August has now started, and this is the month Brussels notoriously empties out (together with Paris, etc.), you can’t find anyone who can actually make a decision, and so nothing can get done. But when they come back in September EU officials will face a full plate, topped by Brexit but also refugee policy (the incoming hordes have now notably shifted to Spain), Poland/Hungary, Trump, and all sorts of other things. None of those is a particularly pleasant subject, so the EU mandarins will surely cherish all the more any good news on their agenda – like Bulgaria know knocking on the door of that EU club-within-EU club, the Eurozone, as Martin Ehl recently reported for the Czech business newspaper Hospodářské noviny.

This is nothing particularly new. Rather, we’re just past an important milestone for this effort by Sofia (no, not any female but rather Bulgaria’s capital), which namely happened in June when the Bulgarian government struck agreement with Eurozone officials on a program of six economic/financial requirements the country will have to meet by June of 2019 to then be admitted into the so-called European Exchange Rate Mechanism II (ERM II), a monetary arrangement allowing a divergence of only ±15% around a set central rate. It is standard that any given national currency be subject for at least two years to ERM II before that country is allowed to adopt the euro.

Membership Requirements: No Sweat!

For Bulgaria, upholding that ±15% should be no problem, as the Central Bank has long had its currency, the lev, “shadow” (i.e. stay close to) the euro around a fixed point (and before that, the lev “shadowed” the deutsche Mark). When it comes to the three fundamental criteria for euro membership, as well, Bulgaria meets them all with room to spare:

• Inflation: 1.4% in 2017 (1.9% max allowed)
• Government budget deficit: Actually had a surplus last year of 0.9% GDP (max allowed deficit is 3%);
• Overall government debt: Now 29% of GDP (max allowed 60%)

It is hardly unknown for central bank authorities to have their national currency “shadow” a dominant neighboring currency, even though such a policy effectively means giving up control of national monetary policy to that “shadowed” money: the Netherlands authorities long had the guilder shadow the deutsche Mark, while Denmark still today does the same for its krone with regard to the euro (it’s the only other country currently within ERM II).

(more…)

The tweet reads “High time for a parliamentary investigation into the euro.” Could they be talking about Greece?

For indeed, doubt was thrown on Greece’s continued membership just yesterday, by Finance Minister Varoufakis, in the event that Eurogroup ministers refuse to accept Athens’ own ideas about how to deal with its tremendous burden of sovereign debt. This despite that fact that there is no mention in the treaties underpinning the Eurozone for any member leaving it, much less any prescribed procedure. Still, there is neither any authorization nor prescribed procedure for, say, giving birth during a transcontinental airline flight, yet that does happen from time to time; if/when the emergency arises and Greece just has to return to the drachma, they’ll surely find some way to do it, with or without formal EU treaty provisions.

In any event, this tweet (from the right-wing Dutch political blog Dagelijkse Standaard) does after all call for a parliamentary inquiry, and cuts closer to home. This is a petition directed to the Netherlands parliament, initiated by a group of political commentators led by a certain Thierry Baudet. Still only in his early 30s, Baudet already has a string of publications to his name, most of them in a Eurosceptic vein, decrying the threat to the nation-state posed by the super-national European institutions. More directly relevant, he also succeeded back in 2013 in having a referendum submitted to the Dutch Tweede Kamer – that is, he gained more than the 40,000 signatures required to put it to the attention of the parliament – which was to be “concerning the future of the Netherlands within the European Union.” The Tweede Kamer did duly consider the proposal, then rejected it.

Unsurprisingly, the group behind this latest proposed referendum has its own website, complete with a dedicated page to “Why a parliamentary inquiry over the euro?” Key to their argument is their assertion that it was assumed Northern European lands would allow themselves to become responsible for the fiscal failures of Southern European lands.

Despite what was claimed later, this perverse mechanism was amply foreseen by politicians. As Romano Prodi, president of the European Commission at the time when the Maastricht Treaty was concluded, said, “The difficult moments were predictable. When we created the euro, my complaint as an economist was (and I discussed this with Kohl and with other heads-of-state): how can we have a common currency without shared financial, economic and political pillars? The answer was: for now we have made this leap forward. The rest will follow.”

And:

It continues to surprise us how it could have been possible for such a radical decision to be paired with such little critical debate. What role did the government play here? How is it possible that politicians did not take more care over the financial stability of our country? What did those involved know precisely about the risks? And what did they not know? . . . Did people realize that this euro eventually would make necessary a very great transfer of power over to Brussels – such as the banking union, the stability pact and the upcoming budgetary union?

So they want the Dutch parliament to look into such questions, obviously with a view towards taking further concrete measures should unsatisfactory answers be revealed.

First of all, again, there is no explicit procedure available for any country now using the euro to ditch it for another currency – although, granted, that procedure can be made up on the fly, but surely not with great accompanying financial and economic chaos. More importantly, although this conservative group can probably once again get their 40,000 signatures to bring this measure before the Tweede Kamer as well, the question of the Netherlands in the euro is surely settled for now. There is no sign at all of any truly widespread political rejection by the Dutch populace of the common currency.

Indeed, economic analysis has tended to show that the euro has greatly benefited those Northern European lands heavily involved in trade and able to keep their labor costs in check – such as Germany, especially, but also the Netherlands, both of whom have seen their terms of trade steadily improve since the introduction of the euro in 1999 against Southern European lands with less ability to hold costs down. This widening gap between those advantaged and those disadvantaged by the euro contributed substantially towards getting everyone in the sovereign-debt mess we find ourselves in now – well, except for Germany and the Netherlands (again), plus a few other Eurozone countries (and Denmark) who find that they can actually ask borrowers to pay them to take their money on loan these days, rather than actually pay positive rates of interest.

This initiative must therefore be counted as merely a cry from out of the Dutch conservative wilderness. To the extent anyone takes it seriously, it is surely not constructive, in that doubts concerning any Eurozone member’s commitment to the euro are not useful just now as that grouping has to decide what to do about Greece’s new governing regime and its demands to cut down austerity. It’s rather the Greek people who need to examine the depth of their commitment to the euro, and thereby their level of support for future negotiating maneuvering by their Syriza government which we can surely expect more of in the near future

Mark your calendars: there’s a serious Eurocrisis coming up, specifically on January 25 when Greece holds elections and the anti-austerity Syriza party will likely come out on top. There’s even a serious argument to be made that it should come out on top, made among others by Economics Prof. Yanis Varoufakis of the University of Athens, who has gone so far as to offer himself up as a Syriza candidate.

He explains why he did that, and what is going on between Greece and the EU generally, in an excellent segment that I’ve embedded for you below (starts at the 4:00 mark). Do keep in mind that, generally speaking, we should all be suspicious of anything coming out of RT (= “Russia Today,” brought to you by Vladimir Putin), and it is easy to be dismayed by the blonde-airhead TV anchorwoman. But this is truly very informative.

(H/t to Yves Smith at Naked Capitalism.)

A quick note here on the latest entry on The Economist’s “Eastern approaches” blog entitled “Poland’s foreign policy: A shaky compass.” (Subscription required – well, you do get to look at one article per month for free, make it this one!)

The point here is that Poland’s Foreign Minister Radosław Sikorski sees his country’s swift adoption of the euro as a needed response to the turmoil to the East. From the article:

Ditching earlier concerns by former finance minister Jacek Rostowski, Mr Sikorski called for Poland to move rapidly to adopt the euro – the last core European institution to which Warsaw does not yet belong. “The decision about the eventual adoption of the common currency will not have just a financial and economic character, but rather it will be mainly political, dealing with our security,” said Mr Sikorski.

This view has yet to gain much traction. . . . Recent polls show about two-thirds of Poles opposed to joining the euro.

First let me note that Poland has a treaty obligation to join the euro, under terms of its 2004 accession to the European Union. But then let me add that this is an obligation to do so eventually, and that Poland will not be allowed in until its economy and the złoty pass a number of real-world tests – something over which any Polish government will naturally have a great degree of control.

But there is a larger point here, which is the strange continued attraction of the euro to certain (EU and non-EU) countries, even while other member-states regret it and some are indeed seriously suffering under it. That attraction is self-evident in the accession to the euro of Estonia in 2011 and Latvia just this past January 1. And now we have Poland – or at least that country’s Foreign Minister.

Can his assertion really be true that adoption of the euro will help strengthen Polish security? It really seems unlikely. Surely a more profound discussion is to be had concerning under what circumstances Eurozone membership really can benefit a country. It’s possible that such a discussion would sooner be characterized by many economists as a “reminder,” but surely things that we thought we knew along those lines need to be reassessed in light of the terrible track-record since the outbreak of the European sovereign debt crisis in 2009. And soon, please: Lithuania is all set to join its fellow Baltic states in the Eurozone as of January 1 of next year.

Meanwhile, beware of hysterical Polish political discourse. I don’t necessarily mean Mr. Sikorski’s assertions quoted above; I rather mean this from the end of that Economist piece: “[Polish Premier] Mr Tusk on Friday said that some members of the opposition, with their Eurosceptic views, posed a ‘mortal danger to Poland.'”

In this space we recently covered a new political party in Germany dedicated to discarding the euro. But what happens when the same thing happens from the other end of the EU’s economic spectrum?

#Grecia: nasce Drachma Movimento Democratico Cinque Stelle, il Beppe Grillo greco: “Basta austerità” #m5s http://t.co/fQaN9kp0XO

May 20, 2013 12:12 pm via The Huffington PostReplyRetweetFavorite

@HuffPostItalia

L’HuffPost

Yes, you see “Beppe Grillo” there in that tweet, which is written in Italian, and it’s certainly true that Grillo’s “Five Star Movement” is anti-euro. But I’m talking here about a new Greek party, one that was registered by the Athens authorities only last May 2, namely the “Drachma Five Stars Democratic Movement” which in its very name pays homage to Grillo’s Cinque Stelle (= “Five Stars”) movement.

What does this new party want? Mainly a referendum in Greece over whether to stay in the Eurozone. But it does have a formal five-point program:

1. Renunciation of the Memorandum signed with the “troika” (EU, European Central Bank, IMF) which has imposed the current austerity policy in return for financial help;
2. A return to the drachma;
3. “Self-development” (meaning unclear);
4. Social justice; and
5. National dignity.

This piece by Gabriele Vallin in the Huffington Post’s Italian edition does not indicate how much popular support this “Drachma 5-Star” party has attracted, but again, it’s brand-new. It does feature an interview with the party’s founder, Theodore Katsanevas, Professor of Labour Economics at the University of Piraeus. (more…)

ELSTAT: you know, it’s surprising this acronym is not better-known within the context of the economic crisis that has been raging since (roughly) 2008. And I mean in a negative sense, the way names such as Lehmann Bros., Goldman Sachs, Royal Bank of Scotland, Northern Rock, etc. now call up unpleasant associations among most economic observers.

For ELSTAT is the abbreviation (from the Greek) for the “Hellenic Statistical Authority,” the Greek government’s official statistical agency. If you are of the view that Greece never belonged in the Eurozone in the first place – and many are, including French President Nicolas Sarkozy – then ELSTAT is your villain, as it was the false statistics it submitted in the 2000-2002 time-frame which led Greece to be admitted into the club when it was not ready, and may never have been. Similarly, ELSTAT was involved back in late 2009 when Georgios Papandreou won the national elections and became Greek prime minister, only to announce shortly thereafter that his country’s fiscal situation was way worse than he, the EU, and the general public had been led to believe (by ELSTAT) – and that was what kicked off the long-running Greek sovereign debt imbroglio which even last Monday’s deal with the “troika” (EU, ECB and IMF) has surely not definitively solved.

Anyway, there’s a new ELSTAT scandal now, and Dirk Elsner over at @blicklog tips us off:

Staatsanwaltschaft erhebt Vorwurf, dass Griechenlands Staatsdefizit 2009 auf EU-Druck zu hoch angesetzt wurde http://t.co/dG4DPUPY

February 23, 2012 1:13 pm via HootBarReplyRetweetFavorite

@blicklog

Dirk Elsner

There’s also an article to the same effect in the Czech press, spotted by @Zpravy:

tiscali.cz: Řecký parlament bude šetřit údajné “nafukování” údajů o deficitu: http://t.co/NgrpIbe0

February 23, 2012 1:10 pm via twitterfeedReplyRetweetFavorite

@Zpravy

Zpravy

What is going on? Well, once again ELSTAT’s numbers are said to be in error, and that for a political purpose. This time, however, you can say that the alleged fraud is in the opposite direction: numbers not falsified to fool outsiders, but rather to fool the Greeks themselves! The Athens public prosecutor now asserts that the Greek budget figures were actually exaggerated back at the end of 2009 – just after Papandreou had taken office – and this at the request of the EU. Specifically, the EU wanted to see a budget deficit figure of 15.4% – and duly got it – rather than the 12% which was reality. Why? For ammunition to use to browbeat the Greeks into the tough austerity measures they passed/started to pass then.

A Greek parliamentary committee is going to look into this. For now, the suspicion remains that ELSTAT is an agency not to be trusted by anyone, whether on the home or the visiting team. There is also sure to be an additional, unpleasant political effect if the Greek electorate starts to feel it was misled into adopting the painful budget/pension/wage cuts the government undertook to mollify the EU and to deal with its fiscal situation.

The beginning of the year coming up, 2012, offers a rather bittersweet anniversary. Do you remember? It was from midnight on 1 January 2002, literally as fireworks still lit up urban skies, that euro banknotes first issued from ATM machines inside the 12 original Eurozone members, and that banks and merchants first returned eurocoins in change, all of those with a national emblem reflecting where they had been minted on one side.

No prize for guessing why any commemoration of this 10-year milestone is lacking so far in the press – everywhere I look, really. For 2012 promises to be a difficult year for European national finances, and therefore for the euro; to many, an exit from the Eurozone of one or several states is likely, and from that possibly even the common currency’s “collapse” (although I think that, no matter what, there will be a rump core of states – Germany, Netherlands, Finland, etc. – still using it for quite a while).

But enough of this depressing talk! We have all read and heard quite enough of it, at least before the onset of the holiday season (when the bureaucrats and bank officials in charge left their desks for a while).* Let’s rather follow the Luxembourg lead and consider the euro from a different perspective:

http://t.co/eNBpc2Z7 Dix ans de l’euro Pas vraiment de mixité dans les porte-monnaie http://t.co/b3mtHfyx

December 27, 2011 12:40 pm via HootSuiteReplyRetweetFavorite

@luxembourg_news

news luxembourg

That perspective is “integration,” always a hot European topic: to what degree are the various European peoples mixing with each other and getting along while they do so? Except that here, in this essential piece from the French-language Luxembourg paper L’essentiel (no byline), the subject is rather the degree to which all the various eurocoins are mixing with each other in people’s pockets. The lede:

Ten years after the arrival of the euro, the coins which sport a national symbol on one face are not yet totally mixed in European wallets.

(more…)

The scoop ultimately belonged to the Financial Times, but that article is ensconced behind their semi-porous paywall. So here at €S we had to get the news from Lidové noviny, from the Twitter alert by @cznews (Oh no! Not Rozpočtoví hříšnici!):

Rozpočtoví hříšnici v eurozóně zaplatí pokutu ve výši 0,2 % HDP: Země eurozóny, které v budoucnosti po... http://bit.ly/9X8tCn #czech #news

September 24, 2010 9:09 am via twitterfeedReplyRetweetFavorite

@cznews

Czech Business News

And a scoop it truly is, for the FT journalists (Peter Spiegel and Joshua Chaffin) have unearthed proposed “legislation” set to be officially unveiled by Economic and Monetary Affairs Commissioner Olli Rehn next Wednesday, which their article terms “the EU’s most ambitious attempt to reorder its economic governance since this spring’s debt crisis that nearly destroyed the single currency.” Basically, the Commission would step up to take up a role in examining the national budgets of the 16 Eurozone member-states in a big way, with the authority to impose fines of 0.2% of GDP on governments which “consistently fail to bring down their public debt levels” – or “fail to control their annual spending,” or “fail to reform their economies to improve their competitiveness.” Once having decided to fine a member-state, the Commission under the proposal could only be stopped by a qualified majority vote from the European Council within 10 days of the decision. (Similar rules for member-states still outside the Eurozone will apparently be forthcoming later.)

Even just ignoring recommendations about how to improve national competitiveness (from the Commission presumably; and so how can they really be described as “recommendations”?) could make a government liable to a 0.1% of GDP fine. And, somewhat ludicrously, the Commission would also maintain a productivity data “scoreboard,” sort of like the running list of grades on an elementary school classroom wall.

Pretty amazing – especially when those of us with any sort of historical memory (it need not go back any further than ten years or so) recall the Stability and Growth Pact that was a key component to the introduction of the euro at the end of the 1990s. That also prescribed monitoring of (Eurozone) member-states’ public finances by the Commission; and it also prescribed “sanctions” (initially fines) for those governments who continued to violate the fiscal rules (budget deficit less than 3% of GDP, national debt less than 60% of GDP or getting there) after repeated warnings.

But it didn’t work: among the first to break these rules were the giants making up the EU’s “axis,” namely Germany and France, and no one ever dared to try to punish them in any way. Besides, there was always the fundamental bit of illogic in such arrangements of trying to punish by means of a monetary fine a government which has gotten into trouble because it doesn’t have enough money available.

So Why Now?

What’s the difference this time, that makes Commission staff think that these sorts of proposals will be accepted, and that they even will work if enacted to influence member-state government behavior? Obviously it’s the big Greek/Spanish/Portuguese/Irish/etc. debt crisis of 2010, which in May prompted the panicked assembling of a €700 billion+ support fund for states in trouble with their sovereign debt. It’s by no means clear that that will be enough to head off trouble; it’s by no means clear, for example, that Greece will in fact be able to avoid default (or, probably, the same thing camouflaged as debt “restructuring”).

Neither is it clear that member-states will be at all receptive to these latest Commission proposals as they are formally presented next week (together with similar ones from Council President Herman van Rompuy). It’s hard to avoid the thought that this sort of supervision of their budget processes from an external, super-national body of experts, backed up by sanctions with financial teeth, was not what most if not all of them thought they were getting into when they joined the EU and then the Eurozone. That historical process of European integration is likely about to face a decisive “gut check” moment, coming up next week.

The finance blog Naked Capitalism today linked to a current article of high interest which happens to be available only in a foreign language, in this case French. I’m referring to the interview with French Finance Minister Christine Lagarde in the business newspaper Les Echos – newsworthy at any time, but of crucial interest appearing just now.

This is not the first time this has happened on Naked Capitalism, but my intent here is certainly not to scold. In many of those previous instances I have been happy to step in and provide a translation of the article in question on this site, and I do the same below after the jump with the Lagarde interview. The piece’s lede is “‘There’s a determination to construct a new edifice, to reinvent the European model,’ declared the Minister of the Economy in an interview with Les Echos.” (Interviewer’s questions are in bold.) (more…)

Writing in the Walloon (i.e. Belgian-French) business newspaper L’Écho, in a piece somewhat sarcastically entitled The euro, our Savior, Marc Lambrechts makes a brief macroeconomic survey of the current European scene and comes up with a couple paradoxes. It looks like everybody is feeling better now about the business conditions, as surveys carried out within the Eurozone among both businessmen and consumers show. But this might be nothing more than spring-fever; Lambrechts prepares us for the shock that first-quarter 2010 economic reports are going to bring, showing a marked slowing-down then (e.g. German GDP drop of 0.4%) caused mainly by the severe winter weather and the sharp drop in auto-sales from the expiry of all those national “cash-for-clunkers” purchase-subsidy schemes.

Surely recovery will come about eventually, although with regard to Europe generally economists at the OECD are not optimistic about that happening until the second half of this year. One way for Germany to expedite that for itself, though (since the Germans earn so much from exports), is to get the euro to fall in value against the other major world-currencies – a process to which nothing has contributed more lately than the continuing confusion in the financial markets over Greece’s fiscal problems, which German obstinacy and tight-fistedness at the EU level has only prolonged. “A curious paradox,” Lambrechts calls this.

UPDATE: Strangely, the performance-vs.-confidence balance seems to be reversed in the US, as per this article from the New York Times.

Today is the day EU heads-of-government convene in Brussels for yet another summit. There will be an elephant in the room, a problem that needs to be handled – Greece, of course – but which some (mainly, but not only, Germany) don’t want to handle just now. So, bizarrely, the summit meeting itself will not have Greece on its agenda; rather, there will be a meeting called of all Eurozone heads of government (16 of them) just prior to the main summit event to address the Greek problem.

I learn this from the preparatory blogpost to the summit provided by the Economist’s “Charlegmagne” correspondent, and I have to admit that, here, that source (in English, of course) is the best provider of information and analysis that I have been able to find. Among other things, his main insight (as embodied in his column’s title, “Why Greece is not suffering enough yet”) that Greece will only be bailed out after it has been forced to suffer considerable economic pain – namely to set an example to other potential fiscal miscreants – is spot-on. And he also reports (although indirectly, from FT sources) the very valuable information of what Germany is demanding to help Greece: 1) Greece must first exhaust all other sources of finance from the markets; 2) It must then get as much as it can from the IMF; and 3) Then Germany will help, but will at the same time demand “tough new rules on debts and deficits that will impose more budgetary discipline than before, even if that involves changing the treaties.” (more…)

The financial travails of the Greek government go on, and will do so for some time even in the best of scenarios. So at least one thing is fixed: simple arithmetic quite clearly shows a noticeable imbalance in that country’s public financial resources and the amounts it customarily spends. Unfortunately, all other considerations surrounding that predicament and how best to address it seem to be stuck in a kaleidoscope-like flux.

Take for example the blogpost found on this site a couple weeks ago: there, resort to the IMF to assist Greece out of its bind was unthinkable, and the proposed solution – suggested by no lesser figure than the current German Finance Minister Wolfgang Schäuble – was instead to set up some sort of Monetary Fund within the institutions of the European Union. You can scratch that now; according to no less than Bundeskanzlerin Angela Merkel (who of course outranks Schäuble), IMF involvement would be perfectly OK and, if there is to be some sort of within-the-EU Monetary Fund, then it certainly won’t be able to appear in time to have anything to do with solving the Greek case. Oh, and another point I made was that the preferred technique so far of EU heads-of-government for dealing with the Greek situation was simply to issue declarations of support without actually doing anything to back them up, and that is also no longer completely true. Mind you, it’s not that the EU leaders now are trying to back them up; it’s that some, such as Bundeskanzlerin Merkel, don’t even want to talk about it any more, including shutting Greece’s problems off of the agenda for another EU summit meeting scheduled to be held next week.

But it gets even worse, as we see in an article in today’s issue of the Dutch business newspaper Het Financiële Dagblad. Merkel now is willing to countenance IMF involvement, but Nicolas Sarkozy still insists publicly that that is out of the question. Furthermore, the French President (together with Jose Manuel Barroso, Chairman of the European Commission) does want to talk about Greece at next week’s summit, at least to the extent of issuing another ringing declaration that the country will not be let down by its EU brother-states – thereby accomplishing a lowering of its borrowing costs, at least for a while.

Unfortunately, it seems that an IMF team has already been called in to take a look at the Greek situation, according to this HFD piece. Plus, the suspicion remains (although it is mentioned elsewhere, not here) that Sarkozy mainly wants to shut out the IMF in order to deny credit/glory to that organization’s head, Frenchman Dominique Strauss-Kahn, who might well run in 2012 to replace Sarkozy as French president. But this now-open disagreement on fundamental aspects of how to deal with the situation between the heads of the EU’s two leading states can only worsen investor confidence in Greece’s finances, and thereby the situation as a whole.

Greece has been having its well-known fiscal problems, but there’s no way that it should resort to going to the International Monetary Fund for money to help out. Quite apart from some technical problems with that approach (e.g. the IMF generally tells you what to do with your monetary policy, in exchange for getting its money; as a member of the Eurozone, Greece has no control over its monetary policy), that would simply be an intolerable political gesture showing the world that the European Union is incapable of cleaning up its own financial problems.

But then what is the EU to do in light of continuing Greek fiscal weakness? Why, set up its own version of the IMF! Call it, for now, the EWF (Europäische Währungsfonds) – yes, using the German term, since it was German Finance Minister Wolfgang Schäuble who got the whole idea started with remarks he made this past weekend. But the idea was further endorsed (at least in a vague way) yesterday by the EU’s man-on-the-spot Olli Rehn, the new EU Commissioner for Economic and Monetary Affairs. For now, it is still nothing but an idea, but that also means it can go in any of a number of directions, something pointed out in the very title of an analysis in the German commentary newspaper Die Zeit: The Fund can be a savior or a bankruptcy-administrator. (more…)

I’d like to take up again the subject of the rather unconventional German governmental response – so far – to the surging economic troubles to be found in Germany as well as more widely, prompted as I am to do so by the reader response I’ve received. You might recall that we can summarize that response as “Times might be tough, but there’s no need for this government or any other to spend huge sums, go way into debt, or otherwise endanger the EU’s Stability Pact that is supposed to underpin the euro.” (But also remember that this unorthodox position seems to be held only at the German government’s top levels, with plenty of insistent calls to start spending coming from elsewhere, including lower-down in that same government.)

This whole question in its broader sense – which could be phrased, ¡¿Caramba!, what can we do to stop the onrushing Great Depression? – is put into sharp relief by a commentary from Thursday in the Financial Times by the historian Niall Ferguson* (in English of course: The age of obligation, h/t to Naked Capitalism). (more…)

The leading Dutch daily NRC Handelsblad had an interesting item over the press conference given by Minister of Finance (and Cabinet chairmen in the absence of Dutch premier Jan Peter Balkenende, who is visiting China) Wouter Bos, which we can see in the article’s headline: Bos alludes to extension of French EU chairmanship.

From the very beginning of the European Union (i.e. from 1958; it was then known as the European Economic Community) the member-states have taken turns, at six-month intervals, at assuming the “EU presidency,” although the role is more-accurately described as the presidency/chairmanship of the Council of the European Union, which is the legislative forum for the member-states and usually the most-powerful of the EU’s component institutions. Naturally, the queue of countries waiting to serve their turn as president includes all EU member-states, and it was in the first half of this year that the first country from the great 10-country EU enlargement of May, 2004, had its turn as president, namely Slovenia.

The thing is, the second half of 2008 has proved to be far-from-normal times. First there was the diplomatic crisis over the conflict between Russia and Georgia, and now we have the international system of finance seriously in need of some restructuring. France is now EU President, and French president Nicolas Sarkozy has by all accounts done a credible job in responding to the worldwide financial panic. (His intervention in the Russian-Georgian conflict to secure the cease-fire was subject to rather more mixed reviews.) The comfort the EU has had with Sarkozy as point-man on that crisis may have much to do with the French president’s own personal qualities, but it also stems from France’s status as one of the EU’s major powers and its deep and capable governmental machinery. What if one or more of these grave problems had arisen during the Slovenian presidency: could President Danilo Turk and the Slovenian government have effectively handled the task of leading the EU response? (more…)

It was heartening to read, from this European vantage-point, the article about Suddenly, Europe Looks Pretty Smart in the New York Times last Saturday, mainly describing the European “bailout plan that has now set the pace for Washington, not the other way around, as had been customary for decades.” At the same time, so far the poster-child victim of the financial crisis has been poor Iceland, a country that is rapidly running out of foreign exchange with which to pay for any imports and so is in contact with the International Monetary Fund for a rescue. But Iceland has gotten some company in the IMF petitioners’ ante-room recently from (among others, but just to name a European country) Hungary. The three Baltic states – Estonia, Latvia, and Lithuania – are likely soon to join them there, although of course the European Union is also offering its own assistance.

So Europe may look “pretty smart,” but still European countries can suddenly find themselves in a deep financial hole in the present dire international conditions – yes, even EU member-states like Hungary and the Baltics. The one common denominator that seems to remove a European state from vulnerability, though, is membership of the Euro-zone, i.e. those 15 states out of the 27 member-states of the EU who use the euro as their common currency. Hannes Gamillscheg of the Frankfurter Rundschau recently picked up on this phenomenon (The guardians of the crown – alone) but from the point-of-view of a couple of those countries now outside the Euro-zone who in the past have explicitly rejected opportunities to come inside, namely Denmark and Sweden. (So the “crown” in the article’s title refers to the two different “crowns” that are those countries’ currencies.) (more…)

Sorry, today I’m not going to cover the G8 summit on Lake Geneva, at Evian. From the press coverage you indeed get the impression, as Elisabeth Bumiller of the New York Times (registration required) puts it, of “a messy family reunion,” where the main thing people are interested in is who avoids whom, who smiles at whom, who shakes whose hand and how enthusiastically, etc. This even in the German press, as in Die Welt’s Versöhnlicher Handschlag (“handshake of forgiveness”), or the FT Deutschland’s Bush schenkt Schröder drei Minuten (“Bush grants three minutes to Schröder”). Then, on the other side of the police barricades, you just have whatever credibility the arguments of the “anti-globalists” retain being trashed along with the cars and shop-windows that are the target of that minority of demonstrators who see the occasion as another chance to have some violent fun and quite likely get away with it, since the police can’t bash or arrest them all.

Apparently the summit continues on into today, so the press coverage will likely merit a better look later on. German Chancellor Gerhard Schröder didn’t even make it out to the lake until late last night, but he had a good excuse: He was busy at a special congress of his Social Democratic Party (SPD), gaining party approval for an ambitious program of retrenchment of Germany’s welfare state that he calls “Agenda 2010.” That, as even the Guardian points out in today’s leader, is the sort of major development that merits attention. (more…)