Ashoka Mody: A Schuman compact for the euro area

Ashoka Mody has a new Bruegel essay proposing a “Schuman compact” for the Euro area, available here.

12 replies on “Ashoka Mody: A Schuman compact for the euro area”

This is a good proposal as solidarity is more expected of others than people are willing to give themselves.

Earlier this year France called for an EMU ‘economic government’ but weeks later President Hollande was angered by the perceived brass neck of the Commission to tender advice on the budget deficit.

Mody highlights a key problem with external surveillance: the lack of credible sanctions.

Bail-ins do not guarantee good economic governance but at least the lenders would know in advance the risks in lending to such a country.

No other country can for example solve Italy’s problems but itself.

@ Aidan R


The common feature of the contributions of the distinguished contributors is that they underestimate the resilience of the institutional structure of the EU mainly because they have, it would seem, little understanding of it.

This Commission document, courtesy of the Times and the UK eurosceptic think tank Open Europe, analysing the positions of the different players on the “cascade”, or “pecking order” as it was referred to in the recent Dáil exchanges, of the contributors to bail-ins illustrates the point.

“None of the
fundamental problems underlying the euro crisis have been solved –
not the banking crisis, nor the sovereign debt crisis, nor the competitiveness

But on planet DOCM tout va très bien, madame la marquise

Ashoka Mody communicates that it is time to recognize and render more effective the de facto decentralisation in Europe (via three compacts).

The Fiscal Compact: The delegation of European fiscal governance to the European Commission has created complex structures that have encouraged costly delays, deceptions and half-measures. For this reason, fiscal policy should be the responsibility of the member states where the sovereignty lies. This concept is already present in the Fiscal Compact to which states voluntarily commit. (I comment that political bickering in nation states will never ever establish any sound fiscal plans).

The Sovereign Debt Compact: To minimise the risk of excessive future sovereign borrowing, a credible “no bailout” regime must ensure that private lenders bear losses when sovereign debt becomes unsustainable. This will require writing the possibility of restructuring in debt contracts, using sovereign CoCos. (I comment that investors see no credible sovereign authority providing investment seigniorage, that is investment moneyness, for new debt).

The Banking Compact: The current debate is focused on the intractable financing details of the complex banking union. But financial stability requires a much smaller euro-area banking system. The compact would encourage states to pro-actively downsize the growing crowd of zombie banks (using debt-equity swaps) while bolstering viable banks. (I comment all, yes all European Financial Institutions, such as IRE, SAN, NBG, DB, are insolvent banks; and shutting them down is an unachievable task).

No people and no governments in Europe are going to sign on to these agreement for the reasons indicated. The bottom line is that The PIIGS, that is Portugal, Italy, EWI, Ireland, EIRL, Greece, GREK, and Spain, EWP, are insolvent sovereigns, and the European Financial Institutions, EUFN, are insolvent financial institutions.

Bible prophecy of Revelation 13:1-4, foretells that out waves of sovereign insolvency and banking insolvency, the beast regime of regional governance and totalitarian collectivism will rise to provide economic and political life for mankind. This monster with its ten horns, will provide monetary and economic diktat in each of the world’s ten regions; and with its seven heads, will provide debt servitude, totalitarian collectivism, in all of mankind’s seven institutions, according to Revelation 13:1-4.

In his foundation speech of June 20 1950, Robert Schuman communicated that the achievement of democracy was inevitable. Yet as a bible believing dispensational economist, I believe that the EU is ordained of God to emerge as a democratic deficit Federal Super State, the very model of empire that is to be reproduce in every one of the world’s ten regions, to the point where eventually each will have its own king, Revelation 17:12, yes ten kings for each of the world’s ten regions. Furthermore, it’s God’s will that the World’s Sovereign, rise to power in the Eurozone, Revelation 13:5-10, and that he be accompanied to power by the World’s Seignior, that is top dog banker, who in providing seigniorage, that is moneyness, takes a cut.

Those who believe that democratization and decentralization of Europe is possible are like Austrian Economists, who hope for a free land, where they can live free of intervention of the state, are believing in a mirage, that is believing in an illusion, on the Authoritarian Desert of the Real.

On Wednesday, November 20, 2013, Nation Investment, EFA, traded lower, documenting the failure of sovereignty of democratic nation state governance. Greece, GREK, Spain, EWP, Italy, EWI, Ireland, EIRL, Germany, EWG, EWGS, Netherlands, EWN, Finland, EFNL, led Eurozone Stocks, EZU, lower.

And Global Financials, IXG, traded lower, being led so by the European Financials, EUFN, documenting the failure of the seigniorage of the banker regime.

Bible prophecy of Revelation 13:1-4 communicates that the new paradigm and age of authoritarianism will rise out of Eurozone sovereign insolvency and banking insolvency to provide regional governance and totalitarian collectivism for regional security, stability and sustainability, replacing the former paradigm and age of liberalism which provided investment gain.

@ All

On the point I made above regarding the resilience of the institutional structure of the EU, the recent speech by Merkel, as reported by Derek Scally in the IT, is of interest.

Her “new” approach represents a 180 degree turn from the thinking that she outlined in her Bruges speech some years ago. Needs must!

The assumption by Derek Scally that a referendum would be required in Ireland in the event of a treaty change is not necessarily correct cf. this link that I posted on the OMT thread.

@ All

Dijseelbloem does not think much of Merkel’s pet idea of country contracts with the Commission – with associated financial sweeteners in return for action on reform – nor of French ideas with regard to a budget for the Euro Area and a permanent chairman of the Eurogroup. However, experience over the decades has shown that any agreement between Germany and France – even if not very sensible in the long term – is better than no agreement and immeasurably better than conflict between them.

@DOCM-danke-some good news stateside this is BIG BIG news over here its a wow moment-game changer.
If you missed the press conf. they normally make them available shortly after.
terrific link above,and i did print out Mody’s piece just havent got too it yet.

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