The Corner

The German Court Decision

As Patrick notes, Germany’s Constitutional Court has basically given the green light to the ESM (the new bailout fund), but there are buts…

Open Europe has a typically helpful summary here.

One key paragraph:

[The cap on the German contribution of EUR 190bn] makes topping up ESM more difficult: The current lending capacity of the ESM, €500bn, is not nearly enough to take, say, Italy and Spain off the market, meaning that the cap could prove a real obstacle for large-scale Eurozone bailouts down the line. However, the impact of this could be offset by last week’s ECB decision to buy unlimited short-term government debt – via the OMT – which reduces reliance on the ESM. It is also worth considering that a situation where the ESM needed to be topped up, would mean the crisis had significantly worsened once again and an extra layer of parliamentary approval may be the least of the eurozone’s worries.

My guess until the next one: fear of reversions to national currencies away from the common millstone ought to have been more or less removed from the equation for now (although a complete Greek socio-politico-economic meltdown–which cannot be ruled out—could change that).  This has left the euro, confesses UKIP’s Nigel Farage (in yet another vintage performance)  in a somewhat less crumbling state than he might have expected at this point, but that was before it became clear that  Draghi would “fight to the last German taxpayer to keep the Mediterranean countries” in the currency that they should never have joined in the first place.  

So the eurozone’s long trudge continues. One size fits all will still be a noose for the currency union’s weaker brethren, the Target2 imbalances will build up still further and mainland Europe’s banks will continue to dodge their rendezvous with reality.

Put another way,  this miserable soap opera lurches on, with the next chapters being Dutch elections (probably not boat-rocking) today, and Spain’s endless agonizing over whether to accept the “conditions” (turn of the screw) that will open Mr. Draghi’s checkbook.

And, oh yes, the EU’s Barroso has also called today for—wait for it—a new treaty:

Today, I call for a federation of nation states. Not a superstate. A democratic federation of nation states that can tackle our common problems, through the sharing of sovereignty in a way that each country and each citizen are better equipped to control their own destiny. This is about the Union with the Member States, not against the Member States. In the age of globalisation pooled sovereignty means more power, not less.  And, I said it on purpose a federation of nation states because in these turbulent times these times of anxiety, we should not leave the defence of the nation just to the nationalists and populists. I believe in a Europe where people are proud of their nations but also proud to be European and proud of our European values. Creating this federation of nation states will ultimately require a new Treaty.

All EU ‘citizens’ should be worried by this, not least David Cameron, as this will put “Europe” just where he doesn’t want it – on the front-burner just ahead of elections to the EU parliament in 2014 and (likely) British elections in 2015.


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