Merkel and Sarkozy Plan 'True Economic Government'

Am I the only one who think it is good that EP elections have relatively low turnouts? The problem in European politics have always been that parties bow too much to irrational popular sentiment and too less to the interests of Europe itself. Now, it seems the problem has solved itself as the EP is mostly elected by people who actually care to inform themselves about what really matters.

GoodSamaritan said:
I call it a necessary compromise, otherwise Malta wouldn't count anything in the EP.
The EU is all about compromise and horse trading. The current systems looks unfair to many people but the political reality is that no state smaller than Spain would have agreed to anything else.
I don't think that is really the Parliament's job. The Parliament's job is to represent its voters. Compromising would the European Council's job.

kronic said:
The EU may get some revenue but that's about it. Nice, but not pressing at all for now.
Of course it is. If the EU possesses a steady stream of revenue, it is also able buy up bonds of member states to keep interest rates low.
 
Of course it is. If the EU possesses a steady stream of revenue, it is also able buy up bonds of member states to keep interest rates low.
That income stream will be rather limited. Secondly, the EU will have low quality bonds in its portfolio. If you use the money that way it pretty much has the same problem as the Eurobonds. It wouldn't be used to fix the underlying economic problems at all. Talk about wasting tax payers money.
 
Kronic said:
Secondly, the EU will have low quality bonds in its portfolio. If you use the money that way it pretty much has the same problem as the Eurobonds. It wouldn't be used to fix the underlying economic problems at all.
Then offer to provide more in exchange for achieving certain conditions (like labor market reforms). That'll do.
 
Which brings us to the other point. What you're implying here is adjustment through wage policy. Well, good luck trying to out-German the Germans (or out-Dutch the Dutch if you prefer). Remember that wages in Germany have not even kept pace with inflation for many years.
 
I call it a necessary compromise, otherwise Malta wouldn't count anything in the EP.
The EU is all about compromise and horse trading. The current systems looks unfair to many people but the political reality is that no state smaller than Spain would have agreed to anything else.
With an argumentation like that, it's no wonder people still consider them Maltese, Spanish, Irish ... when voting. The point is, we are all Europeans, and as such we should vote for the European parliament.

Of course in a federal system you need some mechanic to preserve the voice of smaller constituents. That's where actual democracies bring a bicameral system in. And currently, we already have an own commissioner for every member country, with increasingly ridiculous tasks, which only serves to diminish the effectivity of an institution that is hailed as the saviour of all of our current problems at the moment.

I don't see how the current institutions of the EU can carry what is expected of those who want to centralize it. They seem to work under the usual EU modus operandi of "Let's transfer authority there and the capabilities to carry them out will come on their own" which has never worked. I think a more centralized EU can work, but we have to wake up from our petty national reservations and throw that sissy "but always with small steps" mentality over board.

You're right. But it also makes no sense to give more power to a parliament that is largely ignored by the voters. It will take a lot of time and many little steps to transform the EP into a real parliament.
I'm aware it's kind of a vicious cycle, but it's only after the people realize the decisions made in the EP actually affect their lives when they will start voting there.
 
I'm surprised you call a parliament that values the vote of a Maltese voter more than 12 times more than that of a French one democratic.

That's literally the least of its problems. In many countries similar provisions exist to guarantee a representation of minorities which could otherwise be completely sidelined. Do you realize that if every vote had the same weight, there would probably be no representatives from Malta, Luxembourg, or Cyprus?

You have a point that the balance is way too skewed, but some disbalance is needed to guarantee at least some representation to smaller countries.

The main problem with the EP is that it keeps failing to explain its role to the public, is way too big (700-something representatives? Come on, that's not conducive to the kind of democratic debate we want to have, they don't even know each other), and it keeps moving back and forth between Brussels and Strasbourg. Also, it doesn't really have much say in who "rules" the EU - it can't select the Commission president or the individual Commissioners, it only approves their nomination by the heads of members states. Ditto for the President of the Council, the High Representative, and so on. The powers the Parliament does have are not very sexy - people don't understand their significance and thus they don't give a flying crap. Oh, and one last thing - we need pan-European parties. The parliamentary factions as they exist today in EP are not sufficient to promote the kind of trans-national democracy we want (and need).


This really is a terrible plan. It brings the single currency zone one step closer to collapse. Everyone who supports it should really think it through.

I think the time has come for your to unveil your brilliant plan how to deal with the situation (I am not being sarcastic here, I am genuinely interested).
 
I think it is a good thing given that Europe that these countries already have a united currency (monetary policy). It only makes sense that the fiscal policies be united as well other wise there is just too much chaos.
 
Any plan that requires national balanced budgets at all times is going to magnify the severity of all economic problems. It's not doable.
 
spiegel.de
Following a summit meeting in Paris, Angela Merkel and Nicolas Sarkozy have announced proposals to introduce a "true European economic government" as part of a long-term plan to battle the debt crisis. They also appear to have ruled out issuing euro bonds, at least for the time being.

So, which of them gets to wear the crown of the Economic European Empire? :lol:

You guys do realise that this plan is a pile of crap?

Realism is not appreciated, get used to it. I did. :(

1) "Economic government" - not more than another institutionalised chatting club with that Rompuy guy as head. Maybe nice, maybe not but nothing that changes anything.

And what a wonderful choice he is! Just think about it: you ant to inspire confidence in your new "european government", so you try to appoint to head it a politician from a country presently holding the modern record of inability to form a government! :lol:

The real cracker is 3), the debt brake for every member country that I think is going to be disastrous for Europe's economy. Let's go through it. Remember that the Eurozone already takes away any flexibility in terms of monetary and currency policy from its members. Now they're taking away fiscal policy as well. As monetary policy cannot suit all, possibly not even a few countries really well, national governments desperately need fiscal flexibility to soften the consequences of unfitting monetary policy. This door is now to be closed. A sensible coordination of fiscal policy would involve exactly the opposite, i.e. allowing for a combination of expansionary fiscal policy in some countries and more cautious fiscal policy in others depending on the macroeconomic situation of member countries and the Eurozone as a whole. If we get that debt brake for everyone the only tool available to adjust for differences between member states is wage policy. Of course, wage policy is a) harder to change for a government as it's mostly decided by employers and unions and b) only allows for small changes in a short period of time. In other words, wage policy is relatively inflexible by nature. I'm sure it's easy to see what it means to force such a rigid scheme of governance on a currency area with 17 very different economies and provide no tool for national adjustment at all.

It can't be forced, it won't be applied, ever. This is a smokescreen, delaying tactics while desperate attempts are made to shore up several huge banks before the inevitable defaults. Even "eurobonds" would be only a delaying tactic. The purpose is to preserve the financial system as it is today. which is to say, preserve the cause of this crisis!

European leaders still seem to believe that Europe can be rescued by cutting whereas the real problem is the utter lack of growth. If there's any way left to avoid bankruptcy than it is creating higher GDP than debt growth. Every measure they take, and that debt brake proposal adds to that, leads away from such a path. You can't stabilise the debt of heavily indebted countries if GDP flatlines. Has anyone ever studied fiscal policy under the German chancellor Brüning and its economic consequences in the early 1930's? That's what we're heading for. And some countries are probably already beyond the point where they could be saved.

There isn't any way to avoid bankruptcy except taxing the hell out of the wealthy in order to pay the debts... held mostly by the wealthy anyway! And in cases of external debts to foreigners, there is no way to avoid default, point.
The whole debt thing is theater: as that american economist who got famous for predicting this crisis (which was was easily predictable anyway) said recently, Marx was right: capitalism must guarantee consumers for its goods, or it collapses. Sooner or later, the old idea of accumulation profit meets an unbreakable wall. The idea is that the capitalist enterprise invests and then gets back its investment plus some profit. That profit must come from somewhere. If, in the overall economy, the comparative share of profits grow, the non-owners of capitalist enterprises become comparatively poorer. Wealth gets concentrated. And the logic of capitalism always encourages further concentration...

For some 30 years already in western Europe, but especially in the last 15 or so, the growth of consumption was financed by credit, which is unsustainable. The credit came from those accumulated profits, and in turn allowed further accumulation of profits, by allowing these profits an outlet which promised even further remuneration (interest). Credit growth thus reinforced the vicious system of capitalism (accumulation), all the while looking virtuous (increased profits and increased consumption - yay!). All the while until it became obvious that the debt could not be repaid. And that only becomes obvious when its interest cannot be serviced anymore - no one wants to piss in the party before it blows.

In an open capitalist system, say, a national economy engaged in trade with the rest of the world, this could be sustainable: if profits are lent out of the country and production is exported, growth of profits (and of credit) and of production can continue. But the world is now "globalized", it all went capitalist. Thus, the oft-repeated recipe "exports" cannot work for this global crisis. The only way profits can continue to grown, in the closed global capitalist system, is if they are lent out to consumers for them to buy what their other income could not afford alone. Then those same profits plus interest get lent out again. Rinse and repeat. All the while the accumulated capital in the credit bubble grows... It can't continue forever, because soon enough the interest itself becomes unaffordable to the debt-ridden consumers.
A stable system would require:
- zero interest rates (debt could potentially accumulate forever?)
- zero profits (what's the point of making a profit with zero interest rates?)
but then it wouldn't be capitalist, would it?

Typical capitalist credit bubble. Nothing new. Except... the world is now "globalized". Capitalism, in a whole world system, is visibly a Ponzi scheme. That is what scares the elites. They cannot offer the public any way out of this without exposing and discrediting the scheme.
The one valuable thing of this Ponzi scheme is that debtors fell obligated towards creditors (who happen to be the wealthy and powerful); if debtors realize that their inferior position must exist by design of the system, they'd may just, eventually (the only infinite thing is human stupidity), come to demand a different system.

Edit: Not directly related to my argument but still an interesting opinion piece to read as alternatives for saving the system are discussed: Philip Pilkington: Profits in a Capitalist Economy – Where Do They Come From, Where Do They Go?
 
The real cracker is 3), the debt brake for every member country that I think is going to be disastrous for Europe's economy. Let's go through it. Remember that the Eurozone already takes away any flexibility in terms of monetary and currency policy from its members. Now they're taking away fiscal policy as well. As monetary policy cannot suit all, possibly not even a few countries really well, national governments desperately need fiscal flexibility to soften the consequences of unfitting monetary policy. This door is now to be closed. A sensible coordination of fiscal policy would involve exactly the opposite, i.e. allowing for a combination of expansionary fiscal policy in some countries and more cautious fiscal policy in others depending on the macroeconomic situation of member countries and the Eurozone as a whole.
Are you talking about the present or the future? I can see, for example, why Greece would need fiscal rules, to prevent profligacy in the future (and also oversight to make sure they're not just cooking the books, as they and many others did with the SGP). And I can see, for example, why fiscal contraction a stupid idea in Germany in the present, which as you say needs and can afford fiscal stimulus to boost growth (especially as its own borrowings are so low). But I don't see why the debt brake needs to be applied in Germany and Greece at the same time. Is there something in the rules that says that Greece can't contract fiscally unless Germany also contracts fiscally? Indeed, is there something in the rules that says that Germany needs to contract at all? If so, then the problem is with the rule, not with the principle. It would be pretty easy to construct a fiscal rule that forced Greece to spend less, while at the same time forced Germany to spend more, given that they are both in very, very different fiscal and economic situations.

I guess the problem is in the asymmetry of the rule: there's a debt brake, but there's no "fiscal accelerator" to go along with it.
 
I guess the problem is in the asymmetry of the rule: there's a debt brake, but there's no "fiscal accelerator" to go along with it.
That's exactly what I was trying to point out. It's the end of fiscal policy as a means of adjustment for the Euro economies.


By the way, it looks like Finland made a deal with Greece. Basically, Greece has to deposit cash for Finland in exchange for loans. :lol::goodjob: Now, Austria, the NL and Slovakia want the same.

http://www.reuters.com/article/2011/08/18/us-austria-greece-idUSTRE77H4DT20110818

In other words: The EFSF is falling apart...
 
With regard to the post above, I guess the European far-left's answer is communism. Oh well, what else is new...

It's an historical inevitability, haven't you heard? :p

Time will tell. But don't believe me, I'm not the official spokesman of the european far-left. In fact I even doubt there is any european far-left left.
 
Which brings us to the other point. What you're implying here is adjustment through wage policy. Well, good luck trying to out-German the Germans (or out-Dutch the Dutch if you prefer). Remember that wages in Germany have not even kept pace with inflation for many years.

I wasn't taking about wage moderation, but rather lifting restrictions on firing workers, as these are unnecessarily restrictive in Greece.
 
It's an historical inevitability, haven't you heard? :p

Been there, tried that. Didn't work.

Time will tell. But don't believe me, I'm not the official spokesman of the european far-left. In fact I even doubt there is any european far-left left.

So you're left of the far-left that's left? :mischief:
 
Is the world really so upside down that the leaders of France and Germany believe eliminating deficit-spending as a tool is a good thing? I thought that was supposed to be the intelligent part of the world? Clearly the western world is insistent on eliminating itself as a major force of the future.

The only place left in the world with evidence-based and practical economic policies is Asia. South Korea, Singapore, etc. learned their lesson listening to idiot western leaders and policymakers back in 1998.
 
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