The Fiscal Compact: doubts creeping in across Europe-Spain defies Brussels

[ang]

I'm wondering how the ESM can legally "lend" to EU Countries who are not within the 0.5% deficit rule ?

[Dr. FIVE]

Did we miss this?

Nine days ago on February 28th, The German Constitutional Court in Karlsruhe ruled that both the existing EFSF and its planned successor the ESM are unconstitutional in the Bundesrepublik. Even as things stand now, any use of EFSF funds approved by Merkel will be illegal. This is part of the reason why she and Wolfie Strangelove don’t want to talk about boosting it just yet, on the grounds that a bazooka will be just as illegal as a pea-shooter, only much more noticeable.

This is also quite interesting.

Merkel has parked the problem neatly for a week or two, but in the meantime more of those pesky fisco-economic boffins have revealed some awkward anomolies in the assets and stability of Mario Draghi’s European Central Bank (ECB). Helmut Schlesinger, former president of Germany’s Bundesbank, pointed Munich economist Hans-Werner Sinn at a worrying number: towards the end of 2010, records showed claims on other euro-zone central banks totaling over €300 billion. Surprised, Herr Sinn began to get forensic about it.

Since the 2007 financial crisis, huge sovereign debts have been run up with the ECB: a year on from the figure he’d been shown, the sums owed to the Bundesbank had zoomed to €498 billion….a circa 65% increase in one year. During any period of debt crisis, this sort of stuff will happen; however, should the eurozone fall apart, or Greece and/or others leave, the bad debt will be left behind. As Hans-Werner Sinn sums up:

“We’re caught in a trap. If the euro breaks apart, we’re left with an outstanding balance of nearly €500 billion, owed by a system that no longer exists.”

That’s over 150% of the German federal budget. Sinn believes this explains the desire “to save the euro, at almost any cost” as he puts it. It’s hard to argue with that based on behaviour to date; but it means that – if Germany is to be spared an horrendous bill – the eurozone has to reach the Promised Land called Fiskalpakt – and pronto. Only then would we see a binding legal agreement meaning that sovereign nations would remain intact, and thus severally liable for Die Rechnung. (bill)

http://hat4uk.wordpress.com/2012/03/...to-fiskalpakt/

[ang]

The German SPD party looking for concessions in return for supporting the Fiscal Compact:-

(Reuters) - Germany's opposition Social Democrats (SPD) will back new euro zone budget discipline rules on condition the government agrees extra measures like a financial transaction tax, SPD leader Frank-Walter Steinmeier told a German daily.

http://www.reuters.com/article/2012/...&dlvrit=286409

[PaddyJoe]

Interesting to see what happens if the EC tries to push Spain around.

"Technicians of the European Commission have been in Madrid this week to collect information on the (2011) public accounts," said Amadeu Altafaj, the Commission's spokesman on economic and monetary affairs.
"It is a normal practice in all countries under an excessive deficit procedure," he added.

http://www.reuters.com/article/2012/...8280V120120309

[morticia]

Both the financial transaction tax and the inspection of Madrid's accounts could be dynamite, I suspect. Oh well, should be interesting viewing....

[C. Flower]

Did we miss this?



This is also quite interesting.



http://hat4uk.wordpress.com/2012/03/...to-fiskalpakt/

Indeed. And the collateral accepted by the ECB has been progressively more and more dodgy/fictional.

[ang]

Germany has failed to reach it's own austerity goals in 2011 and is behind in 2012. It's also worth remembering that Germany were amongst the first to break stability pact :-

As she travels from one European Union summit to the next, Angela Merkel's constant mantra in recent months has been austerity, austerity, austerity. But apparently the German chancellor hasn't been quite as strict when it comes to her own country's budget.

http://www.spiegel.de/international/...820828,00.html

[PaddyJoe]

Juncker showing Spanish Finance Minister Luis de Guindos what he thinks of him today at the Euro Fin Min summit.
This is now on the front of every Spanish news site.

[concernedparent]

Germany has failed to reach it's own austerity goals in 2011 and is behind in 2012. It's also worth remembering that Germany were amongst the first to break stability pact :-



http://www.spiegel.de/international/...820828,00.html

I suppose she doesn't have to be.

She has all of us idiots and our idiotic government paying the bills. That's why a default for Ireland is out of the question.

Mark my words, we could yet see the perfect economic storm.

[C. Flower]

Juncker showing Spanish Finance Minister Luis de Guindos what he thinks of him today at the Euro Fin Min summit.
This is now on the front of every Spanish news site.

Pity he didn't get Noonan

[ang]

I suppose she doesn't have to be.

She has all of us idiots and our idiotic government paying the bills. That's why a default for Ireland is out of the question.

Mark my words, we could yet see the perfect economic storm.

You have a point about the perfect economic storm and not something I would rule out but Germany are prepared :-

The Black Swan NO ONE is Talking About: Germany’s “Plan B”

http://www.zerohedge.com/contributed...lan-b%E2%80%9D

[morticia]

Indeed. And the collateral accepted by the ECB has been progressively more and more dodgy/fictional.

Personally, I think that is a good sign. Acceptance of anti-austerity by the back door.

As for Germany quitting the Euro; they could. If they do, their exports will floor owing to a strong currency, and the associated collapse might well burst the Chinese bubble with truly awful consequences. I'd imagine they know this, too

Handing over ECB dosh for utterly scheisse collateral seems like a much better bet...

Devil....deep blue sea....

[ang]

Personally, I think that is a good sign. Acceptance of anti-austerity by the back door.

As for Germany quitting the Euro; they could. If they do, their exports will floor owing to a strong currency, and the associated collapse might well burst the Chinese bubble with truly awful consequences. I'd imagine they know this, too

Handing over ECB dosh for utterly scheisse collateral seems like a much better bet...

Devil....deep blue sea....

Nothing anti austerity about it. Social Welfare for banks via back door.

[PaddyJoe]

The Eurogroup is insisting tonight that Spain must reduce its budget deficit by another half a percent to 5.3% instead of the 5.8% that the government planned.
Just a mild rap across the knuckles to save face.
The original demand that Spain ignored was a cut to 4.4%
Spain has enough muscle in the European scheme of things to push back and it shows

[C. Flower]

The Eurogroup is insisting tonight that Spain must reduce its budget deficit by another half a percent to 5.3% instead of the 5.8% that the government planned.
Just a mild rap across the knuckles to save face.
The original demand that Spain ignored was a cut to 4.4%
Spain has enough muscle in the European scheme of things to push back and it shows

Noonan says that Ireland is not Spain.