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« California Sales Tax Revenues Nosedive By 33.5% | Main | The Political Euro Revolt Spreads To Austria: “Europe Can Only Function If Every Country Has Its Own Currency” »
Tuesday
Aug142012

German Bailout Rebellion: “We Have Euro-Anarchy”

For German Chancellor Angela Merkel and her ilk, it’s going to be a steamy August and an even steamier September and October with political battles left and right, to be fought mano a mano, as the Eurozone debt crisis and the growing bailout rebellion in Germany are migrating from parliamentary discussions, closed-door meetings, and shaky EU summit—21 of them so far—to electoral politics. Voters may finally have a say.

She has consistently driven her agenda towards a more integrated Europe, but her solutions to the debt crisis have butted into the German constitution. The Fiscal Union treaty and the ESM bailout fund are currently being dissected by the Federal Constitutional Court, with a decision due on September 12. These mechanisms would transfer budgetary sovereignty and other rights from the Bundestag to the EU government, and thus from voters in Germany—or Italy and Spain, for that matter—to unelected bureaucrats in Brussels.

More mechanisms with sovereignty transfers have appeared on the horizon as the EU government has embarked on a power grab—supported by many national politicians with visions of upward extensions of their careers. Might German Finance Minister Wolfgang Schäuble be dreaming about a promotion to EU Finance Minister? And the inevitable Merkel to EU President?

Thus, a few weeks ago, Schäuble had voiced the word referendum, sending shockwaves through the system. With that word, he’d called for a new constitution that would permit the transfer of sovereignty. A constitutional convention would draft it, and the people would vote on it. Politicians on all sides jumped in behind him. On the right, coalition partner CSU was enthusiastic, particularly Bavarian Minister-President Horst Seehofer. Saturday it was Foreign Minister Guido Westerwelle (FDP) who came out in favor. The next day, it was Sigmar Gabriel, President of the center-left Social Democrats (SPD) who wanted “to ask the people.” But the agendas couldn’t be more different.

Seehofer wants to drive a wooden stake through the heart of the mechanisms that transfer Eurozone debt to Germany, such as Eurobonds or a banking union. And he sees the referendum as a chance for voters to say heck no! His party faces strong opposition in Bavaria from the Freie Wähler (Free Voters) who have demonstrated in the streets against a future where a “child, just after being born, is already liable for the bailouts that great-aunt Merkel had signed” [Bailout Rebellion Reawakens in Germany].

Westerwelle might be more interested in creating a European constitution, an effort that had already disastrously failed when the Constitutional Treaty, signed by the 24 member states in 2004, was rejected by French and Dutch voters in 2005. They’d been given a vote. Germans had not.

Gabriel lashed out against Merkel. The liabilities from the bailouts were already enormous, he said, but “without control.” Merkel is “tolerating with a wink” that the ECB buys sovereign debt of Spain and Italy, “while her party colleagues criticize it.” Through the bailouts, Merkel had already created a “secret debt union,” but didn’t want to tell the people. He accused her of always acting too late and without a “clear crisis solution strategy.” It could not be that there is a common currency, he said, “but other than that, everybody is doing whatever they want.” While some countries might not increase their taxes and run up deficits, Germany would have to pay in the end. “Today we have euro-Anarchy,” he said.

His solution to the euro-Anarchy: Eurozone-wide mutualization of debt linked to a centralized control of national budgets by the European government, in which he would no doubt play a large role. The Greens are already in his camp.

Just when there is less agreement within the Eurozone than ever before, and more tensions and discord, all seventeen member states should suddenly fuse together into a solidarity that has never before existed, and integrate into a happy union, subservient to a mega-federalist construct run mostly by unelected bureaucrats, at the expense of taxpayers in Germany, France, and elsewhere.

Even in the US, after two hundred years and a civil war, states are still responsible for their own debts, though we’ve come close to Gabriel’s model via the indirect federal bailout programs for states and the Fed’s printing press that threw so much money into the air that some of it even reached California—which was issuing IOUs at the time.

The French and Dutch, when given a chance to vote on the European constitution in 2005, “unexpectedly” voted for sovereignty. Referendums are risky. And in Germany, voters might follow the French and Dutch example. Meanwhile, the referendum, though it might never come about, is already doing something else: it’s eating into the substantial support among the opposition for Merkel’s policies, and difficult battles and compromises lie ahead.

Germany and Austria may have their differences, and their love for each other may not always be palpable, but when it comes to money, they’re joined at the hip. And now the euro debate took on sharp tones in Austria as well. With a new theme: “Insolvency Procrastination.” Read.... The Euro Revolt Spreads To Austria.

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Reader Comments (4)

This is a big war and the big looser will again be the Germans.
enough said.
German People Becoming Frantic About their Central Bank Gold Reserves in "Safe Custody" at NY Fed
http://chasvoice.blogspot.com/2012/05/german-people-becoming-frantic-about.html
August 14, 2012 | Unregistered CommenterChasVoice
This is a clear analysis of the Eurozone paradox. Incidentally the German Socialist Party, the SPD has this morning announced the total German guarantees for the Eurozone to be in excess of a trillion Euros.

The German economy is being used to guarantee debts of nations that exceed its GDP by a muliple of five. That is a hopeless trap for Germany.

The European Central Bank is using creative and questionable- methods outside its mandate to keep the borrowig costs of insolvent Eurozone nations low. these nations consider interest repayments as real costs, capiital can never be repaid only indefinitely rolled over. The social costs to the people of these nations is immeasurable, and the damage not worth this senseless rescue.

Spain, Italy and Greece are being surreptitiously supported by devious ECB sovereign bond recirculating strategies as well as national printing of Euros (your Post Greece prints last week).

Politicians in Germany, the Netherlands, Austria and Finnland have ransomed the future of countries to preserve an ideal that has become a financial moloch. A monster that grows by feeding on itself, creaating debt to pay debt, diverting and misallocating financial resources and manpower to preserve a vast wasteful now unnesessary bureaucracy in Brussels, for the derivative business of US banks.
August 14, 2012 | Unregistered CommenterJuno
Juno - totally agree. Your last paragraph is so on target - well said. When will people wake up?
August 14, 2012 | Registered CommenterWolf Richter

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