[D66] Merkel and Sarkozy propose financial dictatorship

[Antid Oto]

Merkel and Sarkozy propose financial dictatorship
By Peter Schwarz
18 August 2011

German Chancellor Angela Merkel and French President Nicolas Sarkozy met Tuesday
at an emergency summit in Paris to discuss how to contain the euro crisis and
calm the markets. The end result, however, fell far short of the expectations
that had been raised.

Merkel and Sarkozy agreed on three proposals intended to demonstrate what they
declared to be their “determination to maintain the euro.” However, they did not
go beyond previously discussed measures that experts give little chance of being
realized.

First is the creation of a “European economic government” to better coordinate
the economic and financial policies of the 17 euro zone countries. Merkel and
Sarkozy proposed that the euro zone government leaders meet for this purpose
twice a year under the chairmanship of European Union Council President Herman
Van Rompuy.

Such an economic government had been announced previously at a special EU summit
in February of this year, and that announcement failed to stem the euro crisis.
As a result of a joint German-French initiative, Van Rompuy was then tasked with
working out a “Pact for the Euro,” which was adopted in March at a second
special meeting.

The pact commits the euro zone nations to coordinate closely on financial
matters, to strictly limit public debt, and to accept common goals regarding
wages, pensions and taxes. In return, the German government agreed to accept an
increase in the euro rescue fund and the establishment of a permanent euro
bailout mechanism.

Merkel and Sarkozy proclaimed in Paris in the spring, “Germany and France are
determined that 2011 will be the year of new confidence in the euro.” They made
the same pledge using almost identical language at their summit on Tuesday. How
the new proposal differs from the previous one is unclear.

The second proposal made by Merkel and Sarkozy this week is also not new. By
mid-2012, all 17 euro zone countries are to enact a constitutionally anchored
upper debt ceiling, along the lines of the German model. This is supposed to
ensure that all countries maintain strict austerity measures, regardless of
election results or changes of government.

Since in most euro zone countries a constitutional amendment requires a
two-thirds majority, there is little chance that this proposal will be
implemented, even if all governments were to accept it, which is by no means
certain. In France, Sarkozy does not possess the necessary majority for such a
decision.

Even the third proposal by Merkel and Sakozy—a tax on financial transactions—has
no chance of being realised, according to experts. Such a tax would be effective
only if the UK and the US followed suit, but they reject this course of action.
The proposal is designed to draw in supposedly “left” forces that have long
demanded such a “Tobin Tax.”

The reaction of the German media and financial experts to the summit largely
oscillated between disappointment and ridicule. “Big words, small deeds,” wrote
Spiegel Online. “A mini-reform for Europe,” declared Handelsblatt.

Commerzbank said of the outcome of the summit, “The results were expected and
will hardly provide the euro with a tailwind.” European stock markets opened
Wednesday in the red, but recovered slightly during the day.

Merkel, Sarkozy and other European leaders have lost control of the crisis that
began in 2007 in the US subprime market, spreading to the banks in 2008 and now
focused on European government debt. The trillion-euro bank bailouts have proven
as unable to overcome the crisis as the brutal austerity programmes to which
Greece, Ireland, Portugal and other highly indebted countries have had to submit.

Since Merkel and Sarkozy announced their “Pact for the Euro” in February, which
was supposed to rescue the common currency, there have been fortnightly summits
held on a bilateral, European and international level. Despite all this, the
debt crisis of the smaller states on the periphery of the euro zone has spread
to Spain, Italy and now threatens France. Meanwhile, economic growth in Europe
and Germany has collapsed, which will further aggravate the debt crisis.

The stock market panic of the past two weeks has been fuelled by rumours, among
others that the rating of French government bonds may be lowered and the largest
French bank, Société Générale, faces payment difficulties. President Sarkozy
invited the German chancellor to the crisis summit in order to calm the markets.
But the result of the meeting means that the next crisis summit cannot be long
in coming.

Despite the meagre outcome, the meeting between Merkel and Sarkozy was more than
a failed public relations event. Both signalled to the financial markets their
willingness to push through further cuts programmes and the establishment of a
kind of European financial dictatorship. They just need more time.

Even before the meeting, it was clear that the euro, and with it the European
Union, cannot be maintained if Germany does not reach deeper into its pockets to
satisfy the creditor banks. So far, the German government has always insisted
that each country is responsible for its own debts and tied its support for the
euro rescue fund to tough conditions.

This course is proving hard to maintain after the austerity measures imposed on
Greece and the other highly indebted countries have driven them into a deep
recession, and now Spain, Italy and France must pay ever-higher interest on
their debts. As a result, a fierce debate has erupted in Germany over the
question of how much money must be provided to defend the euro.

Although economists are agreed that a failure of the euro would throw the
export-dependent German economy into a disastrous crisis, the Free Democratic
Party (FDP) and other members of Merkel’s coalition government categorically
reject the establishment of so-called euro bonds. Other members of the coalition
government, and especially the opposition Social Democratic Party (SPD) and
Greens, regard this as the only way to save the euro.

Such common European bonds would reduce the interest burden of highly indebted
countries considerably, while Germany and other countries would have to pay
higher interest rates.

Shortly before the summit, signals came from the German government that it would
no longer categorically oppose the issue of euro bonds. Currently, however,
Merkel is unable to take such a decision without jeopardizing her governing
majority.

For his part, in deference to Merkel’s plight, Sarkozy has not spoken out openly
in favour of euro bonds. He has left it to lower-ranking members of his
government to make the appropriate noises to the media. At the end of the
summit, he said, “Perhaps we can imagine such bonds at some point in the future
at the end of a process of European integration. But not at the beginning.”

Germany is linking extremely harsh conditions to any consent to euro bonds.
Countries that wished to use such bonds to finance government spending would
have to submit their financial, fiscal and labour market policies to the
dictates of the European institutions which—like the European Central Bank—are
supposedly “independent,” i.e., subject to no democratic control.

This process of ending any accountability of government to the popular will is
already well advanced. “The cancer of contempt by European elites for
parliamentary accountability, for some two hundred years of the principles of
responsible government, is metastasising as the euro zone crisis deepens,”
writes Britain’s Observer.

The proposals that Merkel and Sarkozy presented in Paris proceed further in this
direction. The “economic government” they advocate still has few concrete
contours, but it points clearly towards a dictatorship of the most powerful
European financial interests over all aspects of social life. The balanced
budgets they demand means the disempowerment of parliaments, which would lose
their most important power—deciding on state expenditures and revenues.


http://wsws.org/articles/2011/aug2011/summ-a18.shtml