Vote Rotation at ECB Governing Council

The entry of Lithuania into the eurosystem in 2015 will trigger the long-planned vote rotation system at the governing council:  see ECB FAQ here,  the 2002 press release here that explains the change in the ECB voting system to cater for enlargement (as envisaged in the Treaty of Nice) and the revelation in today’s Sunday Independent here.

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55 thoughts on “Vote Rotation at ECB Governing Council”

  1. Faux-outrage and Brian Hayes MEP is shocked/ outraged about a provision in a treaty from the early 1990s.

    He will write to Draghi.

    Only the gullible could believe that the change will make a difference.

    [Fianna Fáil finance spokesman Michael McGrath told the Sunday Independent: “This move nails the myth that all Eurozone members are equal. It has been clear for quite a number of years that the ECB’s policy has been dictated by the economic needs of France and Germany. That position has now been formalised. This represents a diminution in Ireland’s voice at the ECB Governing Council table. It can have ramifications when decisions are being taken on interest rates to suit the larger economies in Europe.”

    Fairytales and myths! Never of course underestimate the market.

  2. The delayed fuse on this particular reform also came as a bit of a surprise to German politicians. They would argue that they have even more reason to complain.

    http://www.economist.com/news/finance-and-economics/21591638-germans-will-soon-have-another-reason-fume-about-euro-new-club-rules

    The German government did not, however, balk. Probably to the the disappointment of the Economist!

    Much more of interest than the letter sent by the newly-minted MEP to Draghi will be the latter’s response. It will, it is to be hoped, not make him – the MEP that is – appear even more ridiculous.

  3. Its almost as if people have been known to campaign and vote on Treaties and the like without properly reading them. Surely not.

  4. Speaking of Treaties …

    I hear that an abridged version of Angela’s Fiscal Corset is to be added to the upcoming edition of the Brothers Grimm Fairy Tales.

    The Edward Lear Foundation rejected it; its ridiculousness was accepted but it was not deemed to be funny, not funny at all in fact.

    Wonder has MEP Hayes read ‘The Owl & The Pussycat’?

  5. @DOCM

    The delayed fuse on this particular reform also came as a bit of a surprise to German politicians. They would argue that they have even more reason to complain.

    Come on, that is unusually juvenile. From Germany’s point of view this is only a matter of pride, the ECB is already utterly beholden to them in terms of philosophy, shared interests and even institutional design. The circus has many acts but only one ringmaster.

    As it happens I think the change in voting rights is a positive thing, it highlights that Ireland is a subject of EMU but has no control over it and also how successive Irish governments have walked us into a position of impotence and submission in the EU.

    Here is Business Insider on the utter failure of EMU under German leadership and European Commission supervision.

    Europe’s Huge Failure Is About To Be On Full Display

    An economic and human disaster in which every Europhile is complicit.

  6. Whilst various members of the Irish Political Class may feign ignorance and outrage about this.

    I for one will be relieved that more and more financial responsibility is being taken away from the populist chimps in Dail Eireann.

    Personal income tax rates in Ireland are highly progressive and are having a crippling effect on the population. Meanwhile issues such as paying very high rates for medicine have not yet being tackled. But Varadkar is now on the case!!

    What we now require is for matters of taxation to be removed also from the houses of the Oireachtas.

  7. Sporthog,
    soemtimes I sympathise with you. However, we agreed or did nothing to stop control of monetary policy being taken away from Dublin and look what happened. Similarly, we took revenue rasing power away from county councils a generationa ago and look what happened. We gave athe county manager in Dublin absolute power over licences for concerts…that worked.

    I for one, want to see more power going back to elected reps. With power comes responsiblity. Also they are the only people we can exert pressure on. The permo govt ignores us, Brussels ignores us.

  8. @sporthog

    I for one will be relieved that more and more financial responsibility is being taken away from the populist chimps in Dail Eireann.

    What Ireland really needs is a General Pinochet to deal with the liberals and free the market, eh?

    Seriously, this is some ugly stuff, every person who complains about populism is really taking a shot at democracy and how the hoi-polloi get in the way of good business with their demands for equality and representation.

    In the modern EU the anti-democratic, plutocratic strain in the right has found new expression in the kind of European Integration that is uninvolved with the wishes of citizens and unaccountable to them.

    Eine Bank, Eine Komission, Keine Wähler.

  9. Are we facing a Sepp Blatter style slap-down like when John Delaney asked could we be allowed into the 2010 World Cup after Thierry Henri’s hand-ball?

    The acute ignorance of the TDs who asked for all this stuff to be voted through is only matched by the TDs who are now surprised at what was voted through.

    Ireland has had its sovereignty as a small nation hugely diminished by the ever expanding remit of qualified majority voting.

    The Commission has been captured by industry and larger countries and hobbled by there having to be a Commissioner for every country.

    The Irish political class of back slapping yes-men who unanimously campaigned for the novel institutional structures of the EU, uncontrolled immigration and the denigration of smaller countries will now jump on the anti-EU bandwagon. Who knows where the whole mess will end.

  10. @ Shay,

    “complains about populism is really taking a shot at democracy”

    It would be better if one were to distinguish between “Informed” decision making and “Ignorant” decision making. A lot of the clap trap spoken in Dail Eireann is not just “ignorant” it is embarrassing to a educated person.

    Just because a ‘popular’ decision is made… does not mean it is a wise decision.

    One of the major problems we have in Ireland (& it’s not just Ireland by the way) is that academics / politicians / economists do not have to get it right to make a living.

    Other groups, especially investors …. if they get it wrong… can very quickly end up in the slaughterhouse.

  11. @Sporthog

    “Other groups, especially investors …. if they get it wrong… can very quickly end up in the slaughterhouse.”

    Investors in residential property and some other investors who invest their entire wealth, usually in their own business, can end up in the slaughterhouse.

    Other “investors” like people making investment decisions for banks and pension funds and other financial industry “professionals” lose other people’s money and take a cut for the privilege of sending those people to the slaughterhouse. The problem of agency has not gone away!

  12. @Sporthog

    The very notion of “getting it right” in politics or academia betrays a woeful misunderstanding of what is involved in either.

  13. @sporthog

    Just because a ‘popular’ decision is made… does not mean it is a wise decision.

    Two things here.

    The mantra of “tough decisions” adopted by the centre right and the European Union institutions, as if the best way to make a decision was to do what was unpopular with the hoi-polloi, is nonsense. On average unpopular decisions are less likely to be good ones than popular ones. (remember the invasion of Iraq?) but ya gotta be tough if you want to be dumb.

    The second thing is that all these “tough” decisions being made in the EU are in fact popular ones, just not with the average citizen. The decisions are popular in Germany, popular with bondholders, popular among neoliberals, popular with plutocrats, popular with the EU technocracy.

    Other groups, especially investors …. if they get it wrong… can very quickly end up in the slaughterhouse.

    How true. I remember how the bondholders in Anglo lost everything.

    The story of modern banking, investment banking and venture capital is one where there are almost no punishments for failure at the top. Small business people get crushed all the time but it is a sad joke to say that either that large investors have skin in the game (it’s mostly others peoples money) or that it helps them make better judgements (it is a game to them after all).

  14. @ zhou-enlai

    The ECB FAQ draws a comparison with the FED.

    “How does the voting right system compare with that of, for example, the US Federal Reserve?

    The system used by the Federal Open Market Committee (FOMC) of the US Federal Reserve is very similar to the one to be used by the ECB. The FOMC has 12 voting members, 7 of whom are members of the Board of Governors and hold permanent voting rights, rather like the ECB’s Executive Board members on the Governing Council. The President of the New York Fed has a permanent voting right, the Presidents of the Federal Reserve Banks of Chicago and Cleveland vote every other year and the Presidents of the other nine Federal Reserve Districts vote every third year. Unlike the Fed’s yearly rotation, the voting rights for the members of the ECB’s Governing Council rotate every month.”

    The IMF approach is even more of a sight to behold. (Ireland is lumped with Canada in one of the “constituencies”).

    https://www.imf.org/external/about/govstruct.htm

    The interesting question is whether the “revelation” in the Sindo has legs as a story. Even in the silly season, it seems not! A fact which I find reassuring.

    Sovereignty, or the presumed loss of it, has nothing to do with qualified majority voting. In participating in organised rules-led international cooperation, it can be readily argued that sovereignty is being added to, not diminished.

    We also live in a representative democracy (and to do so is a treaty requirement for participation in the EU). It is the job of the elected representatives of the people to both grasp and explain what they are about on behalf of the people internationally.

  15. @ Zhou (et al)

    “Ireland has had its sovereignty as a small nation hugely diminished by the ever expanding remit of qualified majority voting.”

    These new rules will mean large countries like Germany will vote 80% of the time and smaller countries like Ireland will vote 78.6% of the time. Excuse me if I’m less than “outraged” (Sunday Indo) at the implementation of a decision which we agreed to under the Nice Treaty well over a decade ago and which was actually supposed to be implemented a few years ago but wh

  16. @ Shay,

    I suspect we understand different meanings to the word populism.

    From your comment above….@2:35 p.m.

    “every person who complains about populism is really taking a shot at democracy”

    If I understand you correctly…you seem to link populism with Democracy. And that if a person is critical of “populism” it also means they are anti democratic.

    I on the other hand don’t see populism as being linked to democracy. But I do see populism as something that does occur within politics. It is a tool of the political trade. It is a tool which abuses the truth.

    Lets have a look at wikipedia on populism.

    “Populism is a political doctrine that appeals to the interests and conceptions (such as fears) of the general people, especially contrasting those interests with the interests of the elite.[1]”

    “Political parties and politicians often use the terms populist and populism as pejoratives against their opponents. Such a view sees populism as merely empathising with the public, (usually through rhetoric or “unrealistic” proposals) in order to increase appeal across the political spectrum (cf. demagogy).[3]”

    So on this point… I see democracy as being very important (as I am sure you do too)…. but if Irish politicians continue to allow populism to be used as a tool to abuse the truth…. then bad decisions will be made time and time again.

    Until such time as Irish politicians ‘man up’, learn to value the truth, put the abusive tool of ‘populism’ aside and get on with making good important decisions for Ireland…..until this point is reached…. then I think it would be better if financial decisions were to be made by another group of people who do not engage in this most unsavory behavior.

    But this then leads us to Tulls point… can you trust them (this other group)?

    I think… I have a point Shay…. look at the democratic processes in Italy, Greece, Ireland, even the USA etc…. all seem to be stuck in a rut. Politics just does not seem to be delivering the goods anymore. It’s all partisan… like two captains on the bridge of the Titantic fighting over who is in charge.

    Perhaps the answer is non elected technical groups in Europe… making the decisions for countries who are unable to help themselves.

    Your point on Anglo Bondholders…. not true in all cases.

    1) Holders of Greek Govt Debt have had several haircuts.
    2) Iceland….. did creditors all get their money back?
    3) Argentina….. a few days ago… did everybody get their money back?

    Perhaps the Anglo Bondholders were “just lucky” that Ireland was not able (for whatever reason) to burn / severely haircut them.

    I am not the only person… who looks / has looked at Irish politics and despaired. A great many people… not just commentators on this blog site, have suggested a new approach must be found to the dysfunctional manner in which good decisions have to be made.

    I think it is possible… that democratic politics (in a general context) has reached it’s limit… and a new approach has to be found to the more complex issues of running an economy.

  17. That is exactly why it is so good to have BEB back here.
    And I didnt have to find the numbers by myself : – )

    Facts, exposing the outrage as nonsense.

    It happens to all other members with practically equal chances

  18. Sporthog,
    Let me put forward a paradox called Tulls law. If we put technocrats in charge we get worse governance not better because said technocrats have no expertise in the close in skills of politics such as negotiation, compromise, persuasion. That said I am all for technocrats in govt in the widest sense just not in charge.

    BEB is correct btw on this manufactured issue, it is in the realms of 2 bald men fighting over a comb.

  19. @ TMD

    “If we put technocrats in charge we get worse governance not better because said technocrats have no expertise in the close in skills of politics such as negotiation, compromise, persuasion.”

    The first part of your statement is correct but not because of the reason you advance in the second (which also happens to be totally erroneous).

    Technocrats cannot be put in charge because politicians are democratically elected to fill that role. They can be assigned particular clearly defined tasks. The ultimate court of appeal must, however, remain with the politicians and the people who elected them. It’s called democracy.

  20. DOCM,
    I was referring to the fetish amongst the commentariat of using such devices as list systems or unelected chambers as the Lords to out technocrats into office.
    And I don’t agree my point is erroneous. The paradox is that technocrats are useless because they tend not to have the skills to lead people. You yourself are a perfect example of that. In your own mind you have all the answers but I doubt you would elected to a resident association committee.

  21. @ TMD

    Thanks for telling me what I have in my mind. I am not standing for election. And your point remains erroneous. If technocrats do not have the skills to which you refer, there are a lot of overpaid people around.

  22. This is a storm in a teacup. First, there is ZERO evidence that any Irish ECB member would, could or might have any influence. PH would be respected more than most but at the end of the day… Second, this has been known about for yoinks. Third, it is (despite appearances) a EUROPEAN central bank. Not one for Ireland. Or even Germany (yes, despite appearances…I think….)
    August – slow news month

  23. @DOCM, @Eoin Bond

    My reference to the effects of qualified majority voting (QMV) did not relate to the ECB. The ECB will not operate on QMV but rather on a rotating vote system. The reference to QMV relates to how the European Council conducts its business.

    We never hear the stories of how irrelevant we are on many issues after QMV, or how industry manages to get its way using the civil servants of larger countries as its proxies, because it all happens behind closed doors and people don’t vote against something when they know they are beaten under QMV. It’s a pretty ugly system for a ‘democracy’.

  24. @ zhou-enlai

    Why? Voting, irrespective of how it is organised, is at the heart of every democracy. As to closed doors, the confidentiality pertaining to the actions of the Irish cabinet is probably without parallel anywhere.

    It can be credibly argued that what the Irish political system suffers from is a surfeit of direct democracy – i.e. participation in decision-making by the individual voter – and a deficit in representative democracy. Even when it comes to representative democracy, TD’s are largely seen as messenger boys, to whatever authority or benefactor of the day, and the knee-jerk reaction of our MEP can be seen as a reflection of this at a wider international level. This political culture is a major handicap, especially in the context of the EU, at the basic treaty underpinning it states bluntly “the functioning of the Union shall be founded on representative democracy” (Article 10.1 TEU).

    Put differently, the Irish electorate gets the politicians that it merits.

    There is a larger issue at play and it is not the adjustments to the ECB voting system but the question of to what and to whom the ECB is democratically responsible. That is an issue IMHO that will demand further consideration and change. The pending ECJ judgement in relation to the referral to it by the German constitutional court of aspects of the OMT programme may provide some indicators of the direction the debate and negotiation will take.

  25. @DOCM

    Leaving aside the question of the ECB, QMV is dominated by large countries who can agree trade-offs with one another to promote their domestic industries. The same principle applies to any block voting system which is why you have political parties and factions within political parties (and why what John Deasy TD says doesn’t matter a hoot in the wider context of the FG party). QMV allows individual countries to have a perfect control of their block of votes.

    In parallel to this and with different effects, the entities providing policy inputs for many countries are becoming a stepping stone to private industry for their employees, much likes happens in the US. We have a Captive State in Monbiot’s words but now it is extended to the EU.

    Ireland and other peripheral nations do not have the resources or ability to keep pace with all these smart fellows from larger civil services and from very powerful and competent industry lobbies. Ireland also does not have the clout to many “one for you and one for me” deals of its own.

    The EU institutions are a political experiment. My view is that the Commission no longer provides protection for smaller nations as it used to and as it is supposed to do. The institutions are being gamed and the future is not bright.

  26. @ zhou-enlai

    There is no getting away from the fact that some countries are bigger than others and have wider interests. What matters is that all are participating in a rules-led system with the possibility of legal appeal to the ECJ. The only alternative to some form of voting arrangement is to have decisions by unanimity; this effectively gives a veto to every country and would clearly bring the entire system to a halt.

    Apart from legal recourse, the role of the Commission is, as you point out, vital but not for the reason – that has wide currency – that you quote. Its task is to protect the interests of all member countries, large and small, by “promoting the general interest of the Union” (Article 17 TEU) it being enabled to do so because it has the sole right in most important instances to make a proposal. It is also “responsible as a body to the European Parliament” (Article 17.8). The overall system is one of checks and balances parallel to what one would find in all democracies.

    You are also assuming that the big member countries have common interests and act together. The evidence for this is slim to non existent.

    I agree, however, that the overall performance of the Commission under its departing president has been lamentable. It remains to be seen whether his successor can now allow it to perform the role, unchanged and intended for it from its very inception, assuming that it still has the technical capacity.

  27. @DOCM

    The only alternative to some form of voting arrangement is to have decisions by unanimity; this effectively gives a veto to every country and would clearly bring the entire system to a halt.

    Indeed who can forget the decades of inactivity in the EU before the outbreak of QMV in 1999? A dark time it was when there had to be consensus among all EU member governments. A time before the ECB had us underneath its protective wing. I think it is fair to say that the fortunes of smaller countries in the EU have moved in tandem with the extension of QMV.

    I am still convinced that you are a long running situationist art project. No one could say “If technocrats do not have the skills to which you refer, there are a lot of overpaid people around.” or “There is no getting away from the fact that some countries are bigger than others and have wider interests.” with a straight face. Absurd and meaningless to the point of surreality.

    Surely the act has served its purpose and the blog can be allowed to return to normality now, one person posting 1/4 of all comments is a bit much to take?

  28. @DOCM

    The large states do not need common interests to trade votes. Also, industry can target the large countries to promote their sectoral interests.

    There is a systemic/institutional problem with the Commission. The fact that Barroso is worse than useless masks this fact. The Commission as an institution should be able to function well with a poor leader.

    “The only alternative to some form of voting arrangement is to have decisions by unanimity…”

    It is a structural problem. When the EU got larger unanimity was no longer feasible. However, the bastardisation of QMV has not left us with a properly accountable Government. We can’t vote the UK Government out. At least in the USA the citizens can vote for individual senators and representatives who are not constrained to vote in blocks and who do not even obey a party whip half the time.

  29. @ zhou-enlai

    I am finding your logic a bit hard to follow although I agree with parts of it. I agree that adapting QMV to reflect population weights, for example, was not a good idea. However, as I pointed out, one cannot escape the fact that the countries of the EU vary enormously in size and, after enlargement, the bigger countries combined on the basis of the one interest they had in common to bring about this change.

    Unanimity was never the rule although the use of QMV did not really begin until the Single European Act and led directly to the creation of the Single Market.

    It would be nice to think that institutions could operate on the basis of auto-pilot but that is hardly the case.

    As to government, I do not know to what you are referring as the only one that I am subject to can be voted out, as is the case in all EU countries. It is common practice to refer to “Brussels” as representing the EU but there is no government there; nor many technocrats for that matter, it being the month of August. The EU is unique in its organisation. The Lisbon Treaty, endorsed by way of referendum in Ireland, puts the matter succinctly; “Citizens are directly represented at Union level in the European Parliament. Member States are represented in the European Council by their governments, themselves democratically accountable to their national Parliaments, or to their citizens”. The wording covers all the bases.

  30. @DOCM

    I’ve been to Brussels and the place is crawling with people working in the technocrats’ jobs. I’ve been at meetings with some and I have not been impressed.

    I can vote against the Irish Government, but it isn’t worth a whole lot when Ireland itself does not decide policy and has little influence due to QMV. If I were in Germany or France I could be assured that the person I voted for would have influence to exercise therefore my vote, and my contribution to the debate, would be worth more. Nothing I can do as an Irish voter or an Irish political activist can increase my Government’s voting power. Compare that to party political activism in the USA.

  31. @DOCM

    As to government, I do not know to what you are referring as the only one that I am subject to can be voted out, as is the case in all EU countries.

    That leaves out a little detail, no?

    National governments are subject in a myriad of important ways to the decisions of European Union Institutions, and these institutions are of course undemocratic and unaccountable. In that way you and I are indeed subject to the EU. However no voter in Europe could get rid of Olli Rehn, Mario Draghi or Marco Buti (Germans might have a better chance) or has any direct role in selecting them yet we are all subject to their power. Europe has in some ways become a managed democracy where the policy choices of voters are constrained by other stakeholders such as industrial multinationals, the financial sector and the European Union institutions themselves.

    Other than ideological dogma and sheer incompetence this is the main reason that the response of the various European Union institutions has been so woeful. They have other stakeholders and interests than the citizens of the EU. For the ECB the main priority has been securing the interests of the financial sector, placating Germany and extending its powers. Rehn’s DG-Austerity has been busy pushing for more centralized fiscal control (ie: power).

  32. @ zhou-enlai

    You must compare like with like. The staffing of the institutions of the EU, with a population of over 500 million, is comparable with that of a large to a medium-sized city, currently some 56,000.

    http://www.euromove.org.uk/index.php?id=19596

    The federal government of the US, with a population of 317 million, has 2.8 million employees.

    https://www.census.gov/newsroom/releases/archives/governments/cb14-40.html

    You are comparing chalk and cheese.

    One of the biggest failures of politicians across Europe, and in Ireland in particular, has been to attempt to claim all the credit domestically when something is achieved at a European level and to blame “Brussels” when things go wrong. This self-serving approach creates, by implication, the illusion that there exists a separate free-standing federal authority when in reality it is the governments of the EU, their own included, acting in cooperation through the institutions of the EU, that constitute that authority.

  33. @ zhou-enlai

    Corrigendum.

    The quotation above should read;

    “Citizens are directly represented at Union level in the European Parliament. Member States are represented in the European Council by their Heads of State or Government and in the Council [of Ministers] by their governments, themselves democratically accountable to their national Parliaments, or to their citizens”.

  34. @DOCM

    With respect, comparing the Commission to the entire US federal civil service is not appropriate. One should compare the Capitol to Brussels.

    I note the theoretical position re accountability. However, the theory has not worked in practice. People dazzled by the theoretical underpinnings of the intricacies of EU structures have to understand that we have been through a crisis and the theory was tested and failed.

    Where has our national government been held to account for decisions and actions of the EU Council? How has our Government through the Council held the Commission to account when the Commission has been captured by larger states and industry?

    However much the Capitol has been captured by industry, at least it is obvious because most issues have to be discussed in the open. This has lead to deserved satirisation of the Capitol in American culture which may well lead to reform of these systems and/or a degree of political accountability. The EU lacks equivalent democratic accountability. There is a reason that the “democratic deficit” has been a hot topic for more than 20 years now!

  35. @ zhou-enlai

    I drew no comparisons of any description between the US and the EU other than to say that comparing them is to compare chalk and cheese i.e. a superficial similarity but an insurmountable difference in reality in terms of political organisation. When it comes to comparing the political game in Washington and Brussels, there are also superficial similarities but Washington, the home of political and legislative gridlock, would not be seen by most as setting an example to follow.

    As I do not accept the notion that the Commission has been “captured by larger states and industry” there is no basis on which we could have a useful discussion on that point. Certainly, were it the case, the direct and delegated executive powers held by the Commission, especially in the area of competition, would have been called into question long ago and probably have collapsed.

    If and when they present EU structures indisputably fail, we will both know and that point will have been settled.

    I agree that there is a problem of democratic accountability or rather a mistaken widespread perception of how it should function for the reasons I outlined earlier. (This perception is now such in some countries, notably the UK, that it may prove to be irreversible).

    The job of holding the Irish government to account is that of the national parliament. Holding the Commission to account is the job of the European Parliament. (It may be said to have brought about the resignation in 1999 of an entire Commission – under the Luxembourg president Santer- in fulfilling that role). The oversight committees of the Dáil in relation to EU matters have neither the inclination nor the powers either to agree negotiating mandates for the government nor to hold it to account with regard to their outcome. But that is true of all areas of government action.

  36. @DOCM

    ‘As I do not accept the notion that the Commission has been “captured by larger states and industry” there is no basis on which we could have a useful discussion on that point.’

    Quite!

    Minor point:

    Don’t forget the ‘Financial System’!

  37. I note that you do not accept that the Commission and Council have been captured by the larger states or by industry.

    My view on this is coloured by the Commission’s behaviour during the financial crisis, anecdotes I have heard, and my own limited experience of dealing with Commission officials.

    Unfortunately, neither you or I have the time on our hands to examine all the available evidence in the detail required to mount serious arguments. Like most citizens we are limited to our impressions.

    However, it is critically important to note that whatever evidence is available is mostly only secondary corroborative evidence rather than primary evidence of what goes on in Council meetings, what goes on between states, and what goes in between states and industry, and what goes on between states industry and the Commission. The core relationships between states where QMV functions are wholly opaque.

    Wittgenstein would not condone our wasting our time debating such matters. Rather we should concentrate on making knowable that which is currently hidden and unknowable.

    Of course, one might say one is better off not knowing as states might turn against states. However, in that analysis one might also conclude that one us better off living under a technocratic dictator and without democratic freedom.

    (Interestingly, we know that our own Department of Finance wanted to publish what went on between the ECB and the Dept of Finance when Brian Lenihan was being pressurised by Trichet but that this publication prohibited by the ECB. It is to be recalled that at that same time, the Governor of the Irish Central Bank was most effectively pressurised by his ECB counterparts and others to stray outside his proper function to cut the legs out from under the Irish Minister for Finance.)

  38. Also, in other good news, the EU is heading into recession again led by Germany.


    Eurozone growth splutters to a halt as crisis enters new phase

    I am sure Germany’s poor performance is somehow down to lack of structural reform in Italy and France. Perhaps if Ireland had made more cuts this would not have happened? If only the EU had just had more austerity! More hard choices! More difficult decisions.

    No one in the German government or any of any of the European institutions or their supporters has the faintest ideas of what they are doing as regards macroeconomic policy. None of them.

    The time is long past for a major purge at the top of the EU and a realignment of its politics and goals.

  39. @ All

    FYI Jim Power on the topic.

    http://tinyurl.com/megrrkc

    Notably;

    “It would be extremely naive to believe that the ECB ever set interest rates to suit a tiny country such as Ireland regardless of its cyclical economic situation. Policy has to be set to suit the larger economies.

    That is the reality of a monetary union and it is up to the smaller countries, who may end up with an inappropriate level of interest rates, to use the policies that they still have some control over to guide their economies.”

    Given that interest rates are stuck for the foreseeable future at what I believe is known in economic circles as the “zero lower bound”, the point may seem academic. But the policies in question certainly exist. The worrying feature of the debate in Ireland is that neither their existence nor their importance seems yet to have percolated through to the circles where the necessary decisions have to be taken.

  40. @Angelica Sidorova of Russia

    Gold in Pole Vault on final vault:

    Seven_of_9 is very impressed: Blind Biddy is back in Kharkov.

  41. Anzhelika of course.

    @Shay Begorrah

    ‘No one in the German government or any of any of the European institutions or their supporters has the faintest ideas of what they are doing as regards macroeconomic policy. None of them.

    The time is long past for a major purge at the top of the EU and a realignment of its politics and goals.’

    +1

  42. Two years before the launch of the euro in 1997, the governor of the Central Bank told an Oireachtas committee:

    “There seems to be a perception that the Central Bank can exercise some legal authority in restricting credit. It has no such authority.

    Any restriction would be inconsistent with European Union practice. Besides, it would be unworkable as demand would probably be met by overseas lenders.”

    http://www.bis.org/review/r980309a.pdf

    In the following years, as Charlie McCreevy, finance minister, stoked the property boom with income and capital tax cuts coupled with a massive expansion of property tax incentives, the annual reports of the Central Bank chronicled the letters that were sent by the governor to the financial institutions, pleading for prudence.

    In April 1999, the governor had issued a letter stating that an analysis of practices had shown that some lenders had no evidence as to how borrowers came by the balance of their money. The governor criticised what he called, the particularly disturbing practice of allowing large amounts of the borrowers after tax income to go towards paying off a mortgage.

    The 1999 annual report notes: “Institutions were…advised that it remains vitally important for them to take a medium term perspective and to reckon with the potential consequences of rising interest rates and a return to lower rates of growth in the economy. All institutions gave assurances that there would be no slackening in prudential lending standards.” 😆

    We were helpless!

    All this will create a 5-minute wonder sometime next year.

    The EEC/EU has generally worked well for a multilateral organisation and 22 countries have joined since 1973.

    Of course there are issues to criticise including tolerating the facilitation of massive corporate tax avoidance by the Netherlands, Ireland and Luxembourg until it became a global issue. 😳

    @ Joseph Ryan

    Stable sounds more palatable than stagnation

  43. @Michael Hennigan

    The EEC/EU has generally worked well for a multilateral organisation and 22 countries have joined since 1973.

    Property values can only go up. Germany will behave in a responsible way to the other members of the EU. The European Commission will protect the interests of smaller countries.

    Past performance is not a guide to a future returns and inductive reasoning is not working out well for Ireland this millennium. We have been the turkey who every day before Christmas sees no evidence to doubt the farmer’s good intentions, now the farmer has lopped off a foot and we are still saying its only one bad data point.

    This is the first real crisis the EU has faced and it has come off worse than its peers, demonstrated a real callousness (as regards Greece), awful foreign policy instincts (Ukraine) and a marked distaste for popular democracy (in the GIPSIs particularly). The EMU portion of the EU is now the dominant one and it has been a terrible failure, undermining democratic principles, international relations and the economy of the world.

    People need to remember that political structures and institutions that do not work for the less powerful may never be reformed. If Ireland has been taken advantage of once why will it not happen again? Would we be safer outside of the new core-EU than in?

  44. @Michael Hennigan

    Perhaps, I reacted a little too quickly to the wording of the press release.

    However, your word “stagnant” would be a more accurate reflection of reality than the word “stable” that was used. “Stable”, I note from one of the dictionaries;

    “firm, solid, steady, secure, fixed, strong, fast, stout, sturdy, safe, moored, anchored, stuck down, immovable, well built, well constructed, substantial”

    Not words that immediately come to mind when thinking about EZ GDP in particular!!

  45. More words for the EZ economy.

    “Germany’s Bundesbank, which has considerable influence over the country’s public opinion, made the unusual move of responding to Thursday’s data with a statement from its economists, saying the trend “remains pointed upward.””

    http://online.wsj.com/articles/french-gdp-fails-to-grow-in-second-quarter-1407994573
    and DeGrauwe from the same article:

    “”We should not wait until we all become Japan, we should act now,” said Paul De Grauwe, professor at London School of Economics. He recommends a two-pronged approach with massive stimulus spending by governments—particularly in Germany, France and other countries that can borrow cheaply—buttressed by ECB purchases of public and private debt to increase the money supply.”

    IMHO, QE as practiced by both FED and BOE, seems designed to provide both a backstop and lift for the investment community. The investment community in turn reward such largesse by an investment strike, hiding their money in bunds, or cash.

    An infrastructure and housing stimulus would certainly help the lower orders, but that is much less of a priority that a backstop system for investors. No doubt about who the winners will be in that contest for public funds.

  46. @ Shay Begorrah

    Small country members of the EU don’t appear to be interested in teaming together as a countervailing force to the influence of the few big members.

    The UK would likely do fine outside the EU and as a big customer for German products, there would be a mutual interest in a continuing friendly relationship.

    A country like Ireland starting with a new currency and unable to provide a first world standard of living absent the involvement of US firms in key sectors, would face severe headwinds.

    Some 80% of a typical Irish farm household income comes from the EU.

    It is true that the Brussels/ Frankfurt elites operate in comfortable cocoons far removed from the day-today lives of citizens but that scenario is not very different to what exists in individual countries.

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