E' da poco passata mezzanotte ed inizia la mia avventura sul web...
Buona Lettura,
Paolo
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Dopo una quiete, alquanto bizzarra, ecco cosa è apparso, anzi riapparso oggi sui monitor: Euro break up....
Letture su cui riflettere.
Submitted by Alasdair Macleod, via Peak
Prosperity,
It's becoming clear that there is only one sensible solution ahead of us as
the Eurozone’s problems evolve:
Germany and the other countries suited
to a strong currency should leave. If they do, the European Central
Bank (ECB) will be free to pursue the easy money policies recommended by
Keynesians and monetarists alike. It's increasingly clear that Germany has no
option but to behave like any creditor seeking to protect its interests – and do
its best to defuse the growing resentment against her from the Eurozone’s
debtors.
However,
leaving the Eurozone is a political and legal, even seismic
wrench, reversing decades of historical progression towards political
and economic union.
The saga of the Eurozone reads like an old-fashioned novel – with a
beginning, a middle, and presumably an end. In the beginning we are introduced
to the characters, the middle is where the action is, and the end is plainly
predictable. There are two broad types of story: fairy tale and murder mystery.
A fairy tale starts with a handsome prince, who meets and conquers evil and woos
the princess, and at the end they marry and live happily ever after. A murder
mystery starts with a murder, the middle is littered with clues (many of which
are designed to put the reader off the scent), and the perpetrator of the crime
is revealed at the end.
The starry-eyed visionaries behind the Eurozone
embarked on a fairy tale and instead have found themselves as characters in a
murder plot. The difference is not the outcome, but how many pages we
have left to turn to the end of the story.
The victim, of course, is the great European ideal, the
political project that was meant to unite the European nations. The murderer is
sound economic theory, which has been ignored, even trampled underfoot, but has
resurfaced in the guise of reality. None of the actors foresaw (let alone can
accept) this turn of events, and to get a flavour of the current mood we only
have to listen to Manuel Barroso, President of the European Commission, whose
response is to retreat into yet more regulation and statist control in denial of
all reality.
Germany and France are centre-stage; in the post-war years
they were partners in forming an economic and political block on Soviet Russia’s
western boundary, containing the spread of communism. And by uniting the nations
of Continental Europe, the reasons for war between them would be neutralised.
These objectives were achieved, not so much by the formation of the European
Union, but because the USSR’s communist model ensured the eventual economic
collapse and disintegration of Russia and her satellites. And after the
Franco-Prussian War and the First and Second World Wars, Germany lost all
appetite for belligerence anyway.
France, with a little help from her Anglo-Saxon friends, was
cock-of-the-roost after the two world wars, so much so that De Gaulle,
France’s post-WW2 leader, was confident enough to refuse to join NATO, building
France’s own arms capability instead. This sharply contrasted with Germany, who
disavowed any military capability of her own and submitted completely to the
military jurisdiction of NATO. This was reflected in post-war politics, with
Germany quietly rebuilding her shattered economy, basing it on the preservation
of savings, while France sought to build the state. The background to our story
is one involving neighbours presenting a common front, but with very different
attitudes toward life.
It is tempting to think that none of this matters, but it does.
Politics, and not economics, are
centre-stage. The German establishment is fundamentally
reluctant to lead the Eurozone, being more interested in protecting Germany’s
commercial interests. The French retain perhaps a sense of insecurity expressed
in their jingoism. The former president, Sarkozy, visibly epitomised this. The
new president, Hollande, expresses his nationalism by promoting French
socialism. While Frau Merkel and M. Sarkozy were able on the surface to rub
along together, Hollande’s denial of fiscal austerity exposes Germany’s
underlying problem: As the rich and successful partner, it is now expected to
subsidise the rest of the Eurozone for as long as it takes.
Germany is now in the unhappy position of a lender who has committed
large amounts of money to a number of borrowers, who find themselves unable to
repay and require further finance. Does it dig deep and find more money
in the hope that it does not have to write its investments off, or does it say
enough is enough? But it is worse than that; it hasn’t enough money
itself to throw at these debtors, with the likely costs certain to exceed all
its tax revenues. To give you a sense of the problem, in very round figures
Germany’s tax revenues are €1.2 trillion, while the estimated costs of keeping
defaults in the Eurozone at bay stand at close to €4 trillion.
But it gets worse still;
it has no control over the money flowing
through its own central bank. The chart below is of the money the
Bundesbank automatically has to lend the other Eurozone central banks under the
TARGET2 settlement system. Some of this figure, by the way, is included the in
the total estimated €4 trillion.
This balance, which
reflects private sector capital fleeing from the
Eurozone debtor nations and being lent back to their central banks,
stood at €751bn ($975bn) at the end of August, representing perhaps one sixth of
all Eurozone deposits. On top of this, Germany and a few others are being asked
to bankroll these nations’ governments. You only have to look at the rate of
increase to get a sense of the banking runs being suffered in the weaker states
and to understand the scale of the underlying crisis.
Germany’s electorate is becoming acutely aware of the enormity of the
task. In theory, under the European Stability Mechanism (ESM), which is
the vehicle for bailing out debtor nations unable to fund themselves, each
Eurozone nation has to contribute. While one can understand the case for a
nation being bailed out not having to contribute, does this mean that Italy, for
example, must contribute to a bailout for Spain, and if so, how is it going to
come up with the money? Obviously it cannot. And what about France, with its
inward-looking economic model and with its own budget deficit running at over 6%
and rising? It's silent on this matter, but it is a reasonable guess that it
will make diplomatic excuses. This is the background to the German
Constitutional Court’s judgment delivered on September 12, 2012.
German Constitutional Court’s Judgment
Last month
on
behalf of GoldMoney, I spoke to Professor Markus Kerber, who is one of the
German academics that led the action placed before the Court on behalf of about
37,000 citizens. The Constitutional Court was asked to block presidential
ratification of the German parliament’s approval of the ESM. Central to his case
was the rapid increase in the bailout costs faced by Germany. Kerber told me
that in the deposition to the court, the
estimated costs for which
Germany would be liable and that can be substantiated are in the order of €2
trillion, with further commitments of €1.7 trillion in the pipeline.
This is in stark contrast with a similar action bought before the court a year
ago, where the costs appeared to be only €170 billion. That action was rejected
on the grounds that Germany could effectively afford it, in the view of the
judges. So it was entirely logical that they ruled that the German President
could ratify parliamentary approval of the ESM, so long as Germany’s
contribution is capped at the level authorised by parliament at €190
billion.
This is small change in the scheme of things, and the
ESM will
require considerably larger contributions from Germany, assuming that an
immediate and miraculous economic recovery doesn’t happen for the debtor
nations. It doesn’t even begin to tackle Spain’s problems, let alone
Italy’s. The larger contributions required for these debtors can only be
obtained by going back to parliament and asking for an increase; something that
is getting progressively more difficult as the general election approaches. But
the Court went further, by ruling that the ESM can only use funds directly
contributed to it and cannot borrow by issuing bonds in its own right or
operating as a bank.
This eliminates any hope that the ESM can be
levered up.
Even more startling is its ruling with respect to the ECB and its recently
announced Outright Monetary Transactions (OMT), and I quote from an
English
translation:
For an acquisition of government bonds on the secondary market by the
European Central Bank aiming at financing the Members’ budgets independently of
the capital markets is prohibited as well, as it would circumvent the
prohibition of monetary financing (see also Recital 7 of Council Regulation (EC)
No 3603/93 of 13 December 1993 (OJ L 332 of 31 December 1993, p.
1)).
The
Court ruling therefore appears to put a straitjacket on the ECB
as well as the ESM, together with all the bail-out plans cobbled
together so far. The Court has basically made it impossible for unelected
officials to commit German citizens’ funds without parliamentary approval and
for the Bundesbank to condone the ECB’s actions.
The
immediate response from German politicians has been supportive of
the judgment, because it does not seek to overturn the Bundestag (the
German parliament), and frankly, what else can they say without disrespecting
the law? Privately, they must be reflecting on not only the difficulties or even
the impossibility of going back to the Bundestag for ratification of even
greater contributions to the ESM, but also they must be wondering where on earth
they go from here.
The alternative, assuming attempts to rescue indebted nations are not to be
abandoned, is for the ECB to ignore the German Constitutional Court on the basis
that the GCC has no jurisdiction over it, confront the Bundesbank, and
accelerate its lending through the banking system, which of course is likely to
eventually undermine the euro itself. The question then arises as to whether or
not Germany will voice its objections to such a policy.
It makes no
sense for Germany, which has seen its own currency destroyed twice in the last
ninety years and has experienced a period of national prosperity based on sound
money before the creation of the euro, to be a party to the rapid expansion of
money by the ECB.
This monetary expansion has to
happen, however, if widespread sovereign defaults are to be averted. Its
Constitutional Court has effectively made Germany’s decision. It can only with
the greatest political difficulty raise more than €190bn from its own citizens
to support debtors, and it cannot condone the monetisation of government debt.
There is now only one alternative:
Germany must leave the Eurozone
and allow the member states, who happen to believe in the Keynesian
salvation of a weak currency, to pursue their favoured solution with a weak
euro. Germany’s politicians can now demonstrate that their hands are well and
truly tied by their own constitution, which is getting in the way of
co-ordinated solutions.
What does Germany get out of the euro?
Not as much as you would think.
It is a common fallacy that Germany
has benefited by anchoring its terms of trade with its neighbours through a
common currency; this is an error born from neoclassical economic
suppositions. Germany’s original supporters of Eurozone membership were its
large industrial companies, which were looking forward to a trading environment
made easier by a weaker currency. However, it was not long before these benefits
were lost, because companies naturally felt less pressure to control their
costs. The result is that German companies have (if anything) lost their
competitive edge as a result of the single currency, and gains in productivity
have been disappointing as a result.
The biggest losers have been the ordinary workers, whose
wages continued to rise at a very pedestrian pace, if at all. Whereas in the
past, a wage-packet bought more as the Deutsche mark rose in value against other
paper currencies, that is no longer true. Instead, static wages have lost
purchasing power over time, and the result is that growth in real disposable
income per capita is virtually non-existent. Workers have been squeezed between
a legacy of past wage-bargaining assumptions and a change from a strong to a
weaker currency.
Conclusion
In short,
it has become obvious to many people from all walks of life
in Germany that the euro has done them no good, and, far from reaping benefits,
they are actually less wealthy as a result of it. Therefore, the brash
assumption fostered by the debtor nations that Germany can and will pay is
simply incorrect, even if we stick to the headline numbers. But we all know that
a government budget deficit is only the tip of an iceberg. For Spain and Italy,
we must also consider rapidly escalating off-balance-sheet liabilities, the
financial difficulties of local governments, and central government guarantees
for nationalised and other supported industries. Government liabilities can be
doubled or even tripled – who knows? Our experience of Greece’s troubles has
confirmed that an initial few tens of billions, which
Deo volente was
enough, turned out to be only the first of a series of ever-increasing demands.
If Greece is to be regarded as a learning experience, Spain will
certainly be impossible to support, given that she shows no sign or
even any prospect of economic recovery.
Germany’s politicians know this. For the moment they are
frozen in a state of inaction, but there is a general election to concentrate
their minds in about a year’s time. So irrespective of the timing imperative
from Eurozone countries facing financial disaster, Germany is running out of
time as well. It is make-your-mind-up-time for everyone.
If Germany is to abandon the euro, it has to do so as quickly and
elegantly as possible. It must be able to demonstrate that it has no
alternative and that it is the best solution for all parties involved. It must
gain international support for its actions and the support of other key Eurozone
members. There will also be legal difficulties to surmount – because, put
simply, leaving the Eurozone is against the law.
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De Grauwe: Quel che la
Germania dovrebbe temere di più è la sua stessa paura
Su Voxeu
un interessante articolo di De Grauwe sui famigerati squilibri Target2:
quelli dovuti ai surplus commerciali la Germania se li è voluti - quelli
relativi ai flussi speculativi non sono un problema. Timori e tremori per
nulla?
