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JOSH ROSENROTH

retired natural scientist
Articles Posted: 546  Links Seeded: 1554
Member Since: 3/2010  Last Seen: 5/19/2012

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German Bundestag to vote on extension of the 'European Financial Stability Facility' - will it be the end of the blame game too?

Thu Sep 29, 2011 4:28 AM EDT
world-news, europe, eu, germany, greece, euro, merkel, greens, fischer, spd, stability, cdu, fdp, csu, efsf, maastricht, steinbrueck, schr-der, eichel, rescue-umbrella
By Josh Rosenroth
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The vast majority of the political Bundestag opposition (SocialDems, Greens) with the exception of the former Communists-Socialists of the SED-PDS successor party "The Left(ists)" will be joining Chancellor Merkel's request for the parliamentary vote on the  "European Financial Stability Facility - EFSF" - aka 'Euro Rettungsschirm' (Euro Rescue Umbrella) in Germany.

Albeit having some conservative and free-democratic renegades in her ConLib coalition who have been critical and opposed to the EFSF extension, Ms. Merkel will get the crucial 'go ahead' vote in the lower house of parliament, shortly made mandatory by the German Supreme Court - the Federal Constitutional Court (Bundesverfassungsgericht).

But, will the political blame game and fighting on the means and ways of handling the domestic and Eurozone debts be over? Nope, it's just the beginning.

It's nevertheless a good political style by the SPD-Greens to assist the government and take responsibility. Burden sharing is a noble thing but we have to know that the 1998-2005 SocialDem-Greens government of Schröder-Fischer prior to Merkel's CDU/CSU-SPD grand-coalition (2005-2009) watered down their own acknowledged Maastricht stability criteria, thereby encouraging other Eurozone members to follow suit and 'cook' the balance sheets.

Now, the SocialDem fraction leader in the Bundestag and former Foreign Affairs' Minister in the cabinet Merkel I, Frank-Walter Steinmeier,  has been blaming Merkel of not telling the whole truth about the real scope of the EFSF and lack of transparency to the political community in the lower house and to the populace.

Former German social-democratic Finance Minister in the Merkel I cabinet and front-runner to become the chancellor-candidate, Peer Steinbrück, did confirm in various statements and interviews that Greece's admission to the Eurozone was a mistake.

Well, this 'revelation' comes quite late, indeed.

Steinbrück and his predecessor as Finance Minister (1999-2005) of Schröder I and II, Hans Eichel, were surely too naive and obviously lacked the political acumen of foreseeing ill will and 'intelligent' book-keeping by governments in states with former 'soft currencies', like the Portuguese Escudo, the Italian Lira, the Greek Drachma and the Spanish Peseta,  while celebrating and being drunk with euphoria about the biggest currency project in EU's history.

These failures in apparent misjudgments can also be applied to the then conservative-free democratic opposition.

The German political mainstream optimism in terms of being successful with this unpredictable Euro endeavour has still been based on the amazing results of transforming the rock-bottom former GDR to quite competitive new federal states in the reunified entity of 16 (subordinate) federal states and the 'roof' state since 1990.

What most pundits seem to forget is the still necessary huge money transfer and tax compensation toward the five new states of Mecklenburg- W Pomerania, Brandenburg, Saxony-Anhalt, Saxony and Thuringia as well as Berlin that got extended by some 1.1 million people with reunification. This financial 'enterprise' has been concerning about 16 million people in the eastern part of Germany since.

Bailing out Greece by Germany alone, for example, would mean an additional financial and economical burden of some 60 percent of the current solidarity efforts toward the eastern German states, paid for by the German taxpayers since July 1991.

The major Eurozone politicians don't want a euro failure, nor the U.S. which fears a ripple effect.

Sobering news is that even with constitutional debt brakes implemented financial air-bags or rescue umbrellas won't be obsolete.

That is why the christian-democratic, conservative Saarland governor, Ms. Annegret Kramp-Karrenbauer, made headlines about the redundancy of constitutional debt ceilings in the prospect of possible contributions from federal states' budgets toward the EFSF.

Finally, the big brains in Berlin ought to stop arguing about guilt and blame - just come together for the common Euro future.

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  • Public Discussion (11)
Josh Rosenroth

related article by The Local (Germany):

http://www.thelocal.de/national/20110929-37895.html

  • 1 vote
Reply#1 - Thu Sep 29, 2011 4:34 AM EDT
Josh Rosenroth

update

http://www.dw-world.de/dw/article/0,,15425407,00.html

The vote passed with an overwhelming majority thanks to the support of opposition parties, with 523 votes for, 85 against, and three abstentions. (...)

As the eurozone's largest economy, Germany is expected to contribute the largest share to the bailout fund. The country has already guaranteed loans to the tune of 123 billion euros; that will now be boosted to 211 billion euros ($283 billion). (...)

  • 1 vote
Reply#2 - Thu Sep 29, 2011 8:49 AM EDT
Josh Rosenroth

update:

http://www.thelocal.de/national/20110930-37935.html

Bailout expansion clears final hurdle in Bundesrat
The EU's beefed-up eurozone bailout fund cleared its final hurdle in Germany Friday when the upper house of parliament backed the move to help debt-ridden countries. (...)

  • 1 vote
#2.1 - Fri Sep 30, 2011 1:34 PM EDT
Chris-382117

Josh,

My concern is that , when they blow through this bailout fund (211 Billion Euros is just pocket change when you consider what Greece alone owes), will there be enough political will to create yet another on the backs of the here-to-for fiscally responsible nations when they continue to see that the PIIGS will just continue to refuse to get their financial houses in order because "These Cuts are just too painful." Its like I tell people; I will gladly jump into a lake and pull a drowning man out, but what do I do when, as soon as I pull him out and dry him off, he runs as fast as he can to the end of the pier and jumps back in? How many times do I pull him back out before I tell him "Just wait a damned minute!" Where does rescuing him end and enabling him begin.

Since no one knows exactly how bad off some of these countries really are, Seeing that Greece alone understated its liabilities by about 800 Billion Euros, and the same mentality has been pervasive among the rest of the PIIGS, there is a good chance that the fund needs to be at least 10% of the EU's GDP for a year ( 1.6 Trillion Euros) in order to cover this debacle. How are they going to sell that one Germany, France, Sweden, Norway, and Denmark?

    #2.2 - Fri Sep 30, 2011 3:05 PM EDT
    Reply
    Chris-382117

    The only thing that concerns me is when, eventually, the German people say "enough". The bailout umbrella is a good idea as long as those being bailed out have the good sense to "mend their ways" before their benefactors say "not another farthing".

    Currently, it is primarily the German Economy and Tax Payer who are footing the bill for the excesses in the Medeterranian states. One day they will say "Enough, Dammit." I don't know where that tipping point is, but when we arrive, it won't be pretty.

    • 2 votes
    Reply#3 - Thu Sep 29, 2011 10:18 AM EDT
    mstanley2265

    Hindsight, which lays bare the errors, due diligence wasn't done in birthing the EURO. Greece is historical number one in their financial mismanagement. Italy is second. Diplomacy was more the factor under consideration at the time than actual fiscal responsibility.

    The UK is being pressured to agree to the financial transaction tax and since London has the most banks etc, the UK would bear the burden of up to 80% of the tax. All of which would go to a EU bailout fund. So far the UK has refused to endorse this latest method of 'saving the Euro and EU'.

    The people of Greece are being faced with hard choices. They must pay taxes, which in the past has been more like a game as to how much they can avoid paying. They must have goods that are marketable in a global market. But the choices are more like fuss and feud than finding solutions.

    The idea and theory were good, application of the theory is where the failure occurred.

    • 1 vote
    #3.1 - Thu Sep 29, 2011 12:36 PM EDT
    Chris-382117

    Maria,

    So far the UK has refused to endorse this latest method of 'saving the Euro and EU'.

    And things like that are what really worry me. Having lived in Europe during the 80's and early 90's, I have seen first hand that the individual European states will always work in what they see is their personal best interest. It isn't unlike what the United States was prior to the Civil War. Many of the countries look at it as an "us vs. them" light. Eventually, those that are being required to reach deeper into their wallets to pay for those that choose to "fuss and fude" will change the "us vs. them" remark to read "us have had enough, screw them!"

    Then we will have real problems. That is when economies start failing, hyper-inflation, and half of Europe broke and Mad as Hell at the other half. The last time that happened it lead to the rise of a crazy little bastard with a goofy looking mustache.

    • 4 votes
    #3.2 - Thu Sep 29, 2011 1:04 PM EDT
    Josh Rosenroth

    Chris, thank you for your reply.

    Your analysis is correct.

    To give you a picture of the 'euro rescue umbrella' scope, let's count together the populations of Portugal, Italy, Greece and Spain. The sum is nearly 129 million, compared to Germany 82 million.

    Take North America as comparion: USA 320 million, Canada 34 million, Mexico 112 million.

    Now, imagine an evolved NAFTA as North American Union with a common currency, let's say the 'NA$' - U.S.$, Can$, MexPeso abolished.

    What scope should an 'North American Financial Stability Facility' or 'rescue mechanism' have in order to avoid Mexico's insolvency?

    The EFSF -in which Germany's government / parliament has pledged guarantees for contributions of some 211 billion euros ($287bn) for the extended aid pot - will have a credit line of some 440 bn euros ($598 bn) with possible EU money of €60bn and IMF contributions of 250bn euros, makes a rescue mechanism of €750bn (or $1.020bn).

    The Saarland governor was right in her conclusion that domestic (federal, state) mandated debt ceilings were obviously obsolete when the pledges are finally realized and the bail-out money flows into foreign state coffers.

    wikipedia.org/United_States_public_debt

    The public debt has increased by over $500 billion each year since fiscal year (FY) 2003, with increases of $1 trillion in FY2008, $1.9 trillion in FY2009, and $1.7 trillion in FY2010.[3] As of September 9, 2011, the gross debt was $14.71 trillion, of which $10.07 trillion was held by the public and $4.64 trillion was intragovernmental holdings.[4] The annual gross domestic product (GDP) to the end of June 2011 was $15.003 trillion (July 29, 2011 estimate),[5] with gross debt at a ratio of 98% of GDP, and debt held by the public at 67% of GDP.

    • 2 votes
    #3.3 - Thu Sep 29, 2011 1:35 PM EDT
    mstanley2265

    Another aspect is the marketable resources. Greece has pretty much decimated theirs for any type of large export or way of increasing earnings. With 23% of arable land, not a help either. Unless and until they look for solutions to marketable exports, they are sunk. They can no longer stay stagnate.

    • 1 vote
    #3.4 - Thu Sep 29, 2011 1:45 PM EDT
    Josh Rosenroth

    Right, y'know - the Finns would have liked some collateral from Greece in exchange for a bail-out.

    They should rent their islands to an European Union guardian entity that collects taxes.

    • 2 votes
    #3.5 - Thu Sep 29, 2011 1:54 PM EDT
    Chris-382117

    Josh,

    This is what worries the hell out of me with not just Europe's debt, but ours too. When economies start to fail, hyper-inflation starts, and shortages start becoming the norm and not the exception, civilization takes a back seat to want and need. When parents can't feed their kids and it takes a wheelbarrow full of money to buy a bag of groceries (if you can find it), normally sane and rational people will start doing some really friggin' crazy things. Then, when people get desperate enough, some raving lunatic comes along and promise he can make it all better and they will sell their soul and cheerfully follow him into the pit of hell just like the Pied Piper of Hamelin.

    I served with the 3rd Marines in Quang Tri and Thua Thien Provinces of Vietnam in 68 - 69; I've looked into the eyes of that monster before and hope I don't live long enough to do so again. While there, I became far too aware what the human creature is capable of doing. I learned that civilization is a suit of clothes that we CHOOSE to wear and, given the right circumstances, pressures, or needs will remove it just as quickly as a stripper at an all nude review. Hunger, fear, and self preservation, are some of the most ruthless of our natural instincts and it won't take much for us to revert back to the animals from whence we came.

    I'm not an alarmist, I'm a realist. I have seen what we humans are capable of doing and put little past us when the chips start to fall the wrong way.

    • 2 votes
    #3.6 - Thu Sep 29, 2011 3:40 PM EDT
    Reply
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