Statement by Euro Area Heads of State: December 9 Post author By Karl Whelan Post date December 9, 2011 Here‘s the statement by the Euro Area Heads of State. Categories In EMU Tags euro crisis 51 Comments on Statement by Euro Area Heads of State: December 9 ← Sargent’s Nobel Lecture: US then, Europe Now → Fiscal Rules: Stocks, Flows and All That 51 replies on “Statement by Euro Area Heads of State: December 9” Now , can people see the True Goal of Europe ? http://www.youtube.com/watch?v=G11prumD2pY Key messages in this document: p1. The problem is ‘market tensions’ increasing and nothing that we had any control over. Both actions are implied only and there is no guarantee of execution. We are only going to try to address short term challenges. p.2 We are desperately hoping for growth to help solve problems in the EU (despite all evidence to the contrary). ‘new deal’ – what a great phrase but sure I’ve seen it somewhere before new legal framework means we don’t know what the legal complications might be as of today p3. We couldn’t do 3% so now we are looking for 0.5% (surely shome mishtake?) We deliberatly haven’t set a timetable because we don’t have a clue when even 3% is going to be achieved by all members let alone 0.5%. We will use words like: ‘Excessive Deficit Procedure’, ‘endorsement’, ‘economic partnership programme’, etc. to make it all sound a bit softer. Big Brother will be watching you – and hopefully more jobs in the Commission and Council will be created. p4. Why have we suddenly gone back to a 3% deficit target (I must be mis-reading something)? There is room to lobby other members under QMV to avoid ‘automatic consequences’. We are still aiming for the 60% debt target we weren’t able to meet before. Although we’ve had a month now to examine the new rules proposed by the Commission on 23 November, we will now ‘examine swiftly’. Er, didn’t some of us already reject them? Zzzzzzzz Falls off chair in a coma…. @ PR Guy 0.5% is “structural deficit”, 3% is headline deficit. I had to laugh when I saw the footnote on page 6 – “subject to confirmation by Finnish Parliament” – best of luck with that. This document/plan seems pretty wishy-washy to me with enough wiggle room that it can be interpreted in whatever way future politicians wish. For instance who decides whether a deficit is structural or cyclical when applying the 0.5% of GDP test? Breaching the 3% ceiling is also acceptable if a qualified majority agrees – this sounds suspiciously like the existing Maastricht criteria to me. It appears they still don’t get the solvency issue though – reforms must be “combined with immediate action to forcefully address current market tensions” – except it’s not the market that’s the problem, it’s the overleveraged borrowers. Happy there’s nothing in there about corporate taxes, the press last night seemed to give some credit to Enda for that so well done team Ireland on that score. All this to get ECB support that it appears won’t come in any event… @BEB Ah! Thanks. It’s also concerning that the only time the word ‘growth’ is used is as part of the ‘Stability and Growth Pact’ misnomer. They haven’t even paid lip service to imaginary economic growth that might come from ‘structural reforms’. This document is all stick with no carrot. Just another fudge to keep the whole house of cards functioning without addressing the real problems @Edward They don’t get (?) that in this monetory ecosystem goverment debt is the only mechanism that subtracts credit deposits. Its a prototype manifesto for extreme leverage , limitless private credit creation and therefore debt slavery. We have got to get out of this place. For a full money advocate this is the Pit of Hades. I would even shut up if we went back to the pre 1987 8 to 1 leverage , I could tolerate that temperature at least – but this darkness ? This nonsense only makes sense if the CB holds the entire M1 on its books. Maybe this is what Draghi means by the Fiscal compact but I doubt it somehow. @ PR Guy risk rally continuing on, confident of picking up my sportsman bet with you from this morning… 😀 An early thought… The right wing Thatcherite block will be in the schizophrenic position to applaud Cameron’s move. Can’t be bothered to attempt to outdo these: http://ftalphaville.ft.com/blog/2011/12/09/789891/quote-du-jour-eurofudge-edition/ …other than maybe ‘Fears of a two-speed Europe, with Britain in the slow lane’ (and presumably the others in the very slow lane). It’s very like the war on terror. If you don’t understand what happened and why it happened it doesn’t matter how much money you spend trying to fix it. But the money is great for all the vested interests who are delighted with eternal crisis. @ All According to the most recent reports, it could now be 26 to 1. Fog on the Channel, Continent isolated! http://www.irisheconomy.ie/index.php/2011/12/08/colm-on-the-summit/#comments from DOCM FYI http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/126658.pdf http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/126657.pdf discussion there on these docs as well Lucinda Creighton affirmed on news this am tax harmonisation / CT was not on the table. Did we not insist they be put on the table as guarantees? Did we not demand debt reduction guarantees. Note bondholders instead got their guarantees with clauses on Greece being a special case. Cameron walked without similar guarantees. We played blind man’s buff and lost. We gave away even more sovereignty in return for less voting powers across decision making institutions that will decide our future debt burden performance, the message is get used to slavery and serfdom…… @ All It should be clear by now that Cameron has monumentally overplayed his hand. If 26 members of the tennis club wish to use its facilities to play a bit of badminton, without, and this is a crucial point, interfering with the facilties for playing tennis, how can the 27th member object? The Constitution, from a layman’s reading of it, is quite clear in the matter of international agreements. Only the approval of the Dáil is required. There is, of course, the qualification that, until the text is agreed, and lawyers in all the participating countries have examined it, the speed with which it can be ratified is uncertain. But if all the other states can proceed rapidly, why should Ireland not be in a position to do so? On reflection this agreement is a recipe for disaster on a continental scale. It is a formalised locking in of severe austerity until rebalance is achieved. That could take up to ten years. It allows no Keynesian flexibility of any kind in dealing with economic shocks. It is aspirational on growth while its policies are anti-growth. It imposes the harshest of discipline on countries but no discipline at all on the capital of the citizens of those countries. This will not work. Economically, socially or politically. It is a collective march to the scaffold. @Georg R. Baumann The right wing Thatcherite block will be in the schizophrenic position to applaud Cameron’s move. Quite. Merkel is quite the figure of a victorious right wing hero, she is the modern inheritor of Thatcher’s mantle – relentless, amoral and not afraid to threaten the weak. While Margaret Thatcher said that there was no such thing as society and then set about destroying its integrity in the UK Angela Merkel is instead saying that progressive economic policies are not possible and then forcing every other country in the Eurozone to write this position into law. The German right as opposed to the English right approach to remaking the world. @Grumpy re “….and presumably the others in the very slow lane” +1 @Seafoid re It’s very like the war on terror… +1 Huh ? Some sorta future comittment to fiscal discipline…when the crisis is hera and now ? “Statement by Euro heads of state” should really be “statement by Euro Head-the-Balls” @Joseph Ryan: It allows no Keynesian flexibility of any kind in dealing with economic shocks. Actually this is very Keynesian, if they actually mean it: General government budgets shall be balanced or in surplus; this principle shall be deemed respected if, as a rule, the annual structural deficit does not exceed 0.5% of nominal GDP. The structural deficit is defined as the deficit which would prevail at ‘full’ employment. But I suspect that what they have in mind is a primary deficit, which is of course a quite different thing. The Keynesian terminology snuck in thanks to some sloppy drafting. The German version is authoritative, I presume. Does anyone know what term it uses and how that term is understood by the likes of Hans-Werner Sinn? The Swedish position is reported as being: The ones who want to do it can but Sweden will not join at this time and a parliamentary majority of not joining is currently in place. Kind of a mixed blessing of a possible deal…. The ‘Yes-culture’ that helped the banks agree to so many deals seem to be strong. Rather agree to everything than stand for what you believe in and risk being accused of being ‘The mouse that roared’. But hey, that worked well in Ireland (regulator, central bank, ministers, risk professionals…) they all said yes and played ball 😉 & can the constitutional rights of citizens in Ireland be trampled on by simply referring to ‘international agreements’? @ Joseph Ryan You are misreading the situation, or rather ignoring the operational aspects of what is being undertaken to underpin the euro. The jury is still out on whether these will work or not but I think that they will. A key sentence in the Euro Area agreement is “Considering the absence of unanimity among the EU Member States, they decided to adopt them through an international agreement to be signed in March or at an earlier date”. I take this to mean that the attempt to alter Article 136 is also being dropped. Merkel will have some explaining to do on this point before her parliament. The sad fact is that none of the three leaders involved is up to the job. And Europe may well yet pay the price. One mildly reassuring point is that the UK has been in splendid isolation before e.g. in relation to the famous Social Charter but subsequently relented and its provisions were incorporated in the treaties. The domestic political implications for Cameron are also considerable. A visibly angry Chris Davies, the Liberal MEP, subjected Cameron to quite a ferocious attack on Sky just now and this seems bound to make waves. @Bond Eoin Bond “risk rally continuing on, confident of picking up my sportsman bet with you from this morning” Ha ha! Two words: “fat lady” 🙂 Two more words: “unsustainable debt”… “no bazooka”… “banking crisis”… “double dip”….. “solvency problem”… “ratings downgrades”… “deck chairs”… “consumer spending” … “credit crunch”… “severe austerity”… “debt slavery”… “social unrest” … “*”, “cop on” (that’s aimed at the markets, not you!!) * add your own as appropriate H’mmm… not much time left until the markets close. I’d better start spreading some rumours 😉 @ Jesper Sweden has missed numerous occasions in this debate not to stick its oar in. The rapid U-turn of the Swedish PM, scrambling to get on board the EU26 train before it left, was not a very edifying sight. I think the logic of the new deal is impeccable, for members of the CDU or stakeholders in the core Eurozone’s financial sector. Historians may reflect that the global financial crisis came at a bad time, were there agents of the European People’s party not in power in a majority of Eurozone countries we might have actually confronted the underlying problems. However it is the in the modern conservatives nature to always side with the powerful against the weak and hence this new final solution to the artificial issue of Eurozone state debt that “we” have decided on. Insane. @Shay Merkel is quite the figure of a victorious right wing hero, she is the modern inheritor of Thatcher’s mantle – relentless, amoral and not afraid to threaten the weak. The “results” presented today reflect the right wing Ideology of the unhealthy overwhelming EPP in all three major European Institutions. It is a disgusting spectacle that is being played here on the backs of people who had no hand in all this. Another parcel bomb was delivered today to a revenue collector in Italy. I do not sympathize with violence of any kind other than in pure selfdefense, but I guess their understanding of selfdefense is distorted. I believe that harsh civil disobedience is a ‘legitimate’ tool at the disposal of citizens, without causing physical harm through mindless violence. In my world, the questions arises to what degree civil disobedience is a citizens duty now. Intellectuals of all countries are required to combine their efforts to inform and lead a social movement that disobeys the technocrats, their social engineering and this global coup that is unfolding. @DOCM, If it looks like a duck, and quacks like a duck … The text of the Euro area agreement is not the final arbiter of whether something that looks much like another extension to the EU’s competencies falls within the scope of the Crotty judgment. Underwhelming with a few fudges that are of future concern. Key point is that this is ‘Not a fiscal union’, nor does it signal a real intent to move in the direction of a ‘real fiscal union’. Overarching all is the failure to address debt unsustainability – the cancer that is destroying the EU project from within – and the ECB surgeon is available, but waffling away on the state of its toenails. Figures such a 0.5, 3.0 and 60.0 are mere abstractions, with no innate validity whatsoever. In crisis time, such rigidities may turn out to be more of a hindrance than an assistance to many EU regions getting out of the present mess; including the one around here. It isn’t worth a referendum. Principles must trump rules if EU is to progress. Agree with Joseph Ryan — it only allows for the “austerity” solution. The question I have is why is the EZ so beholden to the ‘markets’ anyway? Isn’t the EZ ‘big’ enough at this point to make the Euro a currency like the US dollar – just print up enough of them, like the Fed, to pay off the gov bondholders? And then get out of the bond market completely – use EZ issued fiat Euro for financing although obviously PIIGS would still have to balance their budgets (i.e. live within their means). The EZ is big enough for it to work, and Germany would make damn sure that the amount of Euro issued wouldn’t get out of control. @Kevin Great observation – but all those Keynesian thingys was formulated during periods of fixed exchange rates. Most of these terms no longer have any relevance because we live in a untethered financial world. Its now just a question of producing unleveraged credit vs leveraged credit. We have got to such extreme goverment debt levels because the CBs have stopped financing defecits – giving that job entirely to commercial banks so therefore interest exponentials do what they do best……increase exponentially. The Anglo world has changed this dynamic although there is not much more fiscal spending by Treasuries , preferring to use QE (producing excess to drive down rates on existing debt) Taoiseach Enda Kenny said Ireland’s economic security had been defended and protected and a great deal of work had been done in terms of putting together “firewalls” to prevent contagion. I was tempted to comment here, but I think it is a waste of space as his statement itself is testimony enough! @DOCM From my perspective I do not think I am misreading the situation. The program now agreed to be adopted involves reducing EZ debt by approx 2400 billion and reducing EX deficit by approx 500 billion. In total this is a formalized agreement to deflate the EZ zone by approx three trillion euros. My source is below based on 2011 figures http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-21102011-AP/EN/2-21102011-AP-EN.PDF EZ GDP 2010 is €9161 billion Debt €7822 (85%) of GDP to be reduced to EZ GDP 2010 is €9161 billion Debt €5496 (60%) of GDP Reduction approx 2300 billion. Reducing deficits from 6.2% to 0% will mean a further ~500 billion deflation. Total approx €3,000 billion. What kind of Europe will this experiment gestate? As for the politics of the situation? The UK for has stayed outside probably for narrow reasons but in Mervyn King as advisor they at least have somebody who understands the situation and knows this is a disaster. This time the UK is right. These proposals spell doom for all of us. @Georg R. Baumann Says: December 9th, 2011 at 2:29 pm Taoiseach Enda Kenny said Ireland’s economic security had been defended and protected and a great deal of work had been done in terms of putting together “firewalls” to prevent contagion. +1 If you will permit me Georg ? ‘B******s Enda.’ fiscal sanctions why are we signing up to this? anybody doing the sums can see we are going to be a mess unless we get debt relief on the banking side of our national debt all stick no resolution for Ireland and smaller states particularly smaller heavily indebted countries but keep losing our soveriegn powers with this we will be a puppet state attach the plaster and keep us going another 2 months until it all blows up again somehow im thinking it may be sooner all with no gurrantee that ECB will step up to the plate @Georg R. Baumann I have been wondering whether we should describe the continuing and successful attempts to use the European component of the global financial crisis as an excuse to turn the EU into a laboratory for simpleminded Mittleeuropean rightism as the “Eurocoup” or the “coup de euro”? Would it sound better in German? @ All FYI http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/126712.pdf @BEB Has the rumour I started that the Dutch parliament are going to throw this deal out when their PM gets back and puts it to them hit the airwaves yet? 😉 He won’t have a majority supporting him – neither within the current coalition nor the opposition. H’mmmm FTSE still above 5500 – I had better try harder. Is Kenny the worst Taoiseach we’ve ever had? Arguably the last lot were caught by surprise by the banks, then went on to heap mess on mess. The Kenny, on the other hand, should have his eyes open. We don’t expect him to be a Grimsson or Bo Lundgren, but, a tiny, tiny, bit of cop on? Is that too much to ask. http://www.allthingscherokee.com/articles_culture_events_020201.html “Several years later in 1828 Andrew Jackson was elected president. His popularity and subsequent election are largely attributed to his pro-Indian removal platform. Once in power he began to allow whites to move onto Cherokee land. He also allowed Georgia to extend state law to include the Cherokee Nation. This called into question Cherokee sovereignty and declared their government and laws void.” Similarly, Kenny is giving away our sovereignty, ESM majority voting clauses. Even a gombeen should see that the underbelly of IFSC re tax harmonisation and CT is exposed? How? Austerity he’s signing up to, look at a budget deficit next year and we cant meet our obligations under treaty changes? The only way we’ll be granted another bailout will be to take a hit re Corporation Tax and Tax harmonisation or some other form of asset stripping. They’ve already set themselves us with the powers to do this if matters deteriorate and we can’t meet our repayment schedules. What he’s got sofar from negotiations is a roadmap to EMU’s toxic dump. This is a poisoned chalice. The final chapter will be played out in Romanian Ceausescu fashion perhaps with civil revolt ousting him as austerity really kicks in over coming budgets. No haircut/relief on our debt, Enda? Under all the hair dye, that’s a mighty scalping they’ve given you 🙂 OT I hope folks realise we’re not really in a currency union, it’s more like a currency credit union, with the horseless carriage of the EMU pulled along by the FED and the hidden euro dollar peg. That’s the only way to rationalise lack of action on debt, bank recapitalisation, stress testing, financial reforms. I for one welcome our new Qatari overlords. http://www.reuters.com/article/2011/12/09/qatar-efsf-idUSL5E7N91HE20111209 @DOCM Von Rompuy statement is very short. Is it ambiguous …. “A new Fiscal Rule to be transposed in national legislation” Is this a watered down version? Small win for the hetergeneous wing … I’d like mine in Donegal Irish, Dingle Irish, Scots Irish, Breton, Mandarin, Welsh, and Latin. @Bond Eoin Bond I will graciously admit defeat. :-@ European Council Unity dearly bought 9 December 2011 Die Zeit Hamburg Without doubt, Angela Merkel and Nicolas Sarkozy have taken a big step nearer their goal of a fiscal union. But at what price? Britain remains outside it. The salvation or the disintegration of the Union is now approaching. http://www.presseurop.eu/en/content/article/1268111-unity-dearly-bought Le Monde puts the boot into Cameron. http://www.presseurop.eu/en/content/news-brief-cover/1267001-goodbye-britain @Shay I am not saying this with ease, but since a good while now I describe the events a slow motion coup d’état, and because of this slow motion, applied by the “Incrementalists”, it is difficult for the average and deliberately misinformed citizen to identify it as such. @Georg R. Baumann … a slow motion coup d’état …’ Velocity has increased somewhat – doesn’t really matter what the supine content is – the objective is simply to demonstrate the power of the present powerholders, as a mere tool in sustaining such power. I would advise against giving them a taste for it as they would certainly come back for more. This is not the relevant agenda. Let’s have a proper democratic discussion throughout the EU to agree an apppropriate agenda, and then every citizen be given the democratic right to vote on it. We take it from there … @David O”Donnell Dingle Irish will be all that is required. After all these years I still find it hard to believe that Gaelic is an official EU language. Comments are closed.