[clinch]

Looks like the debtor nations in the Zone are ganging up to try to force Germany to guarantee all their overspending. Could the Germans say enough is enough?

The eurozone's 'Latin Bloc' is in full revolt. The trio of French, Italian, and Spanish leaders - backed by world powers - are to push for a radical shift in Europe's economic strategy at crucial summit on Wednesday.

The package of measures includes an EMU-wide guarantee of bank deposits aimed at halting a slow bank run across southern Europe, as well as demands for full activation of the European Central Bank as a lender of last resort.

They will propose eurobonds to finance an infrastructure blitz, a sort of Marshall Plan to revive confidence even if long-term benefits will take years to feed through.

While the moves are couched in diplomatic language, the clear aim of French premier François Hollande, Italian premier Mario Monti, and Spanish premier Mariano Rajoy is to wrest control of the EU's governing machinery from Germany.

It is not clear what Mrs Merkel can concede. Germany's constitutional court has ruled that the budgetary powers of the Bundestag cannot be alienated to any EU body, implying that Eurobonds might breach the Basic Law.

A change to the ECB mandate requires a treaty change and a two-thirds majority in the Bundestag. While quantitative easing is legal under current treaties, it would set off a political storm in Germany.

All objections are surmountable. Germany can amend its constitution. Yet it is a daunting step to cross the Rubicon to fiscal union, with deep implications for democracy. Just as the Greek people must look deep into their souls this June, so must the German people.

http://www.telegraph.co.uk/finance/c...the-shots.html

[trevgo]

That's the last thing Germany wants. The relatively low Euro has helped it's exports massively. A Deutschemark v2.0 would go skywards.

[1TrueNorth]

Sooner or later there needs to be a federal europe.

[megaresp]

Originally Posted by 1TrueNorth

Sooner or later there needs to be a federal europe.

How will that help?

[Nick1966]

Originally Posted by megaresp

How will that help?

It might be the one thing which stops the euro from splintering apart.

A single Eurozone wide body co-ordinating tax and spend, with some sort of redistribution mechanism. Plus replacing seperate national government borrowing with a single eurozone wide eurobond government debt.

[clinch]

Originally Posted by Nick1966

It might be the one thing which stops the euro from splintering apart.

A single Eurozone wide body co-ordinating tax and spend, with some sort of redistribution mechanism. Plus replacing seperate national government borrowing with a single eurozone wide eurobond government debt.

How will you get people to vote for that? Or do you follow normal EU procedure and avoid asking them?

[zackai48]

Originally Posted by 1TrueNorth

Sooner or later there needs to be a federal europe.

Would the capitol be Berlin? Why can't the powers that be admit that the Euro was a stupid idea that was forced on the populous without consultation and let the countries that want to return to their former currencies. Only then will these nations break free from the shackles of the Euro.

[Nick1966]

Originally Posted by clinch

How will you get people to vote for that?

Willing to guess that few voters across the EU would agree to such a single tax and spend policy.

Originally Posted by clinch

Or do you follow normal EU procedure and avoid asking them?

Probably.

Can't helping think we are getting close to the time when:

some or all of 17 countries will adopt new currencies to replace the euro

or

eurozone will adopt co-ordinated tax and spend policies

[Nick1966]

Originally Posted by zackai48

Would the capitol be Berlin? Why can't the powers that be admit that the Euro was a stupid idea that was forced on the populous without consultation and let the countries that want to return to their former currencies.

What kind of message does that send out to the international money markets, on whose money, our governments rely to pay the bills.

We screwed up: oh and please lend us more money.

Originally Posted by zackai48

Only then will these nations break free from the shackles of the Euro.

In practical terms, exactly how will the work ?

[jmclaugh]

Without Germany the € would fall like a stone, there would be no country to prop it up.

[apaul]

Originally Posted by zackai48

Would the capitol be Berlin? Why can't the powers that be admit that the Euro was a stupid idea that was forced on the populous without consultation and let the countries that want to return to their former currencies. Only then will these nations break free from the shackles of the Euro.

The euro wasn't forced on anyone. It was agreed either by referenda or by national parliaments. Nor is there a majority of the public wanting to leave except in the fevered imaginations of British eurosceptics.

[jmclaugh]

Originally Posted by apaul

Nor is there a majority of the public wanting to leave except in the fevered imaginations of British eurosceptics.

Of course there isn't, who else would bail them out.

[Styker]

I think its hight time that EU countries started voting against what Merkel imo, is pretty much dictating has to be the way.

This financial transaction tax does not have to go through and its not going through so far in a number of countries so who is Merkel to go round refusing to budge on the issue for the whole EU?! She can't dictate to the rest of them and they should vote against what isn't in their interests generally.

Countries in Europe should only sign up to things if its in their general interests to do so though there always has to be some give and take and some compromise but to often countries are expected to sign up to things that are to their complete detriment.

As for a federal European Government, well there are some benefits to one especially on getting better trading deals with the rest of the world and if the Euro is to stay, maybe the Eurozone countries should get on with having a Federal Election/Government.

If a federal Government set was to happen though, surely that would mean we would have to vote to stay in or out of the EU in general? I can't see us retaining our current position if a federal set up went ahead.

[grassmarket]

Originally Posted by Nick1966

It might be the one thing which stops the euro from splintering apart.

A single Eurozone wide body co-ordinating tax and spend, with some sort of redistribution mechanism. Plus replacing seperate national government borrowing with a single eurozone wide eurobond government debt.

And why would the Germans vote for that, considering that it will be their pockets that are to be picked, every single minute of every single day? For that matter, would the French vote to end the 35 hour week and retirement at 62?

[jmclaugh]

Originally Posted by Styker

I think its hight time that EU countries started voting against what Merkel imo is pretty much dictating has to be the way. This financial transaction tax does not have to go through and its not going through so far in a number of countries so who is Merkel to go round refujsing to budge on the issue for the whole EU?! She can't dictate to the rest of them and they should vote against what isn't in their interests generally.

I wasn't aware she was ever dictating to the rest of the EU on a financial transaction tax and she can't anyway. It is all very well whinging about conditions Germany wants for stumping up the money in the Eurozpne but it strikes me those many of those doing so seem to want to have their cake and eat it.

Countries in Europe should only sign up to things if its in their general interests to do so though there always has to be some give and take and some compromise but to often countries are expected to sign up to things that are to their complete detriment.

As for a federal European Government, well there are some benefits to one especially on getting better trading deals with the rest of the world and if the Euro is to stay, maybe the Eurozone countries should get on with having a Federal Election/Government.

If a federal Government set was to happen though, surely that would mean we would have to vote to stay in or out of the EU in general? I can't see us retaining our current position if a federal set up went ahead.

There is no need for a federal Eurozone government let alone a federal EU government. The issue is if the ECB is to become the lender of last resort and in effect guarantee the debts of Eurozone members then strict rules and controls are needed with regard to what budgets members set which are centrally enforced.

[Nick1966]

Originally Posted by grassmarket

And why would the Germans vote for that, considering that it will be their pockets that are to be picked, every single minute of every single day?

Depends how much the Germans want to keep the euro. If they want to keep the euro, they can either do so by

• continuing to bail out countries like Greece or
• go for a single tax and spend authority.

[alanwarwic]

So is everyone else is an ostrich with their head in the sands.
European integration is the least painful solution.

I'd suggest that even sterling would become worthless otherwise.

[Styker]

Originally Posted by jmclaugh

I wasn't aware she was ever dictating to the rest of the EU on a financial transaction tax and she can't anyway. It is all very well whinging about conditions Germany wants for stumping up the money in the Eurozpne but it strikes me those many of those doing so seem to want to have their cake and eat it.



There is no need for a federal Eurozone government let alone a federal EU government. The issue is if the ECB is to become the lender of last resort and in effect guarantee the debts of Eurozone members then strict rules and controls are needed with regard to what budgets members set which are centrally enforced.

Merkel is refusing to budge on the financial transaction tax changes that Hollande was elected on and other countries seem keen on changing too.

On a federal Europe, in addition to what I've already written about it, it it would make more sense that an elected federal Government decides how to distribute money around the EU and set laws on tax and enforcing collection of it. There would also be benefits on defence rather than us having to do most of the work along with a few other Nato Countries.

[jmclaugh]

Originally Posted by alanwarwic

European integration is the least painful solution.

A very simplistic statement which until you know what it actually means leaves any comment on how painful it might be guesswork.

[Nick1966]

Originally Posted by alanwarwic

So is everyone else is an ostrich with their head in the sands.
European integration is the least painful solution.

I'd suggest that even sterling would become worthless otherwise.

Good point. In Europe, at this moment in time, what are our realistic options:

• More years of kicking the can down the road, with yet more and more rounds of bail outs and debt write offs
  
• Some or all of the 17 countries to adopt new currencies, replacing the euro. We haven't even got the stage of Greece doing that and already there are bank runs.
  
• Further eurozone integration withn a single eurozone government bond, tax and spend co-ordinator, ECB lender of last resort.
  

Economically and financially, which is the least worst ?

[jmclaugh]

Originally Posted by Styker

Merkel is refusing to budge on the financial transaction tax changes that Hollande was elected on and other countries seem keen on changing too.

On a federal Europe, in addition to what I've already written about it, it it would make more sense that an elected federal Government decides how to distribute money around the EU and set laws on tax and enforcing collection of it. There would also be benefits on defence rather than us having to do most of the work along with a few other Nato Countries.

Sarkozy was all for a finanical transaction tax too, none of them can insist it is implemented in all EU or indeed Eurozone states. It is in any case an irrelevance with regard to the core issues.

The federal Europe you describe is a pipe dream.

[Pemblechook]

German car workers on Newsnight wanted to keep the Euro .. Good for exports.

[OvertheUnder]

There would need to be a massive incident for the Germans to even think about leaving the Euro. Euroscepticism in Germany does not exist as the whole project is so wrapped up within the German political psyche.

A more than likely scenario would involve a political stand-off between Germany and the PIIGS that crashes the Euro in the process.

[Nick1966]

Originally Posted by OvertheUnder

A more than likely scenario would involve a political stand-off between Germany and the PIIGS that crashes the Euro in the process.

This political stand off could well start on 18 June, after the next Greek general election. The greeks want to stay in the Euro, but they don't want to take the medicine.

Do the Germans say:

"continue to take the medicine and you can stay in the euro. No ifs or buts."

or

"we're prepared to renegotiate"

or

"goodbye, Greece"

[biggle2000]

Originally Posted by 1TrueNorth

Sooner or later there needs to be a federal europe.

Jeez that is too scary for words. Sounds like 1939 all over again