source close to the talks.
Before the euro-zone crisis several new members that have been close to fulfilling the Maastricht criteria for joining the euro zone, including Poland and Bulgaria, had set themselves ambitious plans to speedily join the common EU currency. More recently, several Polish officials have stated that the country has shelved its plans for early accession to the euro zone, until it becomes clear what future should be expected for the common EU currency.
Last April, Hungary indicated that it would seek an opt-out from the euro. More recently the Czech president, the Euro-critical Václav Klaus, said that the EU currency club was a “failure” and that his country should get a permanent opt-out from its obligation to adopt the euro.
Sunday, 9 October 2011
Croatia finalises accession negotiation
Eight years after Croatia’s initial application to join the European Union, member-states have agreed on the wording of the 350-page treaty spelling out the legal obligations and rights stemming from membership.
Croatia will become the EU’s twenty-eighth member on 1 July 2013, provided ratification is completed in all member-states by then.
Unlike Bulgaria and Romania, which joined the bloc in 2007 but were kept under a ”safeguard clause” that could have delayed membership by one year, EU states “have full confidence in the Croatian authorities” in tackling corruption and organised crime and in upholding human rights, a source in the Polish EU presidency said.
But with general elections scheduled for 4 December, days before the official signing of the accession treaty, Croatian politics is already heating up, with the prime minister, Jadranka Kosor, in facesaving mode after her party’s accountant was arrested for corruption.
“This is an orchestrated campaign to minimise the [ruling party] HDZ’s chances in the upcoming election,” she said in a press conference. “They want to create the impression that we’re all the same, that we’re all dirty, that there are factions fighting amongst themselves in the HDZ.”
Croatia will become the EU’s twenty-eighth member on 1 July 2013, provided ratification is completed in all member-states by then.
Unlike Bulgaria and Romania, which joined the bloc in 2007 but were kept under a ”safeguard clause” that could have delayed membership by one year, EU states “have full confidence in the Croatian authorities” in tackling corruption and organised crime and in upholding human rights, a source in the Polish EU presidency said.
But with general elections scheduled for 4 December, days before the official signing of the accession treaty, Croatian politics is already heating up, with the prime minister, Jadranka Kosor, in facesaving mode after her party’s accountant was arrested for corruption.
“This is an orchestrated campaign to minimise the [ruling party] HDZ’s chances in the upcoming election,” she said in a press conference. “They want to create the impression that we’re all the same, that we’re all dirty, that there are factions fighting amongst themselves in the HDZ.”
Saturday, 8 October 2011
Indebted states should be made “wards” of the Commission or give up the euro
Not from Holland with Love
The Dutch government has proposed that highly indebted states should be put into “guardianship,” with spending decisions seized from their elected governments and placed under the direct control of an unelected European commissioner.
If a state is unwilling to surrender its sovereignty in this way, then it would be forced to exit the euro.
The commissioner would be given a “ladder of intervention,” under which the level of control of the state would be steadily ratcheted up and applied to this “ward” of the EU executive.
The first rung of the ladder would involve an outside auditor making adjustments to spending to bring down the level of the deficit. If this level of intervention is insufficient, binding measures would be imposed, or the commissioner could order a country to cut spending or to raise taxes.
The last rung of the ladder would see a country placed under “guardianship.” The auditor would then draft a budget for the country before sending it to the national parliament for approval. Such states, described in the paper as “notorious sinners,” would also lose their voting rights in the EU, and the delivery of European structural funds would be dependent on compliance with the orders of the commissioner.
The Dutch government has proposed that highly indebted states should be put into “guardianship,” with spending decisions seized from their elected governments and placed under the direct control of an unelected European commissioner.
If a state is unwilling to surrender its sovereignty in this way, then it would be forced to exit the euro.
“If a country repeatedly overspends in breach of EU stability pact rules, this commission overseer would be able to intervene directly in the running of the country, in a similar way to how a court intervenes in the running of a bankrupt firm put into receivership. We propose to take a great new step forward by forging effective rules to be strictly enforced by an especially appointed commissioner.
This is how we must safeguard the heath and viability of the euro zone and all its members for now and in the future.”
The commissioner would be given a “ladder of intervention,” under which the level of control of the state would be steadily ratcheted up and applied to this “ward” of the EU executive.
The first rung of the ladder would involve an outside auditor making adjustments to spending to bring down the level of the deficit. If this level of intervention is insufficient, binding measures would be imposed, or the commissioner could order a country to cut spending or to raise taxes.
The last rung of the ladder would see a country placed under “guardianship.” The auditor would then draft a budget for the country before sending it to the national parliament for approval. Such states, described in the paper as “notorious sinners,” would also lose their voting rights in the EU, and the delivery of European structural funds would be dependent on compliance with the orders of the commissioner.
Friday, 7 October 2011
From Russia With Love
Cyprus, a member of the euro zone, is seeking external aid in propping up its finances. But, unlike the EU and IMF bail-out packages, its loan is to come from Russia, with “no strings attached.”
The minister of finance, Aleksei Kudrin, confirmed that Russia is at an advanced stage in negotiating the rescue package with Cyprus. “Italy has not approached us,” he said -
The largest-circulation Cypriot newspaper, O Fileléftheros, reported earlier that Russia will give Cyprus a €2½ billion loan at an interest rate of 4½ per cent. A €1 billion tranche is to be paid in December, and two other payments are to be made by March 2012. Quoted in the Financial Times on Wednesday, the Cypriot minister of finance, Kíkis Kazamías, said the money will be used to plug the country’s budget deficit and to help refinance maturing debt, €1 billion of which is due for repayment in early 2012.
He said that the deal is “a friendly agreement, with no strings attached,” in contrast to the onerous austerity and reform measures demanded by the EU and IMF from other euro-zone bail-out states.
The minister of finance, Aleksei Kudrin, confirmed that Russia is at an advanced stage in negotiating the rescue package with Cyprus. “Italy has not approached us,” he said -
“Eurozone countries have not approached us in general . . . At the moment we are holding talks only with Cyprus. We have good progress [in the] talks. They will conclude within one month.”
The largest-circulation Cypriot newspaper, O Fileléftheros, reported earlier that Russia will give Cyprus a €2½ billion loan at an interest rate of 4½ per cent. A €1 billion tranche is to be paid in December, and two other payments are to be made by March 2012. Quoted in the Financial Times on Wednesday, the Cypriot minister of finance, Kíkis Kazamías, said the money will be used to plug the country’s budget deficit and to help refinance maturing debt, €1 billion of which is due for repayment in early 2012.
He said that the deal is “a friendly agreement, with no strings attached,” in contrast to the onerous austerity and reform measures demanded by the EU and IMF from other euro-zone bail-out states.
Thursday, 6 October 2011
Plans for an EU military command centre
Five of the biggest EU countries have tasked the EU high representative for foreign affairs and security policy, Catherine Ashton, with making plans for an EU military command centre, despite British objections (and Irish silence).
Foreign ministers of the group—France, Germany, Italy, Poland, and Spain—urged Ashton to
They added:
“Permanent structured co-operation” is an EU treaty option that allows nine or more member-states to press ahead on a project without the others, even though it would use the structures of the EU institutions. The initiative is a long-cherished one by Poland and France, which wants to go beyond EU battle groups—temporary teams from two or three EU countries ready to be sent to hotspots at short notice—towards an EU army.
The United States has said in the past that it wants the EU to do more in managing world crises. But the group of five risk angering Britain, the EU’s biggest military spender, which forcefully criticised the idea.
Foreign ministers of the group—France, Germany, Italy, Poland, and Spain—urged Ashton to
“examine all institutional and legal options available to member states, including permanent structured co-operation, to develop critical CSDP [common security and defence policy] capabilities, notably a permanent planning and conduct capability.”
They added:
“We would appreciate [it] if you present conclusions of the work . . . with a view to achieving tangible results by the end of the year.”
“Permanent structured co-operation” is an EU treaty option that allows nine or more member-states to press ahead on a project without the others, even though it would use the structures of the EU institutions. The initiative is a long-cherished one by Poland and France, which wants to go beyond EU battle groups—temporary teams from two or three EU countries ready to be sent to hotspots at short notice—towards an EU army.
The United States has said in the past that it wants the EU to do more in managing world crises. But the group of five risk angering Britain, the EU’s biggest military spender, which forcefully criticised the idea.
Wednesday, 5 October 2011
Ireland has undergone first “audit” of national debt—results “truly frightening
An idea borrowed from developing countries and recently used to good effect by the Ecuadorian government has now been applied to the Irish debt.
Ireland has undergone its first “audit” of national debt—the results of which have been called “truly frightening.” The report, An Audit of Irish Debt, was commissioned by Afri, the Debt and Development Coalition and the trade union Unite and carried out by a team from the University of Limerick.
www.debtireland.org/resources/publications/an-audit-ofirish-debt/
The report calculates a potential national debt of €371.1 billion. This figure includes a “conservative” estimate of the state’s contingent liabilities: money for which the state is on the hook in the event of a fresh collapse in the banking system. The €371.1 billion breaks down into €91.8 billion in direct Government debt and €279.3 billion in bank debt backed by the state.
Dr Sheila Killian of the University of Limerick, who led the research, said the audit “seeks to quantify and explain Ireland’s sovereign debt, both real and contingent, for which the Irish people have become responsible”.
Frankly weird
The report concludes that the “constructive ambiguity” of the European Central Bank’s policy on bank bail-outs is “certainly not a concept consistent with transparency,” and it addresses what Dr Killian describes as “quite intricate layers of anonymity” in relation to bond-holders. The long-standing anonymity of bond-holders “has some justification” in normal circumstances; however, in times when bond-holders have influence on policy it is “frankly weird,” she said.
The €279.3 billion in bank debt includes €111 billion in guaranteed deposits and bonds under the Eligible Liabilities Guarantee Scheme, as well as €74 billion under the Deposit Guarantee Scheme. It also includes the €30.9 billion in promissory notes issued to Anglo-Irish Bank, Irish Nationwide, and the EBS, outstanding NAMA bonds with a nominal value of almost €29 billion, and a net increase of €34.6 billion in the national debt caused by emergency liquidity assistance provided by the Central Bank. The figures contain the caveat that a large part of the €91.8 billion raised by the Government was due to the banking crisis.
A crucial citizen's tool
Explaining the genesis of the audit, Neasa Ní Chasaide of the Debt and Development Coalition said that audits were “a crucial citizens’ tool” that had been used in campaigns against unjust debts in developing countries. In November 2008 Ecuador became the first country to undertake an examination of the legitimacy and structure of its foreign debt. An independent debt audit commissioned by the government of Ecuador documented hundreds of allegations of irregularity, illegality and illegitimacy in contracts of debt to predatory international lenders.
The loans, according to the report, violated Ecuador’s domestic laws, the regulations of the US Securities and Exchange Commission, and general principles of international law. Ecuador’s use of legitimacy as a legal argument for defaulting set a major precedent; indeed, the formation of a debt auditing commission sets a precedent in identifying illegitimate debt.
Subsequently, in June 2009 Ecuador announced that it had reached an agreement with 91 per cent of creditors to buy back its debt for 35 cents in the dollar.
If only!
Ireland has undergone its first “audit” of national debt—the results of which have been called “truly frightening.” The report, An Audit of Irish Debt, was commissioned by Afri, the Debt and Development Coalition and the trade union Unite and carried out by a team from the University of Limerick.
www.debtireland.org/resources/publications/an-audit-ofirish-debt/
The report calculates a potential national debt of €371.1 billion. This figure includes a “conservative” estimate of the state’s contingent liabilities: money for which the state is on the hook in the event of a fresh collapse in the banking system. The €371.1 billion breaks down into €91.8 billion in direct Government debt and €279.3 billion in bank debt backed by the state.
Dr Sheila Killian of the University of Limerick, who led the research, said the audit “seeks to quantify and explain Ireland’s sovereign debt, both real and contingent, for which the Irish people have become responsible”.
Frankly weird
The report concludes that the “constructive ambiguity” of the European Central Bank’s policy on bank bail-outs is “certainly not a concept consistent with transparency,” and it addresses what Dr Killian describes as “quite intricate layers of anonymity” in relation to bond-holders. The long-standing anonymity of bond-holders “has some justification” in normal circumstances; however, in times when bond-holders have influence on policy it is “frankly weird,” she said.
The €279.3 billion in bank debt includes €111 billion in guaranteed deposits and bonds under the Eligible Liabilities Guarantee Scheme, as well as €74 billion under the Deposit Guarantee Scheme. It also includes the €30.9 billion in promissory notes issued to Anglo-Irish Bank, Irish Nationwide, and the EBS, outstanding NAMA bonds with a nominal value of almost €29 billion, and a net increase of €34.6 billion in the national debt caused by emergency liquidity assistance provided by the Central Bank. The figures contain the caveat that a large part of the €91.8 billion raised by the Government was due to the banking crisis.
A crucial citizen's tool
Explaining the genesis of the audit, Neasa Ní Chasaide of the Debt and Development Coalition said that audits were “a crucial citizens’ tool” that had been used in campaigns against unjust debts in developing countries. In November 2008 Ecuador became the first country to undertake an examination of the legitimacy and structure of its foreign debt. An independent debt audit commissioned by the government of Ecuador documented hundreds of allegations of irregularity, illegality and illegitimacy in contracts of debt to predatory international lenders.
The loans, according to the report, violated Ecuador’s domestic laws, the regulations of the US Securities and Exchange Commission, and general principles of international law. Ecuador’s use of legitimacy as a legal argument for defaulting set a major precedent; indeed, the formation of a debt auditing commission sets a precedent in identifying illegitimate debt.
Subsequently, in June 2009 Ecuador announced that it had reached an agreement with 91 per cent of creditors to buy back its debt for 35 cents in the dollar.
If only!
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