EU UNRAVELLING: The more challenges they face, the more its leaders break the law.

Merkel, Draghi and Brussels can bend the rules as much as they like, but their behaviour isn’t playing well anywhere

Enda Kelly is giving the Irish people their vote on Fiscal Union; he’s obviously confident of a ‘Yes’. Certainly, there was no way Brussels was going to give them a say in matters: the last time but one, Ireland gave the wrong answer. Literally, it seems, a case of being politically incorrect. It’s only a matter of time before Kelly starts to get some heat on this one.

But when it comes to the EU this week, things are hotting up all round. The news that the European Investment Bank, the development lender for the 27-member bloc, is getting a similar exemption from Greek debt writedowns to the euro area’s central bank has poured more petrol on the fire lit by Mario Draghi’s blatant rule-changing to avoid losses at the ECB last week.

In Germany, the Constitutional Court in Karlsruhe has made it brutally clear that Angela Merkel and Wolfgang Schauble are starving Bundestag MPs of the information it insisted they must have late last year. It’s also making ominous noises about illegal firewalls.

Chancellor Merkel’s undemocratic side (never that well-hidden, except by her spin-doctors) is now coming to the fore. Her government and the court in Karlsruhe are locked in a power struggle that will soon be a constitutional crisis unless one side or the other backs off. It isn’t going to be Merkel: she already has consitutional changes planned in the pipeline which are, whatever your viewpoint, a pretty blatant attempt to slice Karlsruhe’s balls off. This is setting off alarm bells in some likely, and unlikely, places.

I spoke with The Slog’s Bankfurt Maulwurf within the last hour. He is not a happy bunny.

“Frau Merkel has now ignored the Constitutional Court twice,” he began, “and is to all intents and purposes setting off down a very dangerous road. Schauble has always been slippery, that is not news. But there is being slippery, and there is subverting the constitution. We [Frankfurt bankers] look to the Court to protect Germany from madness. So now they want to cut off its head.”

He was in turn scathing about Mario Draghi’s avoidance of a bond haircut for the ECB over Greece.

“It was a stupid thing to do, quite unacceptable,” he said, “all it does is say to the markets ‘If you buy eurozone sovereign bonds and things go wrong, the Central Bank will cheat’. This is bound to depress future demand for such debt. But above all – as I have told you all along – it simply puts the spotlight back on Germany as the guarantor. I wonder if the politicians in Berlin will ever grasp this.”

But suspicions – and hackles – are also on the rise in Paris. And some fear to go with them.

“I think the President [Sarkozy] was shocked by the Berlin demand for an EU commissioner to take over in Greece,” said a regular source with access to the pulse of the Elysees elite, “And most definitely there is now real concern about the idea of a German leader who doesn’t like votes, argues with the constitutional authorities, and sees technocrats as the answer to everything. It is Berlin out of control again.”

Last year The Slog reported Elysee gossip about Nicolas Sarkozy, screaming as he walked briskly down a corridor following a phone conference with Merkel, “That f**king German bitch is reverting to type”. The Leaden Lady is not doing herself any favours with the French, that’s for sure. And she also has Washington worried.

“It’s safe to say that Geithner is now on the ceiling about the firewall thing,” said one insider there, “and absolutely no-one can read Schauble. If the [Greek] default goes messy, what’s their plan? That’s what worries us.”

It’s worrying pretty much everyone else too – including the UK Treasury, where I’ve been told that plans to deal with an all-out Greek disaster are now set in ink. Says one informed Conservative source, “I think George [Osborne] can’t understand why Berlin keeps showing a bit of leg on boosting the EFSF, and then delaying and delaying. It’s mainly [German] political realities obviously, but the [Treasury] planners are having kittens”.

Others around the EU are simply retaining their doubts about Berlin’s real intentions. Many are still convinced that Wolfgang Schauble set up the Greek restructure to fail, and as I’ve posted in the past, it’s hard to avoid that conclusion.

However, what all the players in this drama need to understand is that the markets are not the citizens, distracted by a thousand other life concerns and generally happy to watch their rights diluted so long as there’s something good on the telly. The markets want their money. And if it looks like every time they claim the money, they get shafted….they will simply turn their backs on the eurozone, the euro, and the EU.

 

48 thoughts on “EU UNRAVELLING: The more challenges they face, the more its leaders break the law.

  1. What if we are looking at this from the wrong perspective. What if Merkel’s end game is to politically ease Germany out of the EZ? One way or another.

    • Along the same line, what if the Germans want the markets to be replaced with government / ECB issued interest free money in a sort of MMT, as a deliberate ploy to distance European money from Wall Street gambling?

    • What if, Georgie…. well the way this totally absurd farce is playing out SHE will be the only one left in the EZ (Whether Germany will actually be there is quite another matter.) This is now as insoluable as the Arab/Israeli question which may indeed turn out to be the pivotal point. The only game in town is to make sure individual and collective national arses are not set up to take the final flack – it wasn’t me mate, honest!.

  2. Enda Kenny isn’t ‘giving’ the Irish people a referendum; it isn’t in his gift, it is a requirement of the Irish constitution so he doesn’t have a choice. The fact that the new treaty needs only 12 out of the 17 Eurozone members to ratify it is not an accident. It was designed that way in the full knowledge the Irish would end up having a vote. It literally does not matter whether the Irish vote yes or no. I wonder what Padraig Pearse, James Connolly, Ned Daly, Sean MacDermott and all the rest of them from 1916 would think of it?

    • Not sure about Pearse et al, but I seem to recall that Eamon de Valera sent the German Commissioner in Dublin a sympathy card with love and kisses when he heard that Hitler had succumbed to lead poisoning.

    • Seb Weet: “Enda Kenny isn’t ‘giving’ the Irish people a referendum; it isn’t in his gift, it is a requirement of the Irish constitution so he doesn’t have a choice.”

      You’re absolutely right. Even taking into account the 12 out of 17 factor you mention, it is breaking practically Irish Politicians hearts (as we have no real opposition, except for a few independent or loony left TDs/MPs……… All parliamentary members of all major parties in Ireland are pro-EU/EZ. We never get back bench revolts) that a referendum HAS to be held. I wouldn’t be surprised if shortly some bright spark proposes a referendum on abolishing the 10th amendment of the Irish Constitution (requirement of referenda), and if we, the Irish electorate reject it, I would expect that the question is put to us ad infinitum until we accept it.

  3. The referendum in Ireland will not make a jot of difference to the eventual outcome as, there are only three possible scenarios.
    1) The Irish people vote YES (not entirely without the bounds of possibility, after they have been threatened will all sorts of horror stories about the outcome if the vote is no)
    2) The ballot is riggged.
    3) The EU ignore the Irish Vote.

      • option 3 is a given – being that they only need about 12 votes to ensure its adoption. Majority voting was deliberately established to prevent any single country from obeying the will of the people. When the EU intends otherwise.

        If the Irish elite can get a yes vote – all well and good (from their perspective) and no need to worry about explanations to the electorate.

        If not – then they can just say they opposed it but were outvoted.

        The best of a sort of ‘win win’ outcome for the elite !

  4. They will ignore the vote (as quoted earlier this needs a QVM to pass) the mask is slipping the EU is now about only one country, Germany, the rest will be bent to their will.

    Quite ironic really (but then that seems to be the way history pans out)

  5. It looks like Merkel is not only taking on, or ignoring, the German constitutional court when it rules against her but also the Americans.

    I wonder what sanctions are available to Karlsruhe if she continues like this? Is there a process for removal from office? arrest and prosecution?

  6. Ireland is a done deal. Enda Kelly has already said there will be no second vote over this irrespective of outcome. He does this because he knows the Irish will back this. The three main parties do (FF, FG, Labour), the two main papers do (Irish Times, Irish Independent). In all probability the ‘Yes’ is going to be overwhelming – probably 2 to 1, which will gut the UK europhobes.

  7. So putting referenda to one side, the ECB has confirmed the new LTRO amount as 529 Bln. Making, in just over two months, €1,018,000,000,000 or one Trillion of New Magic Money that we did not have in November. BUT the interest is 1%, giving (in round figures) 10 Bln (10,000,000,000) in Interest per year or 30 Bln in 3 years. This is supposedly affordable by broke and insolvent banks. The first two intervening years are easy :) You pay the interest from the capital you have borrowed. But Christmas 2014 and New year 2015 are going to be really, really interesting… No? A Trillion plus the final year of interest is going to become due from a banking system that cannot currently afford it’s part of a 100 Bln Greek Haircut just 10% of that amount. Yet it CAN afford 30Bln of Interest?

    • @Timbo
      well, that means that Europe is desparately trying to catch up with the UK for the amount it is printing per person. To my thinking they would have to increase that figure 3x to meet the British benchmark for money-printing.

    • Timbo: I’m not so sure. The newspapers you mention, and especially the parties you mention, aren’t really representative of the ordinary Irish man or woman that has suffered because of Irish austerity imposed from mainly Europe.

  8. An interview on Sky News with a senior bank spokesperson ~ so if some of the banks have a liquidity problem now, what happens in 3 years time if some of those banks have gone bust or cannot repay the loan ?

    A. It will be down to the general public in the EZ to repay those loans

    FFS – are these people living in cloud-cuckoo land just lobbing juggnaut numbers around

    • SA: “are these people living in cloud-cuckoo land just lobbing juggnaut numbers around”

      Actually I’m of the opinion that they’re well aware of the risk but to be perfectly honest I don’t think they give two sh*ts whether we have to repay these debts in 3 years. To them, that’s what we, the tax payers, are here for. A resource to be milked, as often as they can get away with. Which sadly is quite often these days.

  9. EU “partners”: never was a word more debased. The French Resistance and the Greek Partisans did manage to sabotage quite a lot of unreasonable behavior in times past and it will happen again. Pity; a sane view of European cooperation has a lot going for it.

  10. An interesting article, but suggests that Germany is either going to expel Greece or leave the EZ – which has been covered on The Slog before – but mentions the 20th March.

    http://gainspainscapital.com/

    I’m pretty confused just now. But my instinct is that Germany should want out of this debacle. Should….

  11. What supreme arrogance and contempt for democracy – a quote from a senior EU official (D Tel financial crisis blog):
    17.11 A “high-ranking” EU diplomat has told AFP that Ireland’s referendum won’t derail the debt crisis response. The likelihood of a vote had already been “factored in”, they say:

    ‘I do not think the referendum will derail the treaty. Even if there is a no vote, the treaty was built to withstand that. ‘

    http://www.telegraph.co.uk/finance/debt-crisis-live/9112318/Debt-crisis-live.html

  12. “…the citizens, distracted by a thousand other life concerns and generally happy to watch their rights diluted so long as there’s something good on the telly…”

    Bread & Circuses – the weapon of the despot since time immemorial.

  13. Whilst I am still of the conviction that it is Germany who should leave the Euro, it is most unlikely as the German and EU Political class may have to admit defeat, and this they cannot countenance.
    Merkel is putting the German to shame – the third time in a hundred years that the hapless Germans´ rulers are wanting one law for themselves, and one for every body else.
    After the first world war, the vengeful conditions of the Versaille treaty caused Keynes to claim that a country could only remain on its knees under such circumstances.
    therefore the Weimar Republic engineered the Hyperinflation of 1924 to prove to the French and the Belgians that they could not possibly pay.
    Though the fabric of society was greatly endangered, they did recover by about 1927-8.
    then came the financial crash of 29 in the USA, and countries started to repatriate their money. The Americans and the french pulled a great deal out of Germany partly because of the Weimar republics recent Money Printing adventure.
    And going into the depression, it was the Republics own finance minister, Brüning, who prescribed austerity – less than half as draconian which Berlin and Brüssels as a foreign power have imposed upon Greece. This self defeating downward spiral enabled Hitlers rise to power.
    Ambose Evans Pritchard recently related the events of the early 50s when Konrad Adenauer asked for debt forgiveness on the war debt – which the Allies duly gave him due to the Soviet threat – a 70 % reduction. I do not know if the USA had already disbursed the Marshall plan, though it must have been known of by then. So Germany has defaulted twice last century and recieved massive help from the Americans – Greece and Ireland just get the debts of Germanys irresponsible Banks thrust upon them without explanation, and have their democratic rights stolen.
    The average German is decent – but obedient – especially these last 50 years or so, when even now, our children are force fed the Holocaust. Yet they are never taught that the only defensive mechanism which prevents the unfettered rule of an Exekutiv, which by nature must lead to the same brutality as all other totalitarian regimes, is a robust and transparent Democracy.
    The argument has been in the name of “European solidarity” and the need to be a “good European” This enforced obedience has allowed the German political class to repeat the crass mistakes and wrongs of a very recent history.
    Joachim Gauck as designated Bundespresident has a lot of Germans excited, although they are not clear why as such, but they feel his words are honest and principled, and he has experienced sacrife. It is my hope he is also playing the long game. He has the dirt on Merkel I am sure. As John has pointed out, he must have been familiar with Merkels Father and possibly Merkel herself. And he must also be familiar with Merkels Stasi files as he was director from 90 – 95 on the inspection of said files by the West German Authorities – and in contrast to all others, Merkels have never been revealed to public inspection. Gauck was undoubtedly told by Kohl, who only became Kanzellor for the third time by pulling forward the general election forward by a year and a half to capitalize on the re-unification euphoria, that Merkel is ” mein Mädchen” – “my girl”.
    If you think that UK politicians are duplicitous, weak, naive and dishonest, there are more and more Germans waking up to fact that theirs are probably the worst of the lot.
    Irelands Vote on the Fiskal Kompakt may be an irrelevance as far as the EU is concerned as they have rigged the Legalities to make it so. But a no will not go unnoticed.
    Interesting times

    • A very generous-hearted post. I have no doubt that the majority across Europe are more like you than they are like the accursed politicos and apparatchiks of the EU.

    • Thanks Michael. That was very interesting reading… I cannot avoid the impression that Merkel is causing damage and corruption to the German political system. It’s rather odd that according to a Bloomberg poll, her approval rating has increased in recent times. Are German people being fooled?

  14. It was revealed toady that One Austrian bank has 1.2 billion of Greek debt derivatives, just one bank, so believe the tripe about 3.4 billion tied to Greek debt is you please, it was also reported Austria alone has Trillions of worthless derivatives, There will never be a trigger of the CDS swaps NEVER, the FT also reported no one knows which organisations(minus the first example) own Greek debt derivatives, so how would any one really who how many fake derivatives are tied to Greek debt? Here you have the root of the panic surrounding Greek debt default, the derivatives world wide if triggered would send the world back to the stone age? The bankers who run the ISDA will do all in their power to hold onto their wealth. Derivatives are the sword of Damocles hanging over every resident of the western world?

  15. Pingback: BREAKING…German Supreme Court rules against Merkel on ESM. Will she now recognise the Rule of Law? | A diary of deception and distortion

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