This has probably been answered in the foregoing posts, but it is purely politics. (Going on my recollection of an Economist article) there were a lot of people in the IMF, and the states more generally, who said that the euro wouldn’t work. So the eurocrats want to show ‘we’ can solve this problem on our own. Etc.

*we as in we the eurozone, in europe.

@Eoin
As someone who saw and warned, Mr. Johnson has credibility.

@Edgar/Cass
Yes, Asean has also made the same calculation - if nothing else, the “Washington-headquartered” IMF doesn’t ring well with their citizens being asked to bear the austerity (and a nation going bust will always require austerity!).

I don’t really see what the fuss is about, except maybe to disabuse the slackers that they might see money before the rules are set. The rules will be basically the growth and stability pack, parhaps with flexibility to the economic cycle. The money will be pooled and work on a guarantee basis beyond that, not much will really be required as the short-term debt requirements for states in trouble are low. As to when the institution are in place, it really doesn’t matter - that the plan exists and Germany and France have signed up to it is enough.

Yes - it is already a political process in motion. Both German and French are stating opposing postitions internally for local political purposes [president vs finance minister in France - Chancellor vs B-bank and leading figures in Germany] ….. prob designed to give Angela a political ‘dig out’ re upcoming elections and unruly partner…. and President Obama in to lend moral support to Greece re the hedge-fund cabal attacks etc ……….. hopefully these mad credit-default-swaps will be outlawed internationally soon …….. bit of acceleration in EU Governance - no harm at all. I expect a bit of action post that CDU-Green alliance?

http://baselinescenario.com/2010/03/08/european-monetary-fund-arriving-soon/#more-6715

http://www.irishtimes.com/newspaper/world/2010/0306/1224265708199.html

Doesn’t go into detail on any solutions but makes the Polanyian point that “society” has its own “laws of gravity” to correspond to those imposed by financial markets.

He concludes: “Institutional stability sometimes implies a dose of institutional adaptation. This critical juncture should be seen as an opportunity for consolidating Europe’s great institution-building credentials.”

Although I tend to agree with the FT’s conclusion (which I quoted above), I’m glad (and surprised) to see the German finance minister getting this particular ball (i.e. institutional adaptation) rolling…

We shall see in due course.
My reading is we won’t get any more referendums on EU things and people in Ireland are going to be left standing around with open mouths going “aren’t we supposed to have a referendum before they can do that?”

At this point in the economic cycle, in whose interest is it within the Eurozone that the Euro not devalue? Why worry about the PIIGS getting out of the eurozone - just devalue the Euro (and promising to bail out the PIIGS will certainly give the Euro a good downward shove, you’d think)

As for the Greeks - having married in to an expat branch I’m aware of the fondness for the cash deal but if the striking state workers want to be paid they have to go to their Uncle Nick or Cousin Anita who work for cash and remind them that the money for their salaries comes from taxes.

The fact that Greek defence expenditures are amongst the highest in NATO as a percentage of reported GNP (and therefore is an even larger portion of the real - lower - number) isn’t helping either. The issue isn’t selling off islands in the Aegean, it’s for they and Turkey to quit tooling up to have a scrap over them one day.

It’s either a feast and a famine.

Misers and spendthrifts!

German deficits between a budget surplus in 1989 and surplus in 2008.

So how big a deficit should Germany have?

Sure it would use up some of the empties, put a few more people paying taxes and you never know they could lodge the few bob in the banks while they are waiting for the phone to ring….

Don’t think we will need a new treaty on this one ……… as it stands it is more of a ’signalling exercise’, but a welcome and very important one for those who ‘Think European’ …….. and down the line all this is necessary as recent events have demonstrated.

Well I voted for that treaty! All I’m sayin is IF we needed a new one, I wouldn’t be taking votes for granted….

http://www.ft.com/cms/s/0/33ce9360-2aef-11df-886b-00144feabdc0.html

Basically, an EMF would be good if it were a means of “harass[ing] the overprudent as well as the prodigal so that deleveraging does not mean depression. But this is not what Mr Shauble has in mind. His plan is to turn the paradox of thrift into the immutable law of the eurozone.”

Correct me if I’m wrong Sarah but I thought when we (well, everyone else it seems except me) voted ‘Yes’ last year that one of the things we were voting for was a ’self-amending’ treaty and that we were never going to get another referendum in Ireland (or anywhere else for that matter) on changes regardless.

I would be amazed (but pleased) if there was a need to change the treaty and we actually got a vote on it in Ireland - that would cause a few sleepless nights to those walking the great corridors of EU power.

I won’t be holding my breath though. I’m pretty sure they know how to bypass us in the future.

More than the constitutional court Merkel wants to avoid any more friction in her fractious coalition. The FDP won’t take a bailout of Greece.

“Why was it OK for EU member countries such as Hungary, Latvia and Romania to request assistance from the IMF and it would be wrong for Greece to do it?”

Well the difference would obviously be simple EU membership vs full on Eurozone membership. The EU is just a common trade area really, while the EZ is something far more complex and intertwined. While you’re right that we are far from being a United States of Europe, the common currency zone, the Stability and Growth Pact, and a single monetary authority/policy takes us quite a long way down that road economically and fiscally, although not politically. An EMF would simply bridge this gap somewhat with an institution bourne from political concerns, being used to provide economic stability at times of crisis. Obviously the danger would be that it could become run in a political manner, but the hope would be that it is structured with the same independence as the ECB is.

Without the European Solidarity Bond - the IMF would presently be attempting to fish us out of the depts of the North Altlantic Ocean. The time for Pragmatic Realism or Realist Pragmatism is NOW (-;

Daniel Gros does not think that a new treaty is necessary.

A new treaty will not be required but a few amendments are necessary, as the Maastricht Treaty banned bailouts.

I assume that what Merkel has in mind is to avoid problems with the German constitutional court.

@ Eoin

The EU ultimately wants to be a long term economic “superpower” the way the US is and the way China is becoming.

I don’t think so.

What is remarkable about the US, is that people from Michigan and California are so similar; ditto for China where the Han people comprise over 90% of the population.

Would you allow me discipline your children (if they deserved it)?
Keep it in the family!

Al

This move to EMF is very welcome - and Greeks in New York at the mo talking to IMF re expertise - so not a ‘mortal blow’ - EMF is simply further, if painfully slow and necessary strengthening of European ’solidarity bond’ - President Sarkozy came out positive yesterday and Chancellor Merkel will also do so after her local elections. As we discussed previously on another thread - the ’solidarity bond’ is essential to bringing more discipline and common sense to EU fiscal policies [PL. JF, and others have written on this here .... ] … one must simply sort out the policy particulars [members] within a local [European] universal ………… not an easy task …. but a necessary one the broader European Project - but effectively impossible if the ’solidarity bond’ broken. Worth noting that this ‘intangible bond’ is one of our greatest resources at the moment in leveraginig our own way (if and when we get around to pragmatism and away from simplistic ideologues and cliques) our of our present ‘little’ difficulties.

The New York times on this is worth a read as well …………
http://www.nytimes.com/2010/03/09/business/global/09iht-euro.html?8au&emc=au

Overall, this is good move for Europe, I 99% support it.