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"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

EU reform + German leadership « Previous | |Next »
December 8, 2011

As a result of the neo-liberal euro crisis Germany is emerging, for the first time in the EU’s history, as the unquestioned leader. France is having to adjust to a subordinate role, Britain is moving to the margins, and the European Commission is losing powerr as it has failed to lead Europe’s response to these problems of the euro crisis. Public opinion has become more nationalist in much of the Union, weakening those – like the Commission – who favour European solutions.

RowsonM Merkel.jpg Martin Rowson

Richard Wolff, the author of Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It, has commmented that the politics of the current crisis:

is a struggle to take a crisis, caused by the business community and the governments they support, and make the mass of people pay for it. That’s what austerity means. And the test here is whether the mass of people will absorb it and accept it. And I think what’s happening is that they didn’t accept it in Greece, they’re not accepting it in Italy, and so they’re trying to make it a continental austerity program, led by the powerful countries.

France and Germany are pushing for changes to the eurozone treaty, including centralized oversight of national budgets and tighter reins on debt. It is spreading Germany's stability culture towards fiscal union.

In The curious case of German leadership Katinka Barysch says:

Merkel’s government ...wants to construct new eurozone rules and institutions – but in a way that spreads and enforces a German vision of a ‘stability union’. ....the government’s vision for Europe is limited so far: a few ‘surgical’ amendments to the EU treaty to introduce automatic sanctions, take fiscal rule-breakers to the European Court of Justice and allow Brussels to intervene in the budgets of countries that ask for bail-outs.

The immediate questions are: which eurozone states are prepared to agree to what political steps to oversee the fiscal union? If strict budget discipline is to be imposed on eurozone member states like Italy or Spain, what institutions will supervise and legitimate this intrusion into the core competences of a nation state and the lives of its citizens?

Will the new rules to establish a stability culture to be agreed to at the summit in Brussels on 8-9 December begin the process to create a post-Maastricht treat?. Is the fiscal union a hesitant step towards a federal Europe-- a united states or a federation of Europe? Is that "more Europe" is the solution rather than the problem?

What is certain is that the democracy deficit within the EU, now evident from Athens to Berlin, looks set to continue. European citizens, have felt a growing sense of distance between themselves and those at the helm of European unification as Brussels became increasingly remote and out of touch with the everyday concerns of people.

| Posted by Gary Sauer-Thompson at 7:37 AM | | Comments (7)
Comments

Comments

In this Euro crisis the Cameron Govt in the UK finds that it has very limited power as the UK is not in the euro so has only a sideline voice. What it is defending is the threat of a financial tax---Financial Transaction Tax---on the status quo of the loosely regulated and low tax City of London .

Finance capital in the UK is being defended in the name of the national interest.

The EU employment and environmental legislation is abhorred by the Tory right who want the UK to scrap minimum wages and anti-pollution laws so that it can become more like the US.

The game plan of Merkel, Sarkozy and others is to commit the eurozone to much greater central control of budgets and budgetary discipline – greater 'fiscal union' – and so to convince markets, along with tough national austerity plans in Italy, Greece, Spain and elsewhere, that eurozone debt is manageable.

What is meant by fiscal union is entrenching EU control of national budgetary discipline, including balanced budgets, and heavy, automatic fines for those who head into deficit, all enforced by a strengthened European budget commissioner, and with the EU court – the European Court of Justice – given legal powers of enforcement.

The other 15 states in the EU will have to agree – and handing more powers to the EU on national taxes and spending is inevitably highly political sensitive. If a deal is reached, it will probably mean changing the EU's Lisbon Treaty, which all 27 would have to agree. This will take time (at least a year) to get ratified through national parliaments, and Ireland at least would have to hold a referendum – to which a 'yes' vote is not guaranteed.

Eurozone countries are to go it alone with an intergovernmental deal between themselves after Britain blocked changes to the Lisbon treaty on the grounds that e Britain be exempted from certain financial regulations.

That was his price in return for agreeing to Europe's new "fiscal compact". Britain becomes a bystander and non-contributor in the effort to save the currency.

There will be a new treaty forged simply among the 17 eurozone countries.

Is this the emergence of a new Europe in which Germany is the undisputed, pre-eminent power imposing a decade of austerity on the eurozone as the price for its propping up the currency?

Cameron refused to sign up to a revision to the Lisbon Treaty in the early hours of Friday – during a summit to save the euro – because the other EU leaders would not agree to safeguards he demanded for the City and the single market. He said no --a veto--- to fiscal union.

The UK was the only one of the 27 EU nations not signing the accord. The hardline Eurosceptics have won. Britain is now isolated---it returns Britain to the "splendid isolation" of yesteryear.

the only reason for Cameron's veto of the fiscal union is the City's fear of a Tobin ("Robin Hood") tax and the British State's addiction to the cash that flows from the finance capital.

The argument about Govt. debt in the Eurozone often means people forget about private debt. This post by P. De Grauwe includes a graph of both, revealing the much higher levels of private debt in the E-zone (higher than Govt. debt, I mean):

http://www.voxeu.org/index.php?q=node/5062

It’s a bit old (May 2010) but I suspect the basic significance is still there. De Grauwe remarks:

“While the government debt ratio in the Eurozone declined from 72% in 1999 to 67% in 2007) the household debt increased from 52% to 70% of GDP during the same period. Financial institutions increased their debt from less than 200% of GDP to more than 250%.

". With the exception of Greece, the Eurozone governments were more disciplined than the private sector in containing their debt.

". The explosion of the government debt after 2007 was the result of a necessity to save the private sector, in particular the financial sector.

Those who say that it is government profligacy that is the source of the debt crisis are mistaken".