Germany leads the EU

[Al.]

Stratfor has plenty of updates on Germany's designs for consolidating control over the EU even more than it currently exerts, in its 2012 annual report. (Note to mods: This content, per Stratfor's web site, is offered for free; I'll try to be brief, though.)

The European Union and eurozone will survive 2012, and Europe's financial crisis will stabilise, at least temporarily. However, Stratfor expects Europe to continue its long, painful slide into deepening recession. We expect accelerating capital flight out of peripheral European countries as investors in Europe and farther afield lose confidence in the European system. We expect financial support measures to be withdrawn on occasion to maintain pressure on governments to implement austerity, which will lead to financial scares and extreme volatility.

However, the driving force behind developments in Europe in 2012 will be political, not economic. Germany, seeing an opportunity in the ongoing financial crisis, is using its superior financial and economic position to attempt to alter the eurozone's structure to its advantage. The core of this "reform" effort is to hardwire tight financial controls into as many European states as possible, both in a new intergovernmental treaty and in each state's national constitution. Normally, we would predict failure for such an effort: Sacrificing budgetary authority to an outside power would be the most dramatic sacrifice of state sovereignty yet in the European experiment — a sacrifice that most European governments would strongly resist. However, the Germans have six key advantages in 2012.

• First, there are very few scheduled electoral contests, so the general populace of most European states will not be consulted on the exercise. ...
• Second, Germany only needs the approval of the 17 eurozone states — rather than the 27 members of the full European Union — to forward its plan with credibility. That the United Kingdom has already opted out is inconvenient for those seeking a pan-European process, but it does not derail the German effort.
• Third, the process of approving a treaty such as this will take significant time, and some aspects of the reform process can be pushed back. ... Amending national constitutions to satisfy Germany will be the bitterest part of the process, but much of that can be put off until 2013, and judgement by European institutions over how the revision process was handled comes still later. ...
• Fourth, the Germans are willing to apply significant pressure. Nearly all EU states count Germany as the largest destination for their exports, and such exports are critical for local employment. In 2011, Germany used its superior economic and financial position as leverage to help ease the elected leaderships of Greece and Italy out of office, replacing them with unelected former EU bureaucrats who are now working to implement aspects of the German programme. Similar pressures could be brought to bear against additional states in 2012. Those most likely to clash with Germany are Ireland, Finland, the Netherlands and Spain. Ireland wants the terms of its bailout programme to be softened and is threatening a national referendum that could derail the ratification process. ...
• Fifth, the Europeans are scared, which makes them willing to do things they would not normally do — such as implementing austerity and ratifying treaties they dislike. Agreeing to sacrifice sovereignty in principle to maintain the European economic system in practice will seem a reasonable trade. The real political crisis will not come until the sacrifice of sovereignty moves from the realm of theory to application, but that will not occur in 2012. ...
• The economic deferrment of that pain is the sixth German advantage. Here, the primary player is the ECB. ...

So look out for Germany attempting to alter Ireland's constitution. The EU was always and from its beginning a vehicle to advance German interests; a new version of the old German empire.

[McDave]

Still beating that old Blechtrommel, Al.?

[Socratus O' Pericles]

You're a really funny guy -hilarious in fact. What with the S&P downgrade of France and the ongoing wildness in Greece & Hungary to name but two. The lack of any game changing role for the ECB and the way austerity is really solving the crisis here and in other peripherals one can be forgiven for wondering what exactly Germany is up to. Do they see advantage for themselves and are they exploiting it to the full-I'd say yes.

[McDave]

You're a really funny guy -hilarious in fact. What with the S&P downgrade of France and the ongoing wildness in Greece & Hungary to name but two. The lack of any game changing role for the ECB and the way austerity is really solving the crisis here and in other peripherals one can be forgiven for wondering what exactly Germany is up to. Do they see advantage for themselves and are they exploiting it to the full-I'd say yes.

I suppose I'm kind of funny.

But let's be serious for a moment.

1. Greece doesn't amount to a hill of beans in the ultimate outcome of the Eurozone. The various haircuts are putting Greece in the position where *it* decides whether or not it wants to stay in the Euro. If not, then a large part of Greece's private sector debt has been written into the books. Thus eliminating most of Greece's negative ramifications for the EZ overall.

2. Hungary amounts to an even smaller hill of beans. The impact of it's seriously crap economy and polity on the EZ has been expressed in a single notch reduction on Austria's rating.

3. The ECB's role is legally limited. Once the EFSF becomes an EMS, the ECB can back away from supporting sovereigns and concentrate on EZ banking and finance. The game-changer will be EU politicians focussing political fire on sovereign debt management, thus leaving the ECB to focus on what it's meant to do.

4. The 'austerity' mantra is phoney baloney. It seems to be the argument du jour of the left, which seems to think all steps to control national overspend is anathema. And that the solution is to keep on borrowing. From some mythical lender. All the while imposing unspecified targeted cuts on unspecified targets. All the while excoriating 'banksters' and capitalism generally.

5. As for the Germans? Let's leave the hard-core insinuation to Al., shan't we?

[shiel]

The referendum when it comes will decide whether we remain in the euro or rejoin the sterling link. It is up to us to decide.

[YouKnowWhatIMeanLike]

The referendum when it comes will decide whether we remain in the euro or rejoin the sterling link. It is up to us to decide.

What do you think it will take to link to the sterling? And what benefits do you see in such a link over re-introducing the punt?

[Socratus O' Pericles]

I suppose I'm kind of funny.

But let's be serious for a moment.



3. The ECB's role is legally limited. Once the EFSF becomes an EMS, the ECB can back away from supporting sovereigns and concentrate on EZ banking and finance. The game-changer will be EU politicians focussing political fire on sovereign debt management, thus leaving the ECB to focus on what it's meanant..............

The mainstream media are really agreeing with you on this one:

[QUOTEThe decision may add to the debt problems as it is likely to increase euro zone borrowing costs across the board.

The move could trigger a series of downgrades of large European banks, companies and government entities. This could include the European Financial Stability Facility, or EFSF, the fund created to rescue troubled euro zone countries. A downgrade of the EFSF could increase its borrowing costs, reducing its ability to protect the currency bloc's weaker members. n Friday.
][/QUOTE]

France among 9 euro countries downgraded - RT News

I'm listening to that Rolling Stones song gimmie shelter as I type-apochryphal or apocolyptic?

[McDave]

The mainstream media are really agreeing with you on this one:

The decision may add to the debt problems as it is likely to increase euro zone borrowing costs across the board.

The move could trigger a series of downgrades of large European banks, companies and government entities. This could include the European Financial Stability Facility, or EFSF, the fund created to rescue troubled euro zone countries. A downgrade of the EFSF could increase its borrowing costs, reducing its ability to protect the currency bloc's weaker members. n Friday.

France among 9 euro countries downgraded - RT News

That may well make the EFSF more expensive. But it won't make it redundant as it will still be able to cover Greece, Ireland and Portugal. And then some.

IMO, it will add impetus to member state efforts to control costs. Of course it ratchets up pressure on Greece. Whether Greece can handle that pressure is another question.

[McDave]

I'm listening to that Rolling Stones song gimmie shelter as I type-apochryphal or apocolyptic?

Nothing wrong with the Stones! Try listening to 'Happy' off 'Exile'!

Or even 'Soul Survivor' (for the Euro!!!)

[Al.]

Now we have a similarly-titled article from the Los Angeles Times, with rather regal-sounding overtones from German newspaper editors mentioned...

The plan that Europe is pursuing to save the euro currency bears an unmistakably German stamp, with its insistence on solemn pledges of fiscal rectitude, stiff austerity measures and punishment for countries that stray. This week, nearly all of the European Union's 27 nations are due to sign a pact on fiscal discipline that was largely written in Berlin.

Despite the growing chorus of detractors and indicators showing that austerity is strangling economic growth in ailing nations, Merkel has refused to yield, and no fellow European leader has been strong enough to overrule her.

"She's the queen of Europe," said Josef Joffe, editor of the newspaper Die Zeit. ...