The Eurozone these days appears to be stuck in the miser ideology of the average German family.
German Chancellor Angela Merkel, despite having acknowledged that “our policies so far to arrest the crisis may have being wrong” and on another occasion that “good politicians are those who worry about the correctness of their policies”, speaking at the opening of this year’s Davos gathering, denied that there was a need to increase the firepower of the currently operational European Financial Stability Fund (EFSF) and the permanent European Stability Mechanism (ESM) (operational from July) and also explained to her audience that in order for the Eurozone to effectively counter the crisis, people should work more for less and that the rest of the Eurozone must follow the Germanic miser ideology.
What else could she have meant by asking for “more labour-market reforms” and “greater European integration”? And this comes after nearly two years of utterly unsuccessful policies to arrest the sovereign-debt crisis, after it first broke out in Greece in March 2010.
Berlin is also the main impediment to the European Central Bank (ECB) using its immense firepower to support Eurozone governments in distress.
Even the IMF appeared this week to be critical over the ECB’s refusal to participate in cutting down the Greek debt by 50% in long-fought confrontations with the country’s private creditors.
Incidentally, the IMF also explained on 25 January that it has never asked the ECB to play an active role in writing off the Greek debt. IMF boss Christine Lagarde, however, had clearly said while speaking in Berlin that the official creditors to Athens, aka the ECB and Eurozone governments, could participate in the effort to reduce the Greek debt to manageable levels.
In any case, the austerity policies in countering the Eurozone’s debt problems have proved insufficient to convince the world’s financial markets that the single money zone will overcome its over-indebtedness.
The question is whether Merkel, who is the main political force behind the past two years’ attempts, is still insisting that the Eurozone should continue applying the same problematic economic policy mix of austerity and labour market deregulation.
At this point, it must be remembered that even the Greek employers’ associations rejected on 25 January the idea of abolishing the traditional 13th and 14th yearly wages paid to private-sector workers, after these bonuses of two extra salaries were abolished from the beginning of 2010 in the state sector and the pension system.
Greek employers also rejected the idea of a generous reduction of the lowest legal remuneration in the private sector and, instead, asked for a three-year freeze in salaries.
Under these conditions, it seems that the German government will continue to impose Teutonic solutions on the rest of the Eurozone through the tight fiscal Union of the EU26 that Merkel proposed during the European Summit in early December and the other 25 leaders accepted, with the exemption of UK Prime Minister David Cameron.
This new ‘Union within the Union’ is going to be an awkward organisation, not being an EU institution itself but functioning under the auspices of the main European organs such as the European Parliament, Council and Commission, using their blessing to legitimise itself inside and outside the EU 27.
In any case, a lot of action to straighten up the Eurozone’s problems is taking place outside the main EU institutions – for example, the next summit of the 27 EU leaders on 30 January will not have the Greek issue on its agenda, as the Hungarian COREPER II Ambassador Péter GYÖRKÖS recently revealed, adding, however, that this may still change before the summit.
The real action towards an agreement over Greek-debt reduction by 50% takes place in closed rooms in Berlin and Frankfort, outside EU procedures.
The Greek private lenders, aka the banks, which are expected to suffer a 50% reduction in their Athens debt holding, complain that the new demands for a deeper ‘haircut’ to their wealth is removed from what the October EU summit decided.
However, the next EU summit is not supposed to present an opinion on this matter and the details of Private Sector Involvement (PSI) in alleviating the Greek debt are being negotiated outside of the EU institutions.
So, what kind of ‘more Europe’ are the Germans asking for? One suspects that they mean more ‘Teutonic’ Europe…
Published at www.neurope.eu (26.1.2012)