EU austerity régime beginning to hurt German Economy

Germany is continuing to impose disastrous economic austerity measures all over Europe.


Senior German politicians and officials relentlessly plead for the continuation of the austerity policy, undeterred by the erupting recession in areas of the eurozone.


The policy became binding for almost all EU member-countries through the signing of the Fiscal Pact on 2 March. As the German Minister of Finance, Wolfgang Schäuble, declared on 6 March, by signing the pact Europe is on the “right path.” On 13 March the president of the Federal Bank, Jens Weidman, called for the southern euro countries, which are now slipping into recession, to apply “stiffer reforms” and additional austerity measures.


The austerity diktat is driving nearly all indebted southern European countries deeper into the recession, as shown by new data on the economic developments of Spain, Italy, Portugal, and Greece. 


According to this data, Portugal’s economy, for example, declined by 1.3 percent in the last quarter of 2011 and could shrink by up to 6 percent this year. Industrial production in Italy registered a sharp decline. In Spain, retail sales—an indicator of private consumption—declined by almost a quarter in comparison with 2007. Greece is approaching the economic level of countries in Latin America or south-east Asia, which up to now had clearly lagged behind European standards.


In the longer run the recession could have a backlash on Germany, because the massive slump is also affecting German exports. This could have serious repercussions. 


Where this austerity policy, imposed by the German government on Europe, will lead can be seen in Greece’s dramatic crash, which can simply be characterised as Greece saving itself to death. 


According to all predictions, in 2012 the country will remain in its fourth year of recession and continue to approach the economic level of the “Third World.”


The German business press predicts that if Greece’s economic contraction continues it will be bypassed by such countries as VietNam or Peru. A deeper recession could even saddle Greece with a GNP, in terms of buying power, lower than that of Bangladesh.


The German edition of the Financial Times speaks of a “historically exceptional” economic collapse.

"Some experts fear that the GNP for 2012 will again decline up to 8 percent, after an approximately 6 1⁄2 percent drop in 2011.”

This is “the worst recession that a western country has encountered since the war,” explains Barry Eichengreen, an economic historian at the University of Berkeley in California. 


In the end, Germany’s export industry will not escape the downward trend in the eurozone, despite its growing exports to so-called threshold countries. Orders from EU countries coming into German industry are dramatically diminishing. The business press reports, 

“Already since the middle of the year the quantity of new orders from countries of the monetary union has declined consistently, since the debt crisis resurged in the summer.” 

In other countries “a demand for German products has decreased also, because of their austerity measures.”


Berlin’s austerity diktat is ultimately threatening to push Germany’s export-dependent economy into a recession. Like the populations in Greece, Portugal, Spain and Italy today, the German population will most probably have to confront drastic austerity schemes. 

Promissory Notes: Negotiating or Play-Acting?

What other country in Europe is sticking 20 percent of its GDP on its national debt to support a completely bust bank? And how did we get into this position?

In a move clearly aimed at trying to upstage and divert attention from an extremely embarasing Sinn Féin private members’ motion on the ESM Treaty, the Minister for Finance, Michael Noonan, told the Dáil on 21 March that the Government is

“now negotiating with the EU authorities, and principaly with the ECB, on the basis that the €3.06 bilion cash instalment due from the Minister to IBRC [Irish Bank Resolution Corporation] on 31 March 2012 under the terms of the IBRC promisory note could be settled by the delivery of a long-term Irish government bond. The details of the arrangement have still to be worked out.”

What other country in Europe is sticking 20 percent of its GDP on its national debt to support a completely bust bank? And how did we get into this position?

The loan losses in the Irish banks following the financial collapse in 2008 were calculated in March 2011 at €75 billion. In the twelve months since then it has become increasingly apparent that mortgage loan losses will get progressively worse. Evidence is mounting that the total loan losses in Ireland could rise towards €10 billion.

The guarantee in September 2008 to six Irish financial institutions, and the subsequent €31 billion in IOUs given to Anglo-Irish Bank, were the starting-point on this road to modern financial servitude.

Anglo-Irish took these promissory notes, or IOUs, and lodged them with the Central Bank of Ireland. The Central Bank effectively created €31 billion, which was given to Anglo-Irish by a procces known as “exceptional liquidity assistance.”

The money given to Anglo-Irish was not borowed from the European Central Bank, nor was it created by the European Central Bank. It was created by the Central Bank of Ireland, as the creation of money is decentralised in the eurozone.

The Irish Nationwide Building Society later came into the scheme when, from 1 July 2011, its assets and liabilities were transfered to Anglo-Irish in a merger ordered by the courts that created the Irish Bank Resolution Corporation.

So as a one-off, money was created and pumped into the Irish banks to keep them solvent. Normally when banks collapse, their investors do not get all their money back. After 2008, as payments to bond- holders fell due, neither the banks nor the state had the resources to pay them. That is where the ECB stepped in. It lent approximately €135 billion to Irish banks to enable them to repay the bond-holders, with interest, and also to replace lost deposits.

That repayment schedule for this ECB-dictated madness is punishing:

€3.1billion every year until 2023, with smaller annual outlays due until 2031. 

€3.1 billion is about three times the size of Ireland’s austerity measures this year and represents about 2 percent of GDP. To do this it must borrow the money, and pay interest on it, raise taxes, and cut spending. This will destroy any hope of economic recovery.

The Government is afraid to rock the boat too vigorously in these negotiations, because of a belief that the billions of “unprecedented” lending to Irish banks will be placed at risk if the promissory notes are not repaid and that they cannot be reneged on, or indeed disowned by a country that has already shouldered such debt to bail out banks and non-Irish financial institutions.

The country is fighting for its very survival, and the Government needs to negotiate accordingly. The terms of the deal should have more to do with asserting national sovereign rights than trying to look good for the forthcoming referendum.

First published online @ http://www.indymedia.ie/article/101646

ESM Stroke politics = New National Disaster

The Government hopes to be able to pull a stroke within the next few weeks that could be as disastrous politically for this country as the blanket bank guarantee of 2008 has been socially and economically.

The stroke? Sign up, virtually ‘on the q.t.,’ to a new permanent euro-zone bail-out fund, the European Stability Mechanism, to which Ireland will be “irrevocably and unconditionally” obliged to the tune of €11 billion, while all the time making great palaver about holding a referendum on the Fiscal Compact Treaty.

Yet together the European Stability Mechanism and the Fiscal Compact Treaty represent quite fundamental moves in the direction of a qualitatively different euro zone from the one established under the Maastricht Treaty in 1992.

Under the new regime virtually the whole area of budgetary policy will be removed from the national level to the supranational level of the euro zone, without a referendum.

The ESM treaty describes the two treaties as being “complementary.” So why not a referendum on both treaties? Legal advice from none other than the Attorney-General.

The present incumbent of that position, Marie Whelan SC? No. Her predecessor, Paul Gallagher SC, advised the previous Government that there was no constitutional problem in not holding a referendum.

It will be recalled that Gallagher also advised that Government on the night of the blanket guarantee for the Irish banks in September 2008.

So a change of Government did not result in a new, more independent approach to a developing euro-zone fiscal union, any more than it meant any real and significant loosening of the financial servitude imposed on the country by the previous Government. All done for the good of Irish banking interests and the German and French banks from whom they had borrowed.

Even at this late stage it is not too late to demand that the Attorney-General advises on the constitutionality of what the Government is trying to do—particularly in the light of the fact that there are significant differences between the earlier ESM Treaty that the previous Attorney-General advised on and the second version.

Under the ESM Treaty mark 2, any money from the permanent bail-out fund would be given only to states that had inserted the so-called permanent budget rule or “debt brake” in their constitutions or equivalent.

First published online @ http://www.indymedia.ie/article/101640

The Irish Veto: Why a referendum on one treaty and not on the other?

The Government wants the Dáil and Seanad in the very near future to approve a hugely important amendment to the EU treaties without any referendum, even though this amendment and its legal and political consequences would mark a qualitative change in the direction of the EU and in the character, scope and objectives of the Economic and Monetary Union.

The EU authorities are seeking to change the whole basis of the Economic and Monetary Union.

They are doing this by establishing a permanent ESM bail-out fund of €500 billion, which is to be surrounded by an apparatus of strict controls over national budgetary policy, including the permanent balanced-budget rule (0.5 per cent deficit rule).

This fund, which the euro-zone states want to set up from next July, would oblige Ireland to make a contribution of €11 billion, in various forms of capital, towards a permanent bail-out fund, called the European Stability Mechanism. This fund is to be set up by means of the European Stability Mechanism (ESM) Treaty for the seventeen euro-zone countries once all twenty-seven EU countries have amended article 136 of the Treaty on the Functioning of the European Union.

The amendment to article 136 would extend the scope of the existing EU treaties significantly and bears a huge weight of legal and political consequences.

It reads:

“The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”

It is widely recognised among economists that the proposed ESM Treaty, the permanent eurozone funding mechanism it would establish and the apparatus of control of national budgets goes nowhere near solving the present financial crisis of the euro area.

What is needed is more emphasis on stimulating economic growth and demand throughout the area, to the benefit of the common good of Ireland and the other euro-zone countries.

An Irish veto

The European Council of twenty-seven prime ministers and presidents decided in March 2011 to set up a permanent bail-out fund for the euro zone.

Ireland has a veto, for before the “decision” can come into force it must be approved by all twenty seven EU member-states “in accordance with their respective constitutional requirements,” which means that in Ireland it requires approval by the people in a referendum.

The proposed amendment in effect entails a surrender of state sovereignty, which goes beyond the original “licence” that the Irish people gave the state in earlier referendums to join a “developing” European Community and widens the scope and objectives of the present EU treaties by significantly increasing the powers of the EU.

 But there’s more . . .

The amendment is to be made under the so-called “self-amending” article 48 (6) of the Treaty on European Union, which was inserted in the EU treaties by the Treaty of Lisbon. By using this procedure, the 27-member European Council of Prime Ministers and Presidents can take decisions to amend most provisions in the policy areas of the EU treaties, as long as such amendment does not increase the Union’s powers or competence.

For the European Council to claim the authority under EU law to set up a permanent bail-out fund for a sub-group of EU states is an assertion of significantly increased powers for the EU as a whole, because up to now the EU treaties provided for no such fund or mechanism in the Monetary Union. The treaties provided rather for an EU monetary union that would not require or permit cross-national “bail-outs” under any circumstances and would be run on quite different principles from what is being now proposed.

The ESM Treaty sets up the European Stability Mechanism, and sets out the institutional structure and the rights and privileges of this “mechanism.”

The mechanism will include a permanent bail-out fund of €500 billion, to which each of the seventeen members of the euro zone must make a contribution in accordance with a “contribution key.” The treaty provides that the fund may be increased later by agreement—and there is already talk of increasing it.

Ireland must contribute €11 billion “irrevocably and unconditionally” to the fund in various forms of capital.

The ESM Treaty was signed by EU ambassadors on 2 February 2012—replacing an earlier ESM Treaty that was signed by Michael Noonan and other euro-zone Finance ministers in July last year but that was never sent around for ratification. The seventeen euro-zone states have agreed that ESM Treaty No. 2 will be ratified so that it can to come into force by July this year.

This is to happen once it is ratified by signatories representing 90 per cent of the initial capital of the fund, so that Ireland has no veto on it. Not only that, but the treaty could come into force when the eight largest euro-zone member-states, which together hold 90 per cent of the fund‘s capital, ratify the treaty.

The preamble to the treaty states (recital 5) that it is agreed that money from the permanent ESM fund will be given only to euro-zone states that have ratified the later Fiscal Compact Treaty (“Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”) and its permanent balanced budget rule or “debt brake,” and that the two treaties are complementary.

The Fiscal Compact Treaty was insisted on by the German chancellor, Angela Merkel, over the winter of 2011, essentially as a gesture towards German public opinion.

When the Deutschmark was being abolished in 1999, the German people were not told that they would be committed to an EU monetary union with a huge permanent bail-out fund to which they would be expected to be the principal net contributors.

Instead they were told that the “no bail-out clause” of the EU treaties, article 125 of the Treaty on the Functioning of the European Union, guaranteed that there would be no bail-outs by the others for any member-state using the single currency that did not abide by the excessive-deficit rules.

Most economists regard a “permanent balanced budget” rule as absurdly inflexible, for governments do need to run deficits on occasion in order to stimulate their economies and expand economic demand when that slumps heavily in their domestic or foreign markets.

Approving the European Council’s decision to insert the article 136 amendment into the EU treaties, ratifying the subsequent ESM Treaty, with its strict budgetary rules, and ratifying what is stated to be the “complementary” Fiscal Compact Treaty towards the end of this year, will have the effect of removing virtually the whole area of budgetary policy from the national level to the supranational level of the euro zone—without a referendum in Ireland or even a Government white paper on the implications of that

The provisions of the Fiscal Compact Treaty were agreed at the EU summit meeting on 30 January and need not be ratified until the end of this year. This treaty provides for a rule requiring a permanent balanced budget, or “debt brake” of 0.5 per cent of GDP in any one year, to be inserted in the constitution (or equivalent) of euro-zone states.

All seventeen euro-zone states must ratify this treaty, but it comes into force once it is ratified by twelve of of them, so Ireland has no veto on it.

The preamble to the Fiscal Compact Treaty refers to the fact that money from the new permanent bail-out fund (the ESM) will be given only to states that have ratified it. Most of the provisions of the treaty overlap with the so-called “Six Pack” of EU regulations and a directive that constitutes the “Reinforced Stability and Growth Pact” and which were put into EU law last December.

It is important to note that the ESM Treaty and the Fiscal Compact Treaty are not EU treaties, binding in EU law, but are rather “intergovernmental treaties” among the seventeen member-states of the euro zone, although they provide for the full involvement of the EU Commission and the European Court of Justice in their day-to-day implementation.

These are clear moves towards a fiscal union for the euro zone, and the Oireachtas is being invited to approve them in the next couple of weeks, without any significant public discussion, at least to judge by the virtual total silence on them so far.

These developments would remove much of the stuff of national decision-making and normal party politics from the arena of democratic consideration and debate in this country.

At a minimum, the Irish public deserves a white paper on these hugely important developments before Ireland’s last EU veto of significance is abandoned and it becomes too late to save further large areas of our national democracy.



First published online @ http://www.indymedia.ie/article/101627

Peter Mathews: “tear up” our obligation

The last government agreed that the State should pay €31bn to IBRC (formerly Anglo and Irish Nationwide) over a 13-year schedule ending in 2025. The first payment of €3.1bn was made in March 2011. The next payment is due on March 31.

If the European Union and the European Central Bank force us to make this payment, it would amount to increasing the totally unjustified, odious debt burden on the people of Ireland.

How is it unjustified? How is it odious?

Loan losses that occurred in the Irish banks following the financial collapse in 2008 were calculated in March 2011 at €75bn. In the 12 months since then it is becoming increasingly apparent that mortgage loan losses will get progressively worse.

Evidence is mounting that the total loan losses in Ireland could rise towards €100bn.

Throughout 2008 and 2009 there was a slow motion run and controlled implosion of the Irish banking system. In response, the ECB advanced massive loans to the Irish banks and in turn the Central Bank of Ireland responded by providing Exceptional Liquidity Assistance (ELA) to the Irish banks.

Professors Karl Whelan, Brian Lucey and Dr Stephen Kinsella recently made excellent presentations to the Oireachtas Committee on the issue of the promissory notes and ELA. They showed how the Central Bank of Ireland effectively created €45bn ELA money “out of thin air.”

The Central Bank of Ireland doesn’t owe any of this money to the ECB, they said. On a once-off basis, money was created and pumped into the Irish banks to keep them solvent. When the Irish banks repay these ELA loans, the Central Bank of Ireland simply retires them. The money literally disappears.

Therefore, the €31bn ELA money created by the Central Bank of Ireland, and advanced to IBRC to cover promissory notes, can and should be written off.

Specifically, on March 31 next, the write-off by the Central Bank of Ireland of €3.1bn ELA would mean that the Government wouldn’t have to borrow that money to pay the €3.1bn promissory note.
That promissory note could literally be torn up.

The same applies to all the remaining €25bn ELA loans to IBRC and the remaining €25bn promissory notes on IBRC’s balance sheet.

There is nothing dubious or wrong about doing this. Losses which should have been borne by bondholders have, wrongly, been dumped on the people of Ireland.

Normally, when banks collapse, their funders do not get all their money back.

In Ireland, bondholders were redeemed all their money with interest at the insistence of the ECB. Since the end of 2008, as payments to bondholders fell due, neither the banks nor the State had the resources to pay them.

That is where the ECB stepped in. It lent approximately €135bn to our banks to enable them to repay the bondholders and also to replace lost deposits.

The ECB became fully complicit in dumping this bill onto the people of Ireland.

Under normal capitalist principles, the ECB would not have shielded bondholders from the consequences of their investments. They would have to accept that Ireland is “taking one for the team.” Taking all this into account, again under normal capitalist principles, the ECB could not object to writing off up to €75bn of the loans it advanced to the Irish banks.

If the ECB is unwilling to do this, then the Central Bank of Ireland should top up its Exceptional Liquidity Assistance loans to the Irish banks to €75bn (in the case of AIB and Bank of Ireland substituting ELA for ECB loans) and then write it off.

The ECB has a limited ability to prevent the Central Bank of Ireland from doing this. It can only veto a proposal by the Irish Central Bank with a two thirds majority of its governing council. There are 23 members of the governing council, including Ireland’s representative, Governor Patrick Honohan.

So, if he and seven other members of the governing council support the proposal to write off the ELA money there is nothing Ms Merkel, Mr Sarkozy, Mr Draghi or anybody else can do about it.
But has Mr Honohan held discussions with ECB President Mario Draghi regarding writing off the ELA money?

Has he lobbied other Central Bank governors?

Has he lobbied the other eurozone countries in trouble so we can take a joint approach towards debt restructuring? Writing off that €75bn would have a massive positive impact on Ireland.

Firstly, this would allow AIB and Bank of Ireland to pass on these write-downs to mortgage holders and struggling businesses, providing a much needed stimulus to the Irish economy.

Secondly, it would allow us to “tear up” our obligation to redeem the €31bn promissory notes.
Overnight, our national debt would fall towards the Eurozone average and substantially improve our prospects of leaving the EU-IMF bailout programme.

We have been damned with faint praise from the troika. But the current EU policy of “kicking the can down the road” just prolongs the crisis. Our Government has shown willingness and fortitude in taking tough, necessary and often deeply unpopular decisions.

It’s now time for the ECB to establish fairness within the eurozone. If the European political establishment really believes we’re doing such a good job, the best way to show it is to agree to lighten the debt load on the people of Ireland by €75bn.

Peter Mathews is a chartered accountant and Fine Gael TD for Dublin South.

New budget rules up for agreement

EU Observer reports that EU finance ministers are to sign a first agreement on laws that would strongly increase the power of the EU to instruct euro-zone countries on how to spend their national budgets.

Applying to the seventeen members of the single currency only, the two laws require that all national budgets be presented to the Commission for “assessment” at the same time—by 15 October at the latest, according to a draft of the agreement.

The Commission would have the power to ask for a revision of the budget if it considered it likely to lead to a breach of the rules underpinning the euro, which bind member-states to keeping minimal budget deficits.

The seventeen would be required to establish independent bodies and to base their national budgets on independent forecasts—a move designed to depoliticise the process of drawing up the budget in member-states by subjecting it to technocratic eyes. Countries already breaching the budget deficit rules will have to issue regular reports to Brussels and agree a “partnership programme” on how to get back on the right fiscal track.

Those either experiencing or at risk of “severe” difficulties with their finances, or those already in a bail-out scheme, will be subject to far more invasive monitoring. Essentially they would lose the authority for any kind of discretionary spending.

The draft rules would entitle the Commission to grill them on the “content and direction” of fiscal policy, while Brussels would be entitled to see sensitive information, such as information on the financial health of individual banks. Bailed-out euro members would remain under this hyper-surveillance regime until they have paid back at least three-quarters of the money lent to them.

Much of the draft, proposed by the Commission last November, is to be approved by finance ministers, but a clause that would have essentially forced a country to undergo a bail-out has been removed, said a contact close to the negotiations.

The laws come on top of six other budgetary surveillance laws applying to all twenty-seven member-states that came into force in December.

They form part of the EU’s attempt to make sure the present sovereign debt crisis will never happen again, although critics say the laws infringe on national democracy.

Following the ministers’ green light the draft will go to the EU Parliament, with real negotiations between the two sides expected to come in April, after the proposal has made its way through committee.

One of the sticky issues will be how much these laws should encompass what is in the fiscal discipline treaty, an intergovernmental document covering much of the same area, due to be signed by EU leaders in March. If the scope of these laws is too wide it would raise the awkward question—already to be heard sotto voce in Brussels—about the point of having the fiscal treaty at all.

SIPTU stops short of calling for rejection

SIPTU has described the EU Permanent Austerity Treaty as the worst possible response to the economic crisis. In a grim warning the general president, Jack O’Connor, claimed it amounted to a contraction in the face of the “most serious recession since the 1930s.”

The treaty’s twin-pronged approach of cutting public spending and raising taxes, he predicted, would have a far-reaching effect on people’s lives. “It is hard to imagine a worse response to the challenge of recession and stagnation. It’s not about stimulating job creation through investment: it’s actually the reverse.”

O’Connor claimed that EU leaders’ talk of “restructuring” was code for the most savage assault on gains made by working people since the Second World War. “It’s about reducing pension provision, cutting public services, eroding people’s rights at work, and driving down the cost of labour.”

Trade unions have organised a wave of protests throughout Europe about the new Permanent Austerity Treaty over the past month. The day of action on 28 February publicised the “anti-social and anti-democratic” aspects of the treaty—part of a series of centrally driven austerity agreements endorsed by EU leaders.

The pressure increases for co-ordinated corporate tax

France and Germany have moved a step closer to a full fiscal union by announcing a harmonisation of their corporate tax rates by 2013. The proposals are “a first step towards more European coherence” and support the “Euro-Plus Pact,” setting out rules for economic and fiscal co-ordination, which not all member-states signed.

The move will join France and Germany in a single “aligned” rate of business tax, known as a common consolidated corporate tax base, as a prelude to its introduction throughout the EU—a development that Enda Kenny has described as hugely damaging for Ireland’s low-tax regime.

But it won’t be long now until his mettle is tested, as the “own resources” provisions of the Lisbon Treaty come home to roost. Just to remind readers, he promised “constructive engagement".

Austerity Bites: The poor get poorer - 115 million Europeans; 23 per cent of EU population

Recently released figures for 2010 show that 115 million Europeans, or 23 per cent of the EU population, live in households with less than the poverty threshold disposable income, in households where there is severe material deprivation (such as a lack of heating), or where the adults worked less than 20 per cent of their total work potential.

While 13 of the 25 member-states that provided information recorded an increase in the numbers affected when compared with 2009, Spain (23.4 per cent to 25.5 per cent) and Lithuania (29.5 per cent to 33.4 per cent) recorded the greatest leap from one year to the next.

The figures for deprivation were even higher among those under the age of seventeen, with 27 per cent of young people throughout the EU falling below the threshold.

In all, twenty countries recorded a higher rate of poverty and risk of social exclusion among young people than among the general population.

The poverty statistics come on top of unemployment statistics showing a record unemployment rate in the EU, with some 23 million people out of work.

Greek president rejects German interference

Relations between Germany and Greece, strained since the beginning of the economic crisis in 2009, appeared to reach a new low point amid the exchange of barbed comments between the two countries.

President Károlos Papoúlias was uncharacteristically blunt in his response to repeated criticism about the Greek economy and politics. He accused the German minister of finance, Wolfgang Schäuble, of making insulting comments, including the suggestion that Greece should not hold elections now, because its politicians are incapable of keeping to the terms of a new bail-out. “We all have a duty to work hard to get through this crisis,” he said during a visit to the Ministry of Defence. “I will not accept Mr Schäuble insulting my country. I don’t accept this as a Greek.

“Who is Mr Schäuble to insult Greece? Who are the Dutch? Who are the Finns? We always had the pride to defend not only our own freedom, not only our own country, but the freedom of Europe.”

The comment that appears to have sparked Papoúlias’s response was a suggestion by Schäuble that Greece should follow Italy’s example by forming a “technocratic” government. He also cast aspersions on the record of Greek politicians in the past.

“After [the technocrats have completed their work] the democratic process can resume with the effects that we have all seen over the last few decades.”

Fianna Fáil returns from Damascus

Fidelma strikes back...

Senator Mark Daly (Fianna Fáil):

Ireland and the EU have a democratic deficit. The direction the EU is taking is not democratic in nature. Since the failure of the euro started, we have seen that it was designed to fail. According to many commentators, it was not structured correctly. The new EU structures being put in place are also designed to fail. They lack consultation with—

Senator Fidelma Healy Eames (Fine Gael):

The senator is living in his own world.

Senator Daly:

If Senator Healy Eames believes that Europe is democratic in nature while the Germans and French dictate to everyone how it should be run, she is the one who is not living in the real world.

A very late conversion for Fianna Fáil!

Septic tanks?

The European Commission is proposing for the first time to regulate pharmaceutical pollutants in surface water, citing their potential hazard to humans and aquatic life.

Three pharmaceutical substances—including those found in oral contraceptives and hormone medicines—are among the fifteen chemicals the Commission proposes to add to those regulated in EU member-states.

Israel to demolish EU-funded renewable

8Six EU-funded wind and solar energy projects that provide electricity for six hundred West Bank Palestinians have been put on a “demolition list” by Israel, allegedly in response to a report by an EU mission that called for laws to prevent the financing of illegal settlements.

West Bank project managers say the “stop work” orders served against the projects are “a first step to almost automatic demolition.”

Elad Orian, a joint founder of Comet-ME, which oversaw the renewables project, said that four hundred people would be left completely without electricity if the demolition went ahead.

“The people will be left without light or the ability to charge cellphones [mobile phones], which is the only means of communication there.”

The project, supported by Comet-ME and the German group Medico International, built a total of fifteen solar plants and hybrid systems for electrifying villages with a combined population of some 1,500 people.

Area C is a canton under full Israeli control, comprising some 60 per cent of the West Bank and—beyond the West Bank Wall—all of Israel’s settlements, which are considered illegal under international law. Palestinians need permits to build in this region, but a study by the Israeli group Peace Now found that, between 2000 and 2007, 94 per cent of their applications were turned down.

The region, spanning the Dead Sea, Judaean Desert and Jordan Valley, is underdeveloped and the German Foreign Office provided approximately €300,000 for the six hybrid wind and solar energy projects, which serve poor villages in the South Hebron Hills.



Real pay per employee (2000 = 100)
Source: Ameco database.


Some EU diplomats, and many nongovernmental groups, see a link in the timing with a confidential report by the EU’s regional diplomats into the building of settlements and the demolition of houses in Area C. It called on the Commission to draft legislation “to prevent/discourage financial transactions in support of settlement activity.”

Less than two weeks after the report was leaked, notices were served on clean-energy projects in Haribat al-Nabi, Shaab al-Butum, Qawawis, and Wadi al-Shesh.

The German role in the euro-zone crisis

The Economic and Monetary Union that Ireland signed up to under the Maastricht Treaty (1992) and Lisbon Treaty (2009) assumed that the deficit rules of 3 per cent and 60 per cent of GDP for every euro-zone state would be complied with and enforced by means of sanctions that are set out in those treaties.

When Germany and France broke these rules in 2003, the EU treaty sanctions were not applied against them, and they were effectually dropped for everyone else.

Now Germany and France are using the present euro-zone crisis to set about increasing their political sway over the euro zone by changing the whole basis of the Economic and Monetary Union that Ireland signed up to by establishing a permanent €500 billion so-called European Stability Mechanism bail-out fund, surrounded by a framework of controls over national budgetary policy, including a permanent balanced-budget rule (0.5 per cent deficit rule) proposed in the Fiscal Compact Treaty.

Remember that, under the Lisbon Treaty, in two years’ time Germany’s vote in making EU laws, as well as voting in euro-zone matters will double, from its present 8 per cent to 16 per cent, while that of France and Italy will go up from 8 to 12 per cent.

And Ireland’s vote? Cut by half, to 1 per cent.

But what about the German economic model?

Here is a typical portrayal, by Martin Hart-Landsberg at www.spectrezine.org:

As growing numbers of countries face renewed austerity pressures, there is a tendency to explain the trend by searching for specific policy failures in each country rather than considering broader structural dynamics.

Key to the credibility of those who argue for a focus on national decisions is the existence of countries that people believe are performing well. Thus, the argument goes, if only policy makers followed best practices their people wouldn’t find themselves in such a bad place. Recently, German has become one of these model countries.

Here is a typical framing of the German experience:

At a time when unemployment rates in France, Italy, the UK, and the US are stuck around 8%–9%, many are turning to the apparent miracle in the German labor market in search of lessons. In 2008–09, German GDP plummeted 6.6% from peak to trough, yet joblessness rose only 0.5 percentage points before resuming a downward trend, and employment fell only 0.5%. In August 2011, the standardized unemployment rate was about 6.5%, the lowest since the post-reunification boom of 20 years ago.

In other words, Germany seems to be doing things right. Despite suffering a deep decline it actually enjoyed a lower unemployment rate. So, how did it do it? Often cited are recent German policies which have increased labour market flexibility.

But are these the best practices that should be adopted elsewhere? One way to answer that question is to look at what these changes have meant to German workers.

A Reuters report concluded: “Job growth in Germany has been especially strong for low wage and temporary agency employment because of deregulation and the promotion of flexible, low-income, state-subsidised so-called ‘mini-jobs’.”

The number of full-time workers on low wages—sometimes defined as less than two thirds of middle income—rose by 13.5% to 4.3 million between 2005 and 2010, three times faster than other employment, according to the Labour Office.

Jobs at temporary work agencies reached a record high in 2011 of 910,000—triple the number from 2002 when Berlin started deregulating the temp sector . . .

Data from the Organization for Economic Cooperation and Development shows low-wage employment accounts for 20% of full-time jobs in Germany compared to 8.0% in Italy and 13.5% in Greece . . .

One out of five jobs is a now a “mini-job,” earning workers a maximum 400 euros a month tax-free. For nearly 5 million, this is their main job, requiring steep publicly-funded top-ups.

“Regular full-time jobs are being split up into mini-jobs,” said Holger Bonin of the Mannheim-based ZEW think tank.

And there is little to stop employers paying “mini-jobbers” low hourly wages given they know the government will top them up and there is no legal minimum wage.

As the New York Times astutely reported,

But hidden behind the so-called German economic miracle is an underclass of low-paid employees whose incomes have benefited little from the country’s stability and in fact have shrunk in real terms over the last decade, according to recent data.

And because of government policies intended to keep wages low to discourage outsourcing and encourage skills training, the incomes of these workers are not likely to rise anytime soon.

That, in turn, means they are likely to continue to depend on government aid programs to make ends meet, costing taxpayers billions of euros a year.

The paradox of a rising tide that does not lift all boats stems in part from the fact that Germany has no federally set minimum wage. But it also has its roots in recent German politics, which have favoured measures to keep unemployment low and win support from employers . . .

The Confederation of German Employers’ Associations says the introduction of a minimum wage would push up labour costs and lead to more unemployment. Jobs would simply move out of Germany and to Eastern Europe or Asia.

An ILO report, Global Employment Trends, 2012, shows the connection between these policies and the euro-zone crisis.

For they have not only taken a toll on German workers, they have also greatly contributed to the crisis in Europe. The low wages and insecure employment conditions have enabled German employers to boost exports and limited imports.

The ILO report concludes:

The rising competitiveness of German exporters has increasingly been identified as the structural cause underlying the recent difficulties in the Euro area. Crisis countries had not been able to export enough of their goods to Germany as domestic demand there was not strong enough because of low wages. 

German policies to keep down wages had created conditions for a prolonged slump in Europe as other nations on the continent increasingly saw only even harsher wage deflation as a solution to their lack of competitiveness.

The report called on Germany to enact swift changes.

“An end to a low-wage policy would create positive spill-over effects to the rest of Europe and restore a more equitable income distribution . . . An end to a low-wage policy would create positive spillover effects to the rest of Europe and restore a more equitable income distribution.”

As the chart shows, German wages have been stagnating for more than a decade. No wonder Germany has been exporting so successfully and other countries in Europe have found it difficult to compete.

While German politicians blame these other countries for their problems, the fact is that German growth has depended on the high consumption and borrowing in those other countries.

Kenny, Gilmore, and a referendum

Enda Kenny and his cronies would do well to tell the truth about the EU Permanent Austerity Treaty. The Taoiseach and his mates deny that the pact was crafted to minimise the prospect of a referendum in Ireland. That is exactly what happened, however, and it is no secret at all in Brussels, where the treaty was written.

Parts of the pact were explicitly drafted to give Kenny a chance of avoiding a vote on it. An EU official quoted in the Irish Independent accepted that the matter was likely to go to the Supreme Court but said the EU authorities hoped there would be no referendum, as many voters would relish an opportunity to inflict a bloody nose on the Government and the EU over their austerity and pro-bondholder bail-out policies.

Kenny insisted that Irish negotiators were not told to circumvent the risk of a vote and were given a mandate to maximise Ireland’s interests in the talks. But think about the damage that would be done to Kenny if there was a referendum and it was rejected. He would be hugely diminished—domestically and internationally—and questions would be asked about his ability to plough on with the EU-IMF programme, which Eurocrats hope will deliver a badly needed success for their cruel austerity policy.

So there is every reason to believe that the authorities would tinker with the text of the treaty to make an Irish vote less likely.

And what about the comment made by Éamon Gilmore that the provisions of the treaty had no “appropriate” place in the Constitution of Ireland? If that is a legitimate argument to make before an Oireachtas committee, is it not equally legitimate to make it in an EU negotiating forum?

And was it made? Somehow it echoes Gilmore’s claim that there would not be another referendum following the first rejection of the Lisbon Treaty!

Well, there’s a pair of them in it; but remember what happened to Fianna Fáil! There are big changes ahead, and those who are honest with the electorate, uphold their interests and enhance the sovereignty of the people will be the ones to benefit.

Irish spooks up to their necks in it

"Deep in the EU undergrowth..."

...since it has quietly signed up to the Justice and Home Affairs section of the Lisbon Treaty, where it enjoyed a temporary opt-out, Ireland is engaged in discussions on a wide range of “security” issues with a potentially huge effect on civil rights and individual liberties.

The opt-out meant that this hugely important part of the treaty remained below the radar during the referendum debates, but...

....measures designed to combat terrorism and crime and to protect the EU from “natural and man-made disasters,” even “traffic accidents,” are featured on the agenda of a myriad of committees of unaccountable officials.

Their work is revealed in a series of classified EU documents, littered with acronyms, reflecting the large number of proposals designed to strengthen links between the security and intelligence agencies of EU member-states...

One document, “Draft working method for closer cooperation and coordination in the field of EU security,” was sent by the presidency of the EU Council, a post then held by Hungary, to the Standing Committee on Operational Cooperation on Internal Security. It refers to “calls for closer cooperation between the fields of the common foreign and security policy and the area of freedom, security, and justice.”

After mentioning moves to “enhance links between the internal and external aspects of counter-terrorism,” the document states: “It is important to note that effective and timely coordination between the competent authorities at national level and cooperation with the relevant actors at EU level are of critical importance to building close relations between the external and internal aspects of EU security.”

Included among “possible areas of cooperation in the field of EU security” are “the proliferation of weapons of mass destruction,” “terrorism,” “organised crime, including cross-border crime and illicit trafficking,” “cyber-security,” “energy security,” and “climate change.”

Another classified document from the Crisis Management and Planning Department for the Political and Security Committee discusses strengthening ties between the common security and defence policy and the area of “freedom, security, and justice.” Entitled “Elements of a draft road map,” it refers to the EU’s little-known Political and Security Committee drawing up plans for “comprehensive situational awareness and intelligence support” and “improving cooperation in planned EU external action.”

Other documents refer to “informal networks,” a “joint situation centre” designed to promote cooperation between EU spooks, “road maps,” and “inter-institutional information meetings.”

A list of initials and acronyms copied into one document illustrates the plethora of committees relating to “security” and intelligence spawned by the EU. They include JAI, COSI, COPS, CIVCOM, PESC, RELEX, JAIEX, ENFOPOL, COTER, and PROCIV.

The documents were leaked to Statewatch, a British charity that monitors threats to civil liberties throughout the European Union. They reveal a patchwork of committees that may appear on the surface to be little more than an attempt at European bureaucratic empire-building. Their significance, however, is much greater than that, as this secretive network is concerned with security, intelligence, and law enforcement—issues of vital concern to EU citizens.

Tony Bunyan, editor of Statewatch, pointed out that “a whole new panoply of working parties and informal groups is mushrooming in the field of EU external security.” He added that the European External Action Service, headed by Catherine Ashton, was pushing for EU agencies to operate outside Europe on such issues as gathering intelligence and personal data as well as distributing personal information throughout the EU...

"These practices would go far beyond the remits laid down in EU law. Crucial documents are not publicly available," and there is no mechanism for parliamentary accountability at the national or the EU level; and it would more than optimistic to expect that Alan Shatter might break the veil of secrecy!

http://www.guardian.co.uk/news/defence-and-security-blog/2012/jan/24/eu-intelligence-security

"How can one speak of default in future tense when we’re already bankrupt?"

Greece saved for an uncertain fate!

How can one speak of default in the future tense when we’re already bankrupt? . . . Don’t you see the people scouring through refuse and sleeping on pavements? Those who led us to bankruptcy—the troika and the government—now claim they want to save us from bankruptcy. It’s incredible!”

—Míkis Theodorákis, Greek composer and songwriter.

If Greece’s latest €130 billion loan was to be used for fiscal stimulus, it might be worth the commitment. Because that kind of money could put a lot of people back to work and kick-start the economy fast.

But the loan isn’t going to be used for stimulus. It’s going to be used to recapitalise the banks and pay off creditors, neither of which will do anything to boost activity or create jobs.

So, why bother? Why dig an even deeper hole if it achieves nothing?

If that’s the case, Greece should just default now and begin rebuilding the economy ASAP. There’s no point in putting it off any longer.

The “troika” (European Central Bank, European Union, and International Monetary Fund) demanded another €3 billion in spending cuts, even though unemployment is tipping 20 per cent and the economy shrank by 7 per cent in the last quarter.

What sense does that make? You don’t have to be a genius to see that Greece won’t reach its budget targets if tax revenue continues to fall, because everyone’s either been sacked or taking a pay cut.

It will just make a bad situation even worse. But the troika doesn’t worry about these types of things.

They don’t care that their economic theories have failed miserably so far, or that their “austerity” measures have been a complete flop.

They just keep plugging along, making the same mistakes over and over again, impervious to the criticism of reputable economists, oblivious to the abysmal results.

They remain steadfast in their commitment to belt-tightening, convinced that a strict diet of breadcrumbs and water is the best way to nurse an ailing economy back to health. It doesn’t bother them that the facts prove otherwise.

The Fitch ratings agency isn’t convinced that austerity will work; in fact it lowered Greece’s rating, saying that they now think a default is “highly likely.”

Similarly, a “confidential report” that was given to euro-zone finance ministers suggests that there’s a high probability that the slump in Greece will get worse and that the country’s debt-to-GDP ratio will still be 160 per cent by 2020, a full decade after the implementation of austerity measures.

So even if Greece sticks with the hairshirts and follows the troika’s diktats to the letter, its debt could still be at “unsustainable” levels eight years from today.

Why? An article in the high-circulation German weekly Der Spiegel puts it clearly:

Of course, the €130 billion would not solve the problem. It is only intended to buy time. Time until the financial markets have stabilised to the extent that they can handle the actual bankruptcy of Greece without a chain reaction. Without bank failures, no knock-on effects through the loss of credit insurance and no interest for the remaining problem of explosion of the Euro-zone countries.

They’re all heart!

Here we go! Next stop NATO

Irish soldiers are participating in an Austro-German battle group, beginning on 1 July. There are 175 personnel involved, and they will be on standby at Cathal Brugha Barracks, Dublin.

The Dáil will be asked to approve a memorandum of understanding covering Ireland’s participation. The memorandum will be between Germany, Austria, the Czech Republic, Ireland, Croatia and the former Yugoslav republic of Macedonia and will set out principles in relation to the operation, deployment and management of the battle group. It defines Germany as the framework state and Austria as the logistic lead state.

The standby costs are €380,000, and the estimated additional cost for a maximum 120-day deployment of the group is €10.7 million.

The purpose of the EU battle groups is to undertake operations as outlined in the Amsterdam treaty —the Treaty on European Union. These operations, known as the Petersberg Tasks, include tasks of combat forces in crisis management, including peacemaking. In the Lisbon Treaty these tasks were expanded to include joint disarmament operations, military advice and assistance tasks, conflict prevention, and post-conflict stabilisation.

In the words of Alan Shatter, “Ireland’s active engagement in EU battle groups enhances our capacity to influence the ongoing development and evolution of the rapid-response capacity of the EU.”

So much for our policy of neutrality!

The "Fiscal Compact" has an equally obnoxious brother—the European Stability Mechanism (ESM) Treaty

A massive No, and No again if necessary!

From now to the forthcoming referendum we should be informing and organising ourselves; organising our neighbours and friends, trade unions, social and community groups about what the grandly named “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union“ means. For the future of this country, and about the antidemocratic and anti-social dangers that it poses.

The treaty has been quite properly renamed the “Permanent Austerity Treaty.” It provides for a permanent balanced-budget rule or debt brake of 0.5 per cent of GDP in any one year to be inserted in euro-zone members’ constitutions or the equivalent.

But it has an equally obnoxious brother—the European Stability Mechanism (ESM) Treaty—which the Government will not be holding a referendum on and will be trying to push through the Oireachtas in the next few weeks with an absolute minimum of public scrutiny. It is in fact a virtual coup, with equally disastrous consequences for the country.

Democrats of all political persuasions should be very concerned.

Yet, as the preamble to the ESM Treaty states, it and the Permanent Austerity Treaty are “complementary in fostering fiscal responsibility and solidarity within the economic and monetary union.” So why a referendum on one and not on the other?

This treaty sets up the European Stability Mechanism.

This also includes a permanent €500 billion bail-out fund and the contributions each of the seventeen euro-zone members must make to it.

In Ireland’s case this will amount to €11 billion, “irrevocably and unconditionally,” in various forms of capital.

The changes represented by the two treaties would make euro-zone member-states permanently 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.

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 the larger EU states would, regularly and permanently, vet members’ fiscal policies and impose punitive fines on those failing to observe deflationary budget rules.

It should not be forgotten that after 2014, by courtesy of the Lisbon Treaty, the voting arrangements for making EU laws as well as voting on eurozone matters will see a doubling of Germany’s vote in making EU laws, from its present 8 per cent to 16 per cent. While France’s and Italy’s vote will go from their present 8 per cent each to 12 per cent each, and Ireland’s vote will be halved, to 1 per cent.

We should work for a powerful No vote in the referendum on the Permanent Austerity Treaty, but we should also not be distracted from the anti-democratic process that the Government is using to bring the European Stability Mechanism into being.

The ESM Treaty was signed by EU ambassadors on 2 February—replacing an earlier ESM Treaty. The seventeen euro-zone states have agreed that this ESM Treaty No. 2 will be ratified so that it can to come into force by July.

This ESM Treaty must therefore be brought before the Oireachtas for approval of its ratification in the next few weeks before Easter. There will also be an accompanying European Communities Amendment Bill to implement the amendment of article 136 of the Treaty on the Functioning of the European Union, as well as the provisions of the ESM Treaty in Irish domestic law.

The “decision” of the twenty-seven prime ministers and presidents to give permission under EU law to the seventeen euro-zone member-states to set up a permanent bail-out fund for the euro zone must be agreed by all twenty-seven EU member-states in accordance with their respective constitutional requirements.

This means that the European Council “decision” to make this amendment requires approval either by the Oireachtas or by the people in a referendum.

For the European Council to purport to authorise under EU law the setting up of a permanent bail-out fund for a sub-group of EU states can arguably be said to be a significant claim to increased powers for the EU as a whole, as hitherto the EU treaties provided for no such fund, either directly or indirectly.

Arguably, therefore, this amendment would put the Economic and Monetary Union that Ireland signed up to when the people ratified the Maastricht and Lisbon Treaties on a new and different basis, which entails a significant move towards a fiscal union for the euro zone as well as an Irish commitment to a framework of accompanying supranational controls over national budgetary policy.

Therefore, the People’s Movement believes that it would be unconstitutional for the Oireachtas to attempt to give the necessary approval of such a European Council decision without a referendum of the people in Ireland, especially when the Government is prepared to hold a referendum on the Permanent Austerity Treaty.

The EU member-states adopted the rules regarding 3 per cent and 60 per cent of GDP to ensure that euro-zone member-states 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 other states broke the excessive-deficit limits in the early 2000s.

When Germany and France broke the rules of the EMU by running big government deficits in 2003, the EU treaty sanctions for enforcing the deficit rules were not applied against them, and they were thereafter effectually dropped for everyone else. Ireland did not break these excessive-deficit rules, however.

Now Germany and France are seeking to change the whole basis of the Economic and Monetary Union that Ireland signed up to by including, in addition to establishing a framework of controls over national budgetary policy, the permanent balanced-budget rule (0.5 per cent deficit rule) through the Permanent Austerity Treaty.

The ESM Treaty is to come into force once it is ratified by signatories representing 90 per cent of the initial capital of the fund; and the preamble to the ESM Treaty states that money from the permanent ESM fund will be given only to euro-zone states that have ratified the Permanent Austerity Treaty and its permanent balanced budget rule or “debt brake.

On the hundredth anniversary of the 1916 Rising!

The EU commissioner for justice, fundamental rights and citizenship, Viviane Reding, has said that twenty years after the Maastricht Treaty, Europe is in need of “democratic rejuvenation,”, and she has proposed a five-point plan for 2020. The plan includes convening “a convention to draft a treaty on European political union.” Such an agreement should ensure that the European Parliament becomes a true European legislature, with the right to initiate legislation and the exclusive right to elect the Commission.

From 2016 to 2019 the treaty on political union would be subject to ratification in all member-states by way of referendums. It would enter into force once two-thirds of member-states had ratified it.

Citizens should be given two alternatives: either to accept the new treaty or to reject it and remain in a close form of association, notably by continuing to participate in the single market.

So if Reding’s kite flies higher we may have the ultimate referendum on independence and sovereignty in 2016!