'Anchoring Debt Brakes' - just think about it!

The Irish Times, linked here, makes a stab of making sense in English of what Sarkozy and Merkel were apparently proposing at their Paris press conference earlier this evening. These two small paragraphs caught my eye and imagination:

"She (Merkel) said Germany and France have agreed to anchor so-called debt brakes in their countries' constitutions and want other euro region governments to do the same.

"Germany and France have agreed and propose to anchor such a debt rule in the constitutions" of other euro countries and signal that deficit-reduction does not depend on changing political majorities, she said.

As an ex-mariner, I know something about anchors, dragging anchors, raising anchors before an approaching storm, avoiding anchoring on a lee shore or on bad holding ground and certainly not on shifting sands. Anchors are not brakes, used as such they would be lossed, friction on the hull  and the resistance of the ocean are the only thing that will eventually bring a mammoth tanker to a halt! So with this wholly mistaken EMU!

Having watched Germany and France drive a coach and horses through the original EU Growth and Stability pact, I also know something about Franco/German solidarity and supposed restraints on deficits and the non-payment of in-built penalties when such provisions are broken!

Refresh your own memories from the archives of my blog Ironies for the months in late 2003 and early 2004, one linked here.  One such post:

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Franco/German Bullying Gathers Pace

While the entire front page of this morning's Financial Times is taken over with the story on the illegalities of the EU Finance Ministers buckling under French and German pressure to break the law and allow the destruction of the Growth and Stability pact, in order that the two ruling axis powers can continue their prohibited excessive deficit spending, evidence arrives of similar bullying tactics elsewhere. As reported last evening on Ironies.

In EUBusiness we read here of Chirac calling Ahern yesterday "assuring him of French support; next thing we find, to no surprise whatever, that PM Ahern has been on the telephone to guess who: the PMs of Poland and Spain and that the former will be visiting Dublin before the end of the month! Read the report from RTE News.

posted by Martin at 1/08/2004 12:13:00 PM

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(Post corrected and slightly edited 0815 CET 17/08/11)

Eamon, things are not all right in Dublin!

Last night I reminded older readers of a bit of Python, read here, unhappily this morning as long expected there is absolutely no chance of a Constitutional settlement for Ireland, let me explain: 1. The mainly Anglo Irish Bank debts just announced are presently estimated at 34 billion euros, read here. 2. The Irish Government previously provided an open ended guarantee to meet these debts to save the assets of mostly foreign debt holders. Presumably for reasons of EU solidarity (hahahahahahahahehehehehe!!!!!). 3. The Irish Constitution is over-ridden by the Lisbon Treaty, formerly the EU Reform Treaty and before that the EU Constitutional Treaty. Like every other EU member Ireland now has no constitution of its own. 4. The Lisbon Treaty has no rescue mechanism or emergency support programme for member states in such difficulties as it is a non-transfer union as defined under the Maastricht Treaty under the terms of the Growth and Stability pact that was blown out of the water by France and Germany in 2003. (One post of many on Ironies on this topic is linked here scroll to 12th September 2003). 5. Ireland has thus bankrupted itself to aid the larger banks of the bigger member states and can now do nothing to either pay the debts or like Iceland, restore its competitiveness through devaluation. A new Constitution for the Irish Nation outside the EU and withdrawal from the Euro seems its best hope, unless we see an extraordinary display of EU solidarity from Germany in the very near future which would finally seal the fate of the EU once and for all with the German electorate!

Schauble at French Cabinet meeting. November 2003 all over again?

Never let it be forgotten that it was France and Germany acting in collusion that wrecked the Stability and Growth Pact! That deliberate action in November 2003 inevitably spelt the eventual end of either the European Currency or independent national sovereignty and self-government across the EU. Given the history and the inevitable consequences of the events of that month, can there be any doubt that full EU federalisation was not always the objective for such financial profligacy? If you do not believe that now, please read this full posting and all its links and you can thereafter surely be left with little doubt that such was and is the case. My posting to Ironies on 28th November 2003, linked here had all the facts. (The link will take you to the Ironies Archive page for November and the posting is titled "The EU's Problems from Greece to the Golden Gate with some of the links from the post still active although regrettably not all). The previous day I had clearly laid out the future on the same blog, linked here, which I quote in full as follows: Another nail in the Euro's Coffin The press reports from the German State Broadcaster Deutsche Welle Stability Pact -- Rubber Pact seem to grasp the seriousness of the hollow Franco - German deficit victory, more firmly than the quotes from Holland that we linked yesterday. As a non-economist my reading of the situation is this: If twelve (now increasingly less likely one day to be a score or more) countries are all free to spend as much as they please in a currency that will devalue at the same rate for all, then the outcome is assured. Countries that spend the most the soonest will incur the least interest charges and the greatest real spending power. The devaluing money they later print to serve the debts will encourage others to board the gravy train but those who join the rush the latest will suffer the most. Already in the Dutch press yesterday the editorials were urging that spending restraint be abandoned. As the above realisation grows the need for interest rates to rise will further spur the race to be the earlier borrower and the rates being paid yesterday will appear ever cheaper. The rise of the Euro in the foreign exchange markets seems to me an aberration as the common euopean currency has had its foundations removed. The logical end result "Hyperinflation" or a "Pan-European seige economy with rigid foreign exchange controls". In either scenario economic hardship must result. If an economist disagrees please e-mail the blog and I will post the counter-arguments. Or add a comment below! If this is not the case then what was the point of the G & S Pact in the first place? posted by Martin at 11/27/2003 05:25:00 PM Readers who prefer a mainstream media source to verify the facts can read the Guardian report of 27/11/03 from here. So what self-serving mischief have the French Cabinet agreed with the German Finance Minister at yesterday's meeting? "We have just signed a joint letter destined to Mr (Hermann) Van Rompuy which includes a joint Franco-Germany proposal for improving economic governance and strengthening the stability pact," French Finance Minister Christine Lagarde told a joint news conference with German Finance Minister Wolfgang Schaeuble, according to Reuters, linked here. Consider some of what the German Press itself had to say on 26th November 2003 as reported by German State Broadcaster Deutsche Welle, linked here: The Stuttgarter Zeitung said the game being played by Germany and France -- Europe’s largest economies with the EU's largest deficits -- is damaging common stability policies and creating distrust among the smaller euro zone countries as well as the central European countries set to join the EU in 2004. The German-French rule-bending could heavily burden consultations on the future EU constitution, which are reaching a decisive stage. Cologne’s Express wrote." He won himself some breathing space with his successful coup in Brussels regarding Germany’s budget deficit. But, the paper said, he’s actually just made things worse, since the victory comes at a high price. Germany once believed strongly in the EU's Stability and Growth Pact, which is meant to bolster the euro by requiring euro zone countries to keep their budget deficits below 3 percent. If Germany and France are allowed to break the rules without being burdened with the financial penalties the pact calls for, what incentive do other countries have to save, the paper asked. The Stability Pact has become a rubber pact." (Blog editor's emphasis). Finance Minister Eichel’s self-satisfaction will be expensive for Germany, the Berliner Kurier wrote, because Germans will soon feel the effects of the deficit and will have to pay the accumulating interest on it...etc. No doubt the joint proposals to the Lisbon Treaty created, EU Council President, will envisage just such pan-EU control. In Britain's case, Ministers and the Prime Minister, sit on the Council under the Royal Perogative and thus the authority of the Queen (now a mere EU citizen), therefore Parliament has already effectively renounced its power to govern our country. Economic Governance for the Eurogroup will now also hand signatory powers for the UK's cheque book to foreigners. Presumably something acceptable to Cameron and Clegg, who will surely reap rich personal EU rewards for this final selling out of their country! (The non-constitutional manipulations between Blair, Brown and the Foreign Office which ensured Blair could not be questioned in Parliament on the Lisbon deal he struck are all fully detailed on this blog). If the other 25 members of the EU use yesterday's Franco-German joint proposals to Van Rompuy for anything other than substitute toilet tissue or used paper recycling then given recent history they will surely deserve the certain dire consequences that I detailed in the Ironies posting of 2003 as reproduced above!