Europe cannot endure a rift between ins and outs

Marek Belka is the Governor of the Bank of Poland and influential in the EU-wide debate – his FT op-ed is here.

Previously, he was head of the IMF’s European Department – his successor Antonio Burges is to be replaced by Reza Moghadam, as announced here.

41 replies on “Europe cannot endure a rift between ins and outs”

Just saw on RTE Antonio Burges was head of Goldman Sachs London from 2000-2008. Another Goldman Sachs man in an important policy making position.
Antonio Burges had to make decisions in Europe affecting Goldman Sachs investments. Was he completly impartial?
The evidence would suggest that the IMF programs have been too concentrated on austerity and really should have been prescribing debt writedowns earlier.

This is a good commentary but a bit selective.

The real story may be the divide between the AAA countries of the EZ and the rest cf.


“But among the plans that have been mooted in Brussels is creating joint “eurobonds” for triple A countries, which would drive down the borrowing costs of all six and give incentives to other members to join.

In an address to the European Parliament on Wednesday, Mr Van Rompuy hinted at such a plan, saying that among proposals under consideration was “limited mutualisation” of public debts”.

This development, if it goes ahead, would strengthen the EFSF branch which, if I am not mistaken, Ireland happens to be sitting upon.

The EU is not the US and the ECB cannot be turned into the Federal Reserve overnight, as some seem to think, with the wave of a magic wand.

I should add that the main driving force for the idea, it seems to me, is that of self-preservation, the strongest that there is, prompted by the crisis reaching the core. But it would keep France on board the Raft of the Medusa to which the leaders of Germany and France have reduced the European bond market and create a defensive line from which positions can be recovered. It was, of course, floated by the Commissioner from Luxembourg some months agos and was shot down unceremonioulsy by Merkel. But the waters are now lapping at the feet of Austria which has lready nationalised two major banks, if I am not mistaken.

“But among the plans that have been mooted in Brussels is creating joint “eurobonds” for triple A countries, which would drive down the borrowing costs of all six and give incentives to other members to join”

Close the hatch on the compartment that is flooded so that the AAA passengers can survive unscathed. Keep sucking the air (money) from the flooded compartment just in case they have any chance of survival. So let them drown, with the hatch closed.
Now that is EU solidarity. Solidarité.

There is only one answer to that proposal. Immediate and stringent capital controls including a forced repatriation of funds.

These so called triple A countries must think they are dealing with complete idiots.

@ Chris

“Antonio Burges had to make decisions in Europe affecting Goldman Sachs investments. Was he completly impartial?”

If this is really an issue for you, then we are going to have a situation where only civil servants or acadamics are going to be able to take on positions in government, regulatory/monetary authorities or surpanational organisations. Doesn’t seem like a particularly bright idea for a set of government/economies that the EU has admitted are not fast enough to keep up with the markets as-is. The constant referencing to Goldman is also getting a tad boring and is suggestive that people don’t actually understand how many other banks or hedge funds are actually out there. Its a bit like my mum saying she knows about football cos she knows who Pele is…

Goldman controls the US Treasury – perhaps the US Treasury was always a NYFR operation but the line has been blurred to indistinction now.

Anyhow Goldman needs the US treasury and the US treasury needs Goldman.
If they have their men in Havana so to speak what happens to Europe ?

I would argue that Euro austerity is all about directing the new oil surplus created towards America & its terrible twin China.
The Euro is about to fall against the Dollar rather then Gold in my opinion – therefore transferring wealth across the Atlantic and destroying the utility function of euros to lubricate the economy.

@ Joseph Ryan

I think you need to look at the idea a second time. All countries act out of self-interest. The more they can show their electorates that this is the case, the more likely they are to move. Were the AAA countries concerned to make a “limited” bond offer on the markets to test the waters, I fail to see how this could be damaging. It would be confirmation of a political commitment to hold the euro together by the core countries.

By the way, I was reminded of Thatcher’s famous 1980 speech to the Conservative Party “The lady’s not for turning” by the following in the report by Derek Scally in today’s IT.

“A day after her Christian Democratic Union (CDU) agreed a resolution placing the EU’s “community method” of decision-making above inter-governmental deals, Dr Merkel said she found the debate “artificial”. “I wouldn’t set one method against the other,” she said. “If we want to work together (here) in Europe we cannot use the community method, rather use an inter-governmental method which, by the way, is also a very European approach if not as integrated.”

This is, of course, the line expounded in her October 2010 Bruges speech, a town also notable for a speech by Thatcher. I wonder if there a Geoffrey Howe among the ranks of the CDU! I doubt it.

Mr Belka makes a good point about the negative effect of employment law procedures.

I am all for worker protection and workers rights, but you would want a phd to understand and advise on our employment laws, let alone implement them in a business. They are a massive overhead and operate as a brake on businesses that need to operate efficiently. Either they ignore problems witht eir employees or they acceot the massive administrative overhead involved in addressing such problems.

Many small businesses, to their credit, ignore the procedures altogether and apply a general obligation to be fair to employees. They accept the risk of litigation as the overhead. However, this is getting more tricky as employees can’t get work elsewhere.

Unless employment law is reformed to make it easier for businesses to administer it, our economy will labour under the burden of unnecessarily large transaction costs We will suffer as a result of this major disadvantage.


There is something called a conflict of interest. As the old saying goes ‘ a man cannot serve two masters’. I do not suggest that conflicts of interest are confined to the business/financial community, but there is a general sense that big business has corrupted government in a whole slew of countries.

The present crisis, which is as you know a balance sheet crisis, can be traced directly to the policies of Alan Greenspan. Deregulation served the specific private interests of Wall St players like GS. The externalities and losses were successfully hidden in balance sheets but came to surface, like bodies in the water, in 2008. More stinking, swollen, corpses are bobbing up every day, and markets are freaking out.

I do not say that GS, or Wall St more generally, is the sole, or even the worst perpetrator of social and meconomic crimes over the centuries. What is indubitably true is that GS and its like have had a central part in the catastrophe.

IMHO, what is happening is the remoreselss destruction of the so-called western way of life. As long as GS has its tentacles in the process, there can be no real respite. The employees of the financial services sector will eventually go into the bin along with the rest of us, when Wall St and the City of London has no further use for them.


There is a corollary to the German refusal to allow the ECB pruchase bonds.
It is capital controls in all of the EZ countries to keep their own funds in their own countries.
A whole continent cannot sit idly and watch their countries funds being drained towards Germany/Netherlands etc, while they are unable to get funding for their own States or banks and will in time be forced to default.

Germany cannot have it both ways.
This crisis has been very good for Germany and very bad for almost everybody else.
It is time to call a halt to this nonsense.

Well, the Euro can’t survive with everyone “in” either, so I guess that means we’re all “out”.


Good article.

“Berlin, however, is adamantly opposed to such a move. Were the ECB to flood the market with liquidity in the form of unlimited purchases of government bonds from debt-stricken euro-zone member states, rapidly climbing inflation could be the result. And Germany, for historical reasons stretching back to the 1920s hyperinflation which smoothed Adolf Hitler’s rise to power, has a deep-seated phobia of rapidly rising prices.”

The Germans need to break the link between hyperinflation and Hitler, and just accept that they elected him. It’s true that hyperinflation caused instability, but this is not a direct cause and effect. There’s a heap of conditional probabilities that led to Hitler. Getting someone with his attributes was a low probability event.

“”History has shown us, and not just in Germany, that the monetization of state debt is a deadly sin for central banks,” Franz told the Frankfurter Allgemeine Zeitung in an interview published on Thursday. “Doing so not only results in a loss of independence, but it also raises the risk of inflation. Finally, it also represents the undemocratic collectivization of debt under the auspices of the ECB.””

On the first part, what is Herr Franz’s prediction for the US and UK. On the second part “the undemocratic collectivization of debt under the auspices of the ECB” – Irish taxpayers feel for you.


In terms of Coup – the Italian is by far the most impressive of all – not a single elected politician in gov – and not a single shot (metaphorically speaking) FIREd. Will be recorded in the G_S Annals with admiration and awe … and probably a few trillion in between.

@OMF – good article. Thanks for the link. You can always rely on the fascists when you need to put out a good bashing.

There are military wings of the 1% all over the world – they’re called national armed forces, police, etc. – and when they’re told to bash, they bash. Some individuals get a conscience (e.g. Syrian soldiers deserting) and run away from it but ultimately, security forces that wear boots and walk, in the west and elsewhere, are a safeguard for keeping the plebs down and the powerful protected. Protecting the nation and ‘diplomacy by other means’? That’s all done by plane/remote control these days.

I like it – we must debase so that the spice can flow.
Having said that the Italian debacle is rapidly turning me into a FRN bug – Its a excellent piss take having Jackson on the cover of the $20 spot don’t you think.

I thought the ECB was bluffing but now I am not so sure – all western consumption will flow to the US if this keeps up.
These Guild Navigators are good – always messing with the flow so that they can remain above the terrestrial universe.

@PR Guy

“Asked today to confirm the report, Minister for Public Reform Brendan Howlin said “it’s information that hasn’t happened”.”


Um, the VAT rate, property tax, etc. are in the MoU. I really don’t see how this is news to anyone other than the terminally stupid. As they are in the MoU, expressing dismay at them now is rather mad. The time to express dismay was last November…

Rumpy Pumpy says ‘unconventional economic
reponses needed’ ,serious shot across German

And Rumpy Pumpy is normally a delphic creature of the shadows…wonder what is going on ?

@Desmond Brennan
It’s hard to know what he is referring to.

QE in textbooks – check
Printing in textbooks – check
Central Bank as LOLR – check

Perhaps he is referring to installation of unelected governments?

Indeed, Rumpy Pumpy is delphic at best,and with the gnomicism of Twitter…there’s further murk…but I’m pretty sure he’s alluding to ‘unorthodox economics’ …and for all I know, perhaps such is censored from German textbooks 😉


I have to admit, ‘information that hasn’t happened’ is a new one on me – it might just be that the person who said it is an idiot who forgot to put his teeth in this morning. Or is it a like the French ratings downgrade that happened but then didn’t happen the other night?

I expect it’s just a denial. We never told them Germans nuffink guv.

@Desmond Brennan

Humbly suggest you continue with Wittgenstein – all this pure_ile projection and scapegoating and feeble stereotyping is somewhat trying … or simply go to neo-kon school somewhere …

I would like to get hold of a copy of this if the publishers reprint. Article on author worth reading in NYT.

“Forget credit default swaps: Investors betting on further mayhem in the European monetary union should trade in used paperbacks.

Copies of Bernard Connolly’s “Rotten Heart of Europe,” a 432-page book written in 1995, are selling on for nearly $700 apiece, highlighted pages and all.

The New York Times ran a profile Thursday of the book’s author, a former European Commission official turned euro-zone critic whose once-radical views now seem to prescient as European leaders struggle to contain the Continent’s burgeoning debt crisis.”

bit off thread IMF Speaks on The Conflationist Fallacy

Twas Anglo-Irish, the PDs and Fianna Fail wot done in the EuroZone

Working Paper No. 11/269: The Eurozone Crisis: How Banks and Sovereigns Came to be Joined at the Hip

Author/Editor: Mody, Ashoka ; Sandri, Damiano

Summary: We use the rise and dispersion of sovereign spreads to tell the story of the emergence and escalation of financial tensions within the eurozone. This process evolved through three stages. Following the onset of the Subprime crisis in July 2007, spreads rose but mainly due to common global factors. The rescue of Bear Stearns in March 2008 marked the start of a distinctively European banking crisis. During this key phase, sovereign spreads tended to rise with the growing demand for support by weakening domestic financial sectors, especially in countries with lower growth prospects and higher debt burdens. As the constraint of continued fiscal commitments became clearer, and coinciding with the nationalization of Anglo Irish in January 2009, the separation between the sovereign and the financial sector disappeared.

The situation calls for people in positions of power that know their copaleens from asaileens. I see the ascendancy of bureau/techno-crats as an intelligent measure. After all it was authorized and supported by an elected parliament. Only in Ireland do people in positions of power have to be amateurs who can drink until 3:00 a.m. and get your passport renewed in 5 days.

Give the Greeks and Italians credit for putting the right people in the job.

Some in Poland were very keen to join the Eurozone in advance of the other Euro: EURO 2012, that is – especially Donald Tusk, the Prime Minister. It would have been very surprising to me that businesses and banks would have agreed to go through with it in advance of the footie however.

I am all in favour of voting out idiots except where we knowingly replace one set with its identical twin.

The Greek and Italian parliaments still control the process. To deflect the heat and give the impression they are doing something useful they hand the poker which is now hot at both ends to techno/bureau-crats. If heat continues to build they will dismiss the t/b-crats and assume direct control. On the other hand if the t/b-crats are successful the pols will claim credit and life will go on as usual.

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