Sarkozy and Merkel call for 'true economic government' to save eurozone

[jimmy olsen]

Ze Germans are plotting to establish the 4th Reich. Don't be fooled Euros!

http://www.guardian.co.uk/business/2011/aug/16/sarkozy-merkel-economic-government-eurozone

Sarkozy and Merkel call for 'true economic government' to save eurozone

Plan for European economic government with single leader, drawn up after mini-summit, cautiously welcomed by UK

    * Polly Curtis, Whitehall correspondent
    * guardian.co.uk, Tuesday 16 August 2011 20.55 BST

France and Germany have set out plans to create the first "true European economic government" headed by a single appointed leader, as part of major moves to synchronise tax and spending to save the failing eurozone.

The French president, Nicolas Sarkozy, and German chancellor, Angela Merkel, announced the dramatic proposals after a two-hour mini-summit. They also called for the imposition of tighter restrictions on member country's deficits and announced a synchronising of the tax policies of their own two countries. Sarkozy has also secured the support of Merkel for a Tobin tax – a financial tax on all international transactions – to raise funds to ease the crisis engulfing the European economy.

The establishment of an economic government for the eurozone will be regarded by eurosceptics as a political power grab for Europe.

On Tuesday night, the British government gave a cautious welcome to the move, saying they would adopt a "watch and see" policy. A treasury source said: "This looks like the right direction but we need to see how it pans out. We will continue to advance UK interests at every opportunity." The government has no formal position on the Tobin tax, but has stressed that any such tax would need to be truly international to be successful and not disadvantage participating countries.

The proposals, on the day of dire growth figures for Germany, normally considered one of Europe's safest economies disappointed the markets.

Sarkozy said the most important element was the plan "to create a real economic government for the eurozone".

Merkel said "there has to be a stronger coordination of financial and economic policy" to protect the euro, adding: "We will regain the lost confidence. That is why we go into a phase with a new quality of cooperation within the eurozone."

The European Council president, Herman van Rompuy, will be asked to head the new economic government, and will set and enforce a deadline for all 17 eurozone members to reduce their deficits, putting pressure on countries such as Greece and Portugal to shore up public spending.

Merkel said they had rejected for now the idea of euro bonds, which would have pooled the members states' governments' debts to reduce the overall risk of the eurozone,but neither leader ruled their use out in the future. George Osborne has raised euro bonds as a possible mechanism for shoring up the eurozone, but the idea was politically unpalatable in the German coalition. There was also no movement on the expansion of the zone's €440 billion rescue fund, the European financial stability facility, seen by some as crucial to the future of the zone.

Merkel said all countries in the eurozone should enshrine balanced budgets in their constitutions. "I do not really think we can solve problems with stop-gap solutions," she said.

"We are looking at real, realistic step-by-step measures that we can use to gain back the trust that has been lost, and I do not think that euro bonds would help us in this.

"It's quite right that 17 countries need to make a step-by-step progress."

[11B4V]

France and Germany have set out plans to create the first "true European economic government" headed by a single appointed leader, as part of major moves to synchronise tax and spending to save the failing eurozone.

France will be Germany's puppet. Are they the only two countries eligable for the #1 spot. I call BULLSHIT.

[11B4V]

The eurozone currently consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

I say give the #1 slot to Malta.

Sarkozy and Merkel

S&M. Nothing good can come of that.

[Admiral Yi]

Silly idea. 

[Martinus]

Silly idea.

Uhm, that's the only way having a common currency makes sense.

[jimmy olsen]

Sarkozy and Merkel

S&M. Nothing good can come of that.

[Zanza]

Adding another institution to decide on Eurozone matters just serves to exclude some of the more economically liberal EU countries like UK, Sweden or Poland from the decision making so that the French dirigiste point of view has more supporters.

Merkel is an idiot to agree to this.

And it doesn't really address any of the problems of the Eurozone.

[Admiral Yi]

Uhm, that's the only way having a common currency makes sense.

There's no way the member states are going to give up their sovereignty on taxation and spending.  You would end up with another useless title holder in Brussels giving speeches that no one listens to.

Europe has two problems.  A number of countries with unsustainable debt levels and various countries that are at different stages of the business cycle.  Centralized budgeting doesn't fix the second problem and it's about 10 years too late for it too fix the first problem.  The only helpful thing they could do is compel Germany to run large deficits to crank up demand, but then you end up destroying the fiscal position of essentially the last major solvent country in Europe.

[Zanza]

The only helpful thing they could do is compel Germany to run large deficits to crank up demand, but then you end up destroying the fiscal position of essentially the last major solvent country in Europe.

If Germany went on a deficit spending spree now, it would just add to the angst of its citizens and reduce their consumption even more. So it would probably have an adverse overall effect on the economy. Citizens aren't stupid, they know that they have to pay for deficits in the end. That's something politicians promoting stimulus spending seem to ignore. The only way to increase consumption is to take away the fear of the future. There are two major components to this: job security (which is elusive for most of the middle and low wage earners) and a well-financed state that can be relied upon.

[Zanza]

Ze Germans are plotting to establish the 4th Reich. Don't be fooled Euros!

[Tamas]

I remember losing a lot of hope a few weeks ago, when Germany outlined a "plan" to "save teh economy". It was basically, to have all member states follow the German tax rules. Which of course would be awesome for Germany since there would be no competition for them via lower taxes elsewhere.

That quite clearly showed that still, at the edge of the cliff, member states are trying to run totally selfish "solutions". We will tank.

[Zanza]

Never heard of that "plan". Any details? Who promoted it?

[Tamas]

Never heard of that "plan". Any details? Who promoted it?

Not sure, it appeared as a news item, a call for a common tax policy or something like that.

[Syt]

Was it in the "Gypsy Beet Gazette"?

[Richard Hakluyt]

No, I think it was in Goat Breeder's Monthly