The Corner

How’s That Greek Rescue Going?

Markets soared today on hopes that the Greek bailout would go through. In fact, the odds that the July deal enlarging the European Financial Stability Facility would eventually (if painfully) be approved have always been reasonably good. The next two questions are far more interesting. Will the EFSF be enough to stop the rot, and, if not, will more money be coming its way?

The answer to the first is probably not, and the answer to the second is looking very tricky indeed. Here’s the Daily Telegraph’s Ambrose Evans-Pritchard with some reactions from Germany:

Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent.

“The sovereignty of the German state is inviolate and anchored in perpetuity by basic law. It may not be abandoned by the legislature (even with its powers to amend the constitution)…There is little leeway left for giving up core powers to the EU. If one wants to go beyond this limit – which might be politically legitimate and desirable – then Germany must give itself a new constitution. A referendum would be necessary. This cannot be done without the people.”

Spot on.

 Tensions are running high after it emerged over the weekend that officials are working on plans sketched by the US Treasury and the European Commission to “leverage” the firepower of the EFSF to €2 trillion, in conjunction with lending from the European Central Bank. Carsten Schneider, finance spokesman for the Social Democrats, demanded that Chancellor Angela Merkel and finance minister Wolfgang Schäuble clarify their “true intentions” before the vote on Thursday.

“A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable,” he said.

Prince Hermann Otto zu Solms-Hohensolms-Lich, the Bundestag’s deputy president and finance chief for the Free Democrats (FDP) in the ruling coalition, expressed outrage over the secret plans.

“Unless the German finance minister can give an immediate assurance that there will be no leveraged formula, I will not vote for this law. We might as well dispense with months of negotiations if all this means is that the Bundestag will be circumvented and served cold left-overs,” he said.

The accusation that German leaders are conspiring with EU officials to emasculate the Bundestag is highly sensitive, going to the core of the raging debate in recent months over EU encroachments on German democracy.

Dr Vosskuhle said that the improvisation of far-reaching policies had become “dangerous”, and warned against schemes to circumvent the rule of law with backroom deals. “Germany has a great affinity for the rule of law. People expect the political class to obey the rules.”

Really? Then Germans obviously know nothing of their own political class.                                                

The Financial Times meanwhile quotes Bundesbank president Weidmann as suggesting that the way forward will need to involve “a major shift to fiscal union, including a fundamental transfer of key areas of responsibility from national parliaments to democratically legitimised European bodies.”

Quite what those “democratically legitimized European bodies” might be was left unexplained, as indeed it had to be. The European Parliament, the corrupt assembly that purports to represent a European demos that does not actually exist is, probably, the entity Weidemann means. No wonder he is unable to say its name aloud.

Genug mit Dieser Farce: It is long past time for Angela Merkel to find her inner Bismarck. As a first step, she should insist that, one way or another, Germany recapitalizes its banks, and that France does likewise. The best hope that the Eurozone has of surviving in its present form (a nutty agenda, but there you are) is to begin with a decision by its stronger members to get their own houses in order.