Germany to set the terms for saving the euro

No.

Germany’s set the terms for what it thinks will save the euro, what it hopes will save the euro.

But whether it will save the euro isn’t in Germany’s, or any politicians’, hands. It’s all of us, in our interactions in hte markets, that will decide that.

And this is a bit of a death knell for that democracy thing, isn’t it?

“The debt brakes will be binding and valid forever,” said Merkel.

“Never will you be able to change them through a parliamentary majority.”

I’m not particularly enamoured of politicians borrowing and spending like drunken sailors. But the idea that a German politician can tell the Poles not to spend their children’s inheritance does rather grate.

Yes, I know the rules on weirdly shaped veggies were relaxed a few years bak. But that’s an horrific number. And it stems from the way we allowed some anally retentive OCD types to gain power in the bureaucracy who were then able to foist their compusions upon the rest of us.

Apparently they’re frit of curved cucumbers and straight bananas and so they must be made illegal.

At which point we’re throwing away 20% of our harvest. If we didn’t have to do that either we could be importing less food or moving the other way, farming 20% less land. More wildlife, less fossil fuels used.

The collecive costs to us of this are enormous. And all because some Belgian law scribbler was frightened by ugly vegetables under the bed when a child.

It was also being reported last night that the German government wants Greece to hand over control of tax and spending decisions to a ‘budget commissioner’ appointed by the rest of the eurozone, before the country gets its second bail-out.

The budget commissioner would have to power to veto decisions made by the Greek government, according to a proposal seen by the Financial Times, marking a significant step-up in the EU’s powers over the sovereign governments of member states.

I wonder if they’ll actually have the balls to appoint a German as Gauleiter?

What sort of confidence can anybody have in somebody who even the EU fired for incompetence?

Nigel Farage

In a speech to the Council of Europe in Strasbourg, the Prime Minister will argue that European judges have become too powerful. He will say the court should not “undermine its own reputation by going over national decisions”, just days after its judges overturned the decision of British courts to deport Abu Qatada, the radical Islamic cleric.

What the hell do you think a supranational court is for if it isn’t to over rule national ones?

The only way out of this is to leave the jurisdiction of the court, which means leaving the Council of Europe and thus the EU.

No, I don’t think that the ECHR stupidities are sufficient reason to do that, I’ve plenty of other reasons for desiring that we leave.

But to complain about a supranational court being supranational is just stupid.

Surrounded by the wreckage of their system, some Eurofanatics are still asking for more time. The Marxists used to do the same. It is now time for the federasts to follow the Inquisition, Apartheid and the Marxists – out of history.

The German chancellor, Angela Merkel, has warned that the year ahead will “undoubtedly” be harder than 2011 in the starkest of a series of downbeat messages from European leaders dominated by fears over the economy.

Merkel said Europe was experiencing its “harshest test in decades” but would ultimately be made stronger by the crisis.

It’s only that which does not kill you that makes you stronger.

More fundamentally, over centuries this country has made her living (and endured much of her dying) around the world. It is extraordinary that in the age of the internet she should believe that she must do the economic and political equivalent of marrying her next door neighbour. If ever there was a time when matters of language, culture, shared history, law and fellow feeling should trump geography surely this is it.

Quite.

There was indeed a logic that we should trade with the people next door to us preferentially. A logic rather destroyed by the invention of the shipping container.

The first sailing of which was 6 months before the Treaty of Rome…….

OK, we have two entirely different things here, the short and the long term. They’re all tied up with each other, of course, but they are different things and need different answers.

1) Short term.

A falling, at least a rapidly falling, money supply is a sufficient occurence to have a recession shading into a recession. It is not a necessary one, there are other ways that people can fuck up to cause these. It is however sufficient, even if not necessary.

Money supply in the periphery countries, in the Latin/Southern eurozone countries is falling rapidly. I’ve seen numbers like 17% and 24% for Portugal and or Italy.

This will cause recession/depression, the implosion of the banking systems, vast and massive decreases in the living standards of the population.

This is, if you’d like to label it, the Milton Friedman analysis of the Great Depression itself.

The solution is not to allow the money supply to fall. The central bank must, as the Fed and BoE did not last time around but have this, and as the ECB is still refusing to do, print money, hand it to any bank that asks and simply get on with it.

This is lender of Last Resort style stuff and is the reason that we actually have a central bank with the ability to print money.

Austerity, reining in government spending, all being good little Germans, none of these matter at this point, have any effect at all on what is happening. They’re all irrelevant at the one to three month timescales we’re talking about. As are politics, fiscal responsibility pacts, jury rigged eurobonds and all the rest.

2) Long term.

The euro simply is not an optimal currency area. It is possible that it could become one, in a few decades, if the southern/Latin/periphery countries all had the supply side revolutions they so desperately need. Fiscal austerity can get them there: depress living standards enough and even Italian pharmacists will allow a bit more free market.

Similarly, it is possible to deal with the alarming disparity in the productivity of labour. What the Germans did for example, a decade long grinding down of wages while investing heavily in the education/capital goods that increase productivity. Except that the gaps are large enough that this will take two to three decades.

It’s even possible to do this through Keynesian stimulus (yes, I know, spit, spit) although not in the manner Keynesians think of it. Fiscal stimulus to bring about growth won’t do it. Fiscal or monetary stimulus that increase German/Dutch/Finnish etc inflation, particularly and especially wage inflation, over and above Portuguese/Italian/Greek etc would do it. We’d need a nice 2 or more % gap in that labour costs inflation rate (which will have to fight against the general tide of improving labour productivity anyway, so nominal will be higher than this) for a decade or two.

If anyone can think of how to engineer that please let everyone know, we’d all love to hear it. Can’t think of any mechanism that applies to all of the eurozone that will achieve this, specifically higher northern wage inflation than southern.

Or we could have full fiscal union, make the EU like the US Federal Government. That does mean being ruled by Brussels for evermore. It’s also true that very serious US economists have estimated that it took the US some two centuries to become an optimal currency are by this method. Probably wouldn’t take as long in a modern economy but think of having solved it this way by 2050 or so.

Maybe.

Or, break up the euro, return to national currencies and let the currency devaluation take the strain.

Of these long term solutions I personally benefit from the supply side/differential inflation/full fiscal union methods. I earn in $ and £  and the worse the economy gets the better off I get relative to those around me.

I very definitely lose from the break up the euro one. I own property in Portugal that would fall substantially in value were that to happen.

Thus my recommendations for policy action.

Get on with printing to sort out the short term money supply thing. Break up the currency to deal with the long term. On that latter, yes, it is indeed possible to find all sorts of economic orthodoxy to say that we shouldn’t do that. And, quite frankly, fuck orthodoxy when you’re going to condemn a hundred million or more to three decades of grinding austerity.

Economics, even economic orthodoxy, is a tool, not a Bible.

Thus sayeth The Worstall. Largely cribbed from Milton Friedman/Scott Sumner/Ambrose Evans Pritchard. Those  three roughly cribbing from the one previous in the list.

The hope here amongst people who understand what’s going on (many European leaders are not in this category)

Rule by technocrats is all very well until you realise that the technocrats are ignorant.

instant dismissal with no pension for any Civil Servant who has unauthorised dealings with European bureaucrats or politicians

And “unauthorised” should be expanded to anyone who even says good morning to one without the necessary appendage “you hateful foreign person you”.

Or would that be going just a tad too far? Maybe we could relax it to just “you foreign person you” as the rest is understood to be there?

On the whole, the French media, even those hostile to Sarkozy, welcome the Brussels results. Throughout the euro crisis they have given him credit for keeping the German chancellor on the European track, pressing her for faster action and defending the French view that political will is more important than rules.

That’s why Britain simply should not be in the same political organisation as France.

For our bedrock political and legal belief is that the rules are more important than political will.

We’ve spent much of a millenium, including several rather bloody wars and revolutions, enforcing this point on those who would rule us.

We call it “the rule of law” and if you want to impose upon us a system where the law does not rule then you can fuck right off.

We might just give you a bloody nose like we did James II, allow you to weep in alcoholic exile like Charles III, IV and so on or cut off your head like Charles I.

But we will get you to fuck off.

Mr Cameron’s “asks” were rejected, not because they were too great – but because it was he who made them. No other British prime minister of recent years would have had difficulty getting this package through. This was Gallic pay-back time for all that unwise Cameron lecturing – and sometimes worse – from the sidelines these last months. I suspect that if he had asked for a cup of tea, Sarkozy would not have lost the opportunity to refuse it. Not a statesmanlike reaction from Sarkozy to be sure; but a human one.

Beneath the tragedy of last Thursday night, lies a deeper and more disturbing fact than Sarkozy’s pique. Long years of anti-European prejudice from the Tory Eurosceptics, laced with downright insults from their supporting press, have now generated a growing anti-British prejudice in many European capitals, not just Paris.

So, err, they hate us, will not give us what we want simply ‘coz we is us and….therefore we should just do what they want.

Eh?

Sounds a bit like being trapped in a bad marriage really: the solution to which is divorce not the doormat position.

Well, he did rather piss all over their chips in Brussels, didn’t he?

This could be Cameron’s opening. Given the trouble he is going to be in anyway – with his sceptics, if he agrees to the proposed treaty amendments without agreeing to a referendum, and with business, if he effectively accepts Britain’s relegation to a lower financial league – he should summarily end the ambiguity of the past year and embrace the only logical solution: Britain’s belated entry into the euro.

Between the lines of what Sarkozy, but also leading German politicians sometimes say, can be detected the thought that, if another big economy, ie Britain, had been in the euro from the start, the operation of the currency would have been better policed. The agreed limits on indebtedness might have been kept; Greece, for one, might not have been admitted. That is all history now. But Britain’s entry into the euro would, at a stroke, bring more money and – as the regulation of British banks improves – more financial stability into the European Central Bank, to mutual benefit.

Britain would retain, or even enhance, its position as Europe’s financial centre – a price that could reasonably be exacted as a condition of entry. Nor need there be complaints – as there were 15 years ago – that sterling would be entering the euro at too high a rate. Thanks to Gordon Brown and the global financial crisis, the pound has been devalued by almost 30 per cent against the euro. Cameron could thus boast that a key requirement set by the former, Labour, government had been met.

Not only does Cameron have all these arguments and more, on his side, but he has the political means to get his way. He is not John Major, teetering on the brink of losing his majority and in hock to his Eurosceptics. With Liberal Democrats and Europhile Labour MPs on his side, he could win a majority in Parliament and campaign country-wide for a referendum “Yes” as the only true representative of the national interest.

With his PR skills and his one-nation Tory credentials, Cameron is one of the few British politicians who could convince mainstream voters to accept the euro. The Republican, Richard Nixon, initiated the US opening to China; the Likud Zionist Ariel Sharon took Israel out of Gaza as the prelude to a Middle East peace (regrettably halted by his illness). David Cameron should be the Conservative who made Britons into Europeans.

Someone should have a discreet look at Ms. Dejevsky’s meds.

The Dutch bank ING has had another go at the numbers, calculating that the Greek Drachma would fall by 80pc against the D-Mark in a full-blown disintegration.

The Escudo and the Peseta would fall by 50pc, and the Lira and the Punt by 25pc. Germany would suffer a “deflationary shock”.

OK, so that’s what would happen to the new currencies. The interesting point is:

If the intra-EMU currency misalignment is so extreme that free floats would cut Greece by 80pc, and Spain by 50pc, it surely validates the eurosceptic argument that monetary union has become a preposterous and unworkable arrangement.

Exchange rates are exchange rates, whether the currencies themselves exist or not. So if money is so badly mispriced within the eurozone, 50-80% in places out, what the fuck are all of these places doing in the same currency in the first place?

Eurozone debt crisis: safeguard the City or I’ll veto new EU treaty, warns David Cameron

He’ll do no such thing. This is a domestic piece of willy waving, aimed at some 80 Tory MPs.

He’s no more going to veto a treaty change than he is to swap Samantha for Edwina Currie.

Fake right, run left, fake national, run EU.

The “lack of progress the European policy-makers have so far made in controlling the spread of the financial crisis may reflect structural weaknesses in the decision-making process within the eurozone and European Union,” the agency is said to have told them.

Well, yes, I think “structural weakness in decision-making” is something that we’ve seen ample evidence of, don’t you?

In another case, Andrew Symeou was extradited to Greece in July 2009 to face charges in connection with the death of a young man on a Greek island.

He spent a year in custody before being granted bail but could not leave Greece. He was finally cleared by a Greek court in June this year.

You can get picked up and dumped in the prison of any other EU country on the basis of no evidence at all. Simply the issuance of a warrant is all that is required.

However, once you’re there, you’re a foreigner with no connections to the country, a flight risk, and thus you don’t get bail and you cannot return home while the case is processed. You know, get on with life, go to uni, whatever, while the mills of Balkan justice grind slowly.

But if you can be picked up anywhere in the EU and dumped into any prison on the basis of no evidence then you’re not in fact a flight risk, are you? If every police force in the continent can be forced to look for you, pick you up and deliver you to the court, then you are no more out of their reach pottering around Enfield productively waiting for trial than you are stuck in either a Greek prison or confined to Greece.

Indeed, the very fact that you have been picked up and delivered on an EAW shows that you absolutely are not out of the court’s jurisdiction while awaiting trial in your home country.

So not only have they got the most basic thing wrong: the EAW shouldn’t exist, no, we should not be bundling up Britons to face the courts of other countries without seeing the evidence against them, but the very fact that the EAW exists should mean instant bail and return to home while the case drags on.

And as the EU hasn’t the wit to organise this then fuck ‘em.

Can we leave yet?