THE NEW EUROPE, FOR BETTER OR FOR WORSE
Although these cartoons are a bit crass, they demonstrate the feeling spreading around the world in accordance to the eurozone. Both the series of cartoons, which I have posted, add a laugh to the dower escapades that are taking place in the summit meeting. I have to agree with my world politics professor, politics is fascinating. Moreover, it is dramatic.
Great political cartoons outlining the on going eurozone debt crisis.
The Times UK: Britain Is left alone in the new Europe. After stopping a 27 nation treaty, Cameron was isolated and europe was deemed stronger, but split. The photos say enough, these are tough times.
Stronger Europe, Weaker Europe…Updates From the Summit Meeting
By Alexandra Hall
The world is abuzz with the news of David Cameron refusal to go along with Chancellor Merkel and President Sarkozy, preventing treaty changes to take place. After one stressful night the UK feels isolated from the rest of Europe.
10:30: The Financial Times ”Eurozone Crisis: Live blog,” by Tom Burgis just reported that the big row that took place between Sarkozy and Cameron was not a real row after all. There are rumors the two will be vacationing together in Bordeaux come next spring.
21:08: It was a very interesting day. Amazingly, it came to an end on time! For the first time, one could say that the meeting was successful, being that for the first time in this debt crisis all 27 European Union (EU) members worked together on a conclusion. Well, except for David Cameron. In the end, it was 26 against one, with treaties to be drawn up by March.
So, what was the result of the summit meeting?
This summit was a win, win for the Markozy team. David Cameron’s veto on any treaty changes, enabled Sarkozy to continue alongside Germany without complaint. The last thing he wanted for France was EU treaty changes, but was pleased with the intergovernmental treaty. Chancellor Merkel, although she had hoped for treaty changes, convinced 26 EU nations to agree to on increased integration and regulation of government spending. It was these very financial regulations that deregulated financial services. This is what Cameron was against.
In the BBC video, “Is Britain now Isolated in Europe,” the deal was clearly outlined. The changes will ensure that national budgets will be examined first at the European level. Debt sanctions are in place for those countries that over spend. In short Greece, Italy, and Spain. To top it all off, the EU countries will meet every month to discus progress, well everyone except Britain. However, not every EU country has signed up for these measures, since, they first must seek parliamentary approval before they can continue forward. Once in place, writes Steven Erlander and Stephen Castle in their article, “German Vision Prevails as Leaders Agree on Fiscal Pact," for The New York TImes, these laws will allow “the European Court of Justice to strike down a member’s laws if they violate fiscal discipline.”
Fiscal discipline will be hard not to violate, when countries are in debt, their GDP’s are above the three percent level, and they are facing increased inner turmoil. Moreover, these fiscal regulations are not going to solve the eurozone problems, which is increasingly in debt and experiencing low growth. The hope for Merkel, Sarkozy, and now other eurozone nations is that further integration will bring back confidence in the markets and drop bond yields helping Greece, Italy, and Spain. For the short term, the summit meeting didn’t solve any immediate questions. However, it did bring major change to the EU by isolating Britain and showing that regional integration was possible.
Many questions still remain. Chris Johnston for the The Times quoted, in his blog “Live: FTSE up following EU summit,” Ed Miliband, the British Labor Party Opposition Leader.
Ed Miliband, Opposition Leader, says there are serious questions to answer following the eurozone summit: “We need an assurance that Mr Cameron has not allowed a deal to emerge that means 25 of the 27 will rewrite the rules of the European economy without the UK in the room. Will the signatories to the new treaty be able to impose economic barriers to those in the EU but outside the new treaty? Will this new treaty be run by the EU institutions, and be enforceable in EU courts? Will the UK have a seat at the table when vital economic decisions are taken? Have we now got the two speed Europe Britain has always opposed, but without any of the safeguards the Prime Minister promised to deliver? And for all the talk of treaty change, where is the plan for growth and jobs that should have been the other focus of this EU summit?
Basically, what will be the roll of Britain in the new EU, that is if all other 9 non-eurozone members go along with the changes after meeting with their parliament. This might be the beginning of further breakup of the EU or perhaps the plug to stop the eurozone from sinking.
Already the clang of EU breakup can be heard, as anti-euro sentiment rise.
Dutch conservative government, lead by Geert Wilder, who represents the anti-Europe Party for Freedom, is against the agreements that were made at the summit. Prime Minister Mark Rutte was hoping for the support from the left-wing opposition, however, the left-wing governments showed no support for the new agreement, thinking it made the euro debt crisis ever more difficult to solve. Meanwhile, the freedom party has threatening to pull out of the collation government due to impending budget cuts. Wilders party is becoming more popular in the eyes of the anti-euro voters, who are become more frustrated with each summit meeting.
Greece, Italy and Spain seem to making painstakingly slow progress. The Financial Times reported that Greece does not have a habit of keeping governmental records, along with collecting taxes, and that government departments lack emploies. Everyone, including the bureaucrats, has a negative image of the government. Italy isn’t much different.
Theses growing public frustrations are likely to increase tensions and cause greater political rift between EU countries. The road to resolving the debt crisis is long and desolate, let’s hope someone comes up with a solution fast!
Reuters Video: EU leaders agree fiscal Pact.
Chancellor Merkel believes that the eurozone has stood strong and agreed upon tighter fiscal pact. However, the point of the summit was to agree upon measures to solve the eurozone debt crisis. So far, this has not happened.
Reuters Video: Breaking Views Dual Europe Threatens Dual Market.
Reflections on upcoming summit meeting. As France and Germany try to further integrate the European Union, especially eurozone countries, David Cameron wants to take this opportunity to limit Brussels power.
DECEMBER 8, 2011: SUMMIT MEETING UPDATES
by Alexandra Gabrielle
20:01: Well after a long day…I have finally began my blogging. So this summit meeting rolling update has become a night rolling update. The summit meeting is in progress into the wee hours of the morning and all day tomorrow. Here is an update from todays news.
What to expect from the European Union (EU) countries in the eurozone meeting?
Spain: Mariano Rajoy will most likely reinstate his commitment to the eurozone and to the imposed deficit reduction targets. His popular party will remain neutral as they move into office and retain their commitment to the euro. It remains to be seen what will happen once Rajoy and his party have settled into office.
Italy: Tim Geithner was in Milan this morning to meet with Prime Minister Mario Monti. The Financial Times ”Eurozone Crisis Live Blog" reporter Guy Dinmore, quoted Geithner after the meeting.
"The leaders of Europe are moving this week to strengthen the foundation of monetary union. They are moving to build the framework for further fiscal and financial integration which is a very important requirement for the viability of the monetary union."
Geithner went on to say that,
"These are vital and critical but also very challenging reforms and they will take time…but I think the world can be encouraged by the progress of these past weeks."
Geithner’s overly optimistic view, seems unrealistic to me. The world is anything but encouraged by the progress made during the last weeks. Although, it does feel that politicians have made some headway, that could all change depending on the outcome of the summit meeting. Geithner and the United States (U.S.) are taking this optimistic tactic to try to raise confidence in the euro, in hopes of reversing negative trends in market confidence.
More news from Italy. Fitch gave a positive “thumbs up” to the progress being made on reforms and austerity measures. The 20 billion euro package has been approved and is on its way through parliament. Although this strengthens its outlook, it doesn’t change Fitch’s negative viewpoint.
Italy, just like Spain, will continue their support of the eurozone and whatever is proposed at the summit meeting.
The biggest problems that the German-Franco plan face, is from the stronger EU and eurozone members. Conflict has already begun to emerge.
Sweden: Swedish Prime Minister, Fredrik Reinfeldt, stated that he has no support for the proposed treaty changes. Instead, he wishes to fix the problems the eurozone is facing now, not waste more time on treaty changes. He will be pushing for reforms in all indebted countries and for increase in the firewall with hopes to regain the markets confidence.
Britain: David Cameron has held his line that he will not support measures that do not benefit Britian. Stability in the eurozone is healthy for Britain, but what Markozy sees as medicine Cameron sees as poison. Britain wants to be involved in everything that takes place in Europe, so further integration of the EU, especially eurozone countries, alienates Britain.
The Guardian reported that a fierce row had broken out between Cameron and Sarkozy when Paris supposidely attempted to isolate London from the summit meeting, after Cameron had tried to opt out of the EU financial services regulation. Cameron wants some sort of return if he is to agree on the new fiscal contract. Otherwise, he will use his veto power to prevent policies changes from taking place. This came after George Osborne had warned that a collapse of the euro would bring serious damage to Britain.
It is not surprising that Sweden and Britain have these outlooks entering the summit meeting, being that they represent two of the larger economies in the EU.
Other EU and eurozone countries have a taken a more neutral outlook entering the meeting.
Denmark: Danish prime minister Helle Throning-Schmidt stated that she is willing to negotiate on treaty changes, stressing that it is crucial that EU members be willing to compromise, in order to keep a united Europe
Finland: Prime Minister, Jyrki Katainen, made a point of agreeing with stricter rules, but not with treaty changes. He believes that the markets interest remains with increased firepower and the stability of the IMF’s future role.
Belgium: Momentous applause was reported, by the Telegraaf, as thundering upon the entrance of the new Prime Minister, Elio di Rupo. It’s about time that the Belgians found a Prime Minister.
Netherlands: Prime Minister Rutte has stated that he wants automatic sanctions against those who are budget “sinners” and, furthermore, that all 27 EU countries should remain together.
There are rummors that eurozone countries will provide 150 billion euros from their central banks to the IMF. The other 10 EU countries supposedly will contribute another 50 billion euros.
News from the European Central Bank (ECB). As expected, the ECB cut interest rates by a quater of a point, down to one percent and announced that more collateral will be accepted to help further protect the banking system.
On a more negative note, the Financial Times reported that the ECB also revealed the stress tests that were conducted on 70 banks. The reports pushed the deficit from 106 billion euros in October, to a stagering 150 billion euros, tripling the capital shortfall.
However, the most devastating news to face the EU summit meeting was Mario Draghi speech, which cause markets around the world to end considerably lower. He stated that the ECB would not step up and buy large amounts of governments bonds, even if countries agreed on increased fiscal union. Many had hoped for this possibility, as it remains one of the last resorts to save the euro.
Still the summit meeting goes on. Reuters announced that treaty changes were thrown aside, but a new fiscal pact on budget discipline was agreed upon. The hope of coming to an agreement with all 27 EU members fell trough, largely due to Cameron’s demands, which the Germans and French objected to. Germany is getting its way, with the ESM to be capped at 500 billion euros and to gain a bank license to increase its firepower. It seems that Europe will be divided between non - eurozone and eurozone nations. Merkel and Sarkozy are pressing on for further eurozone integration. If these moves are successful and further integration takes place, it could have serious effects on Britain. Cameron should rethink his position and all EU members should remember that they must work together. Otherwise, this summit meeting is going to be a disappointment.
Either way, this is going to be a very difficult summit meeting and it is clear that 15 years of built up debt is not going to be solved in two nights. As for the rhetoric that this is the summit of all summits, it might be, but if history is any answer, this is a continuation of the summit meetings of the last six months. However, this time the hopes and fears of the whole world rely on the outcome. Everyone is watching.
In response to the comments arising about the EU being the closest it has ever come to conflict since WWII, no one knows better than the politicians who are fighting the battles. It is hard for those of us in the U.S. to understand the long standing rifts in Europe, which remain deeply ingrained in the national character. However, I think that these threats of extreme unrest are just threats. Merkel who is leading the way, will avoid conflict, and its the last thing anyone wants.
Things are heating up and I will most likely awake to some interesting news tomorrow. As for now, I hope the advisers and politicians have brought their most comfortable wardrobes. I would hate to be stuck in formal wear, especially stockings, for the entire weekend. Maybe opposing arguments should wear differnt colored gym suits to add to the flavor of the heated discusion. I would bring my bathing suit! Its going to be hot!
BBC Video. Jose Manuel Barroso: The world is watching us. Barrosos talks to the press before the summit meeting about what the world will be watching in Brussels. The summit meeting will be starting shortly this afternoon in Brussels and could go into the weekend.
These cartoons by Tom Toles for The Washington Post, Postopinions page, represent some of the sentiment facing the eurozone debt crisis as it reaches a crucial moment this week.They demonstrate a growing frustration with eurozone’s repetitive austerity measures, new budgets, and relentless cuts, all of which fail to solve any of its problems. By the looks of these cartoons, immanent doom faces the euro, it’s just a question of when. Moreover, if the summit meeting isn’t a success this weekend, are we going to face the largest global recession since the 1930’s?
This illustration of the eurozone countries, which are facing the ever intensifying debt crisis, states some fascinating statistics about the countries and their psyche.
This week…Standard and Poor’s Threatens Eurozone Countries Ratings if Proper Measures are not Taken
By Alexandra Gabrielle
This is it, a final chance to save the euro and prevent a world economic meltdown. When is it, Thursday and Friday. Where is it, the European summit meeting held in Brussels. The point, to help rescue the ailing eurozone governments from collapse by adding new legislation for increased integration and austerity within the 17 eurozone member countries.
This week talks between German Chancellor Angela Merkel and French President Nicolas Sarkozy, which to many peoples surprise ended with a comprehensive plan for Thursday and Friday’s summit meeting. Now there is much speculation that Sarkozy is simply following Merkel’s lead, creating a Germany 1, France 0 scenario. They have even been termed the Markozy pair.
This position will most likely lead to the end of Sarkozy’s government and a considerably worsened economic situation for France. Meanwhile, Merkel is still trying to remain intact and not risk political suicide. She is in the ideal position to do so, but if euro fails she essentially does too.
Moreover, the reason for Markozy pair is due to the politician’s motives and the countries domestic fears. Merkel is in a stronger financial position than Sarkozy, but both remain adamant. The Germans domestically fear inflation and, therefore, prefer experiencing a recession to having the European Central Bank (ECB) print money, raising the chance for inflation to occur. Therefore, Merkel refuses to let the ECB buy back large amounts of Italy’s debt. On the other hand, France does not want to give large amounts of power to the European Union (EU) due to its fierce independent history. So, Sarkozy goes along with Merkel, knowing that it is going to be almost impossible to get the 27 EU, or even just the 17 eurozone, countries to agree on treaty changes. Treaty changes like these will take years to be put emplace. Also, the comprehensive plan proposed by Merkel is the last card on the table to try to salvage what is left of the euro.
Gerrit Wiesmann, reporting for the Financial Times, speculated about the difficulty of the upcoming meeting by asking officials, attending the summit, how many shirts they were going to bring. He hoped to discover how long the meeting might last. One of Merkel’s top advisors answered Weismann, saying that he had a huge wardrobe awaiting him in Brussels due to the amount of time he had spent there over the last months. Another advisor commented that he always brought spares because he might spill wine on himself. The advisors are arriving with a whole carriage of provisions. Indeed, it’s going to be a very long weekend.
The Financial Times has a running blog on the eurozone crisis that outlines details on the Markozy comprehensive plan. Basically, if the plan is put into place, the EU will make the rules and provide the money for the eurozone countries. In short it will act as a central bank, but this time to 17 different countries. Therefore, the role of the IMF will be considerably weakened.
Merkel had wanted the europe’s highest court (ECJ) to enforce the new budgets rules, however, the European Council President, Herman Van Rompuy warned the Germans not to continue in pursuit of this tactic. Sarkozy, who also shared this view, is pushing for the eurozone governments to adopt new laws, which will force them to have balance budgets and follow austerity measures. The only way for the eurozone governments to enforce these laws is by cutting spending, therefore cutting jobs and raising taxes. What is worrisome about theses laws is that the new “golden rule” will require eurozone countries to abide by the deficit budgets and if they are unable to do so, breaching the three percent rule, they it will be fined. Funny thing is that all of the eurozone countries, including Germany, are currently breaching the three percent rule. In order to overturn a fine, a country will need a majority of eurozone countries votes. Looking back over the last several months, a majority has been almost impossible to achieve. Therefore, countries are going to incur fines, especially with recession setting in and growth at a stand still.
Furthermore, the Markozy pair called for common corporation and financial transactions taxes among the 17 eurozone countries. This was issued in a letter to Herman Van Rompuy. It seemed hopeful to expect an agreement on common taxes as well as treaty changes. A large glass of water to swallow.
Now its important to note that the Markozy team would like to see the new treaty changes be agreed upon by all 27 European members, but since this is unlikely, they will focus on treaty changes for the 17 eurozone members. This is going to prove no easy task, since Britain is already feeling threatened that it will not have a say. David Cameron announced that he will not allow treaty changes, which are not beneficial to the British. His concern is that if the proposed legislation requires the 17 eurozone members to meet every month, what will be the role of the other 10 EU countries?
I doubt the EU will agree to having the 17 eurozone countries function separate from the whole. Even if they do, new treaties and sanctions are not going fix the plumbing of the European Monetary Union (EMU). Changing the treaties is only going to ensure that future debt crises like this one doesn’t happen. This does not resolve current economic problems. Markozy hopes that a unified EU will clam markets and plug up the leaks, therefore, preventing further contagion.
Standard and Poor’s added to the stress facing the eurozone by threatening the AAA statues of Germany, France, the Netherlands, Austria, Finland, and Luzembourg to AA+, increasing the chance of a possible downgrade within 60 days.
The United States Treasury Secretary Timothy Geithner arrived in Paris on Monday, meeting with team Markozy. He is confident that the eurozone will succeed, but stressed that further action is needed. However, the United States (U.S.) has no plans to help back the IMF or EU financially.
No mater what happens its going to be a very serious weekend. The eurozone crisis is being compared to the great depression of the 1930’s and the Lehman’s Brothers in September 2008. Sarkozy is quoted in Stella Dawson’s Reuters article, “Time of reckoning for the euro zone," stating, "Let us not hide it: Europe may be swept away by the crisis if it doesn’t get a grip, if it doesn’t change."