As details from Thursday’s European Memorandum of Understanding, which has all the binding power of a ‘highly confident letter’ issued by a third tier investment bank, continue to be non-existent, the questions, and conditions, are accumulating fast. While the ESM passed with a solid majority in both the lower and upper houses of German parliament yesterday, its fate is now in the hands of the German constitutional court which as reported previously has requested extra time to study the bailout plan, before it gives the all clear for a presidential signature. Sound familiar? And barely did the ESM pass the ratification vote, before lawsuits alleging its unconstitutionality start pouring in. But probably more importantly, Focus magazine reported overnight that the first clear condition from Germany will be the enactment of a Financial transaction tax for all countries where the ESM would be operational in order to minimize the burden on German taxpayers.
In other words, banks would effectively pool their profits, in order to fund the bailout of other banks (or their own). In retrospect, it does not sound like a bad idea. It may even pass the recently conceived “fairness doctrine” of the Great June Socialist Revolution. Most importantly, however, it appears that events over the past week may have been merely a gambit for something that Schauble and Weidmann have already hinted at: a popular referendum that decides the fate of Europe once and for all, washing Merkel’s hands and letting the people decide if they want the European experiment to continue or
From Dow Jones:
The German government wants to tie using the funds from the permanent bailout fund to directly aid banks to the financial transaction tax, German news magazine Focus reported on Saturday citing sources.
The German government intends to push for the condition that only banks belonging to the countries that institute a financial transaction tax would be able to directly access funds from the European Stability Mechanism, the magazine said. The countries would then use the additional revenue from the tax to fund the ESM, reducing the burden on German taxpayers.
So which countries will find their sovereign bonds tied to a transaction tax? From Reuters June 22:
Finance Minister Wolfgang Schaeuble said 10 countries were prepared to use an EU process known as ‘enhanced cooperation’ to push ahead with developing the tax, which Britain and other states, including some in the euro zone, oppose.
Enhanced cooperation requires at least 9 EU countries to agree to work on a proposal. France, Italy and Spain are all behind Germany with the initiative, German Chancellor Angela Merkel said after a meeting with her counterparts in Rome.
Revenue from such a tax, which some analysts estimate could raise more than 50 billion euros a year depending on the number of countries that participate, could be used to finance initiatives such as a fund to wind down bad banks.
“My impression is that quite a number of member states strongly support the proposal of an FTT (Financial Transactions Tax) in principle,” Schaeuble said after a meeting of EU finance ministers in Luxembourg. “We should give it a try.”
Which basically means that banks in countries that have no choice but to agree to a FTT effectively become utilities: something that should have happened in the US years ago. It also means that the banking sector will see itself “divested” of numerous jobs as remaining workers will scramble to go to those areas in the Eurozone where the FTT does not put a cap on bonuses.
Yet the other question is even if €50 billion can be raised each year from the FTT, where will the balance came from? Obviously, the bulk of it, will have to be sourced from Germany. Which then presents an interesting case: has Merkel’s move over the past week been nothing but a gambit, to let a referendum, or a public vote on a European bailout, come into play? Should the constitutional court find a snag with the ESM it is very likely that Germany will have to resort to the popular measure, whose outcome will remove blame from Merkel for her actions once and for all.
One may say: “Preposterous, what referendum?” After all Greece’s G-Pap was sacked by banker interests for even daring to propose such a thing. Actually, in the case of Germany it is not preposterous at all, and may be precisely the final showdown that Merkel and Schauble have in mind. Recall from Spiegel last week:
German Finance Minister Wolfgang Schäuble kicked a political hornets’ nest when he suggested to SPIEGEL that a referendum on efforts to save the euro will have to be held sooner or later. German commentators jumped into the debate on Tuesday.
Merkel immediately distanced herself from Schäuble’s comments, saying through her spokesman Steffen Seibert on Monday that any such referendum wouldn’t be coming any time soon. But several other politicians indicated their support for the idea, including Social Democratic bigwig Peer Steinbrück and Patrick Döring, general secretary of Merkel’s junior coalition partners, the Free Democrats. Steinbrück told the Stuttgarter Zeitung on Monday that “if you have been listening carefully to the Federal Constitutional Court, you would realize that there is no way around” a referendum.
Indeed, the decision over a referendum may ultimately not be a political one. Germany’s Constitutional Court, the highest in the country, has recently indicated that the limits of the country’s constitution have been reached when it comes to efforts to save the common currency. Already, the court is fielding several legal challenges to the European Stability Mechanism (ESM) and last week it controversially asked German President Joachim Gauck to delay signing the law until the court could fully examine the challenges. Last September, Constitutional Court President Andreas Vosskuhle said that further European integration would require a new constitution, making a referendum unavoidable.
“It is remarkable how quickly the CDU wants to stifle a debate that started with its own finance minister, Wolfgang Schäuble. His boss Angela Merkel called referendums over constitutional amendments dealing with Europe’s future as a step for ‘the day after tomorrow’ … Sure, but actually, why not? … In recent months the tempo of political integration has accelerated. The fiscal pact, a banking union and joint liability — all of this was unthinkable even just a short time ago. But so far politicians and citizens have been acting more as followers than framers. Often because leaders have delayed decisions until there were no other options.”
“Politicians and citizens alike must be able to debate the alternatives in peace, weighing the pros and cons — and to vote on them. Otherwise the EU loses its legitimacy. But this can’t happen in just a few hours, as Merkel would apparently prefer. Instead we need a long and intensive discussion, both in parliaments and in the public. But for this to happen, one can’t wait until the day after tomorrow. It should begin today.”
So the question is: was the Vaffanmerkel cover nothing but a very Pyrrhic victory for the Italians? Because if indeed this is the chosen sequence of events, ultimately Merkel merely put the decision in the hands of the people. Correction: the angry people. Now that events are in motion, we will get the answer very quickly. As Focus write the lawsuits challenging the ESM are already piling in:
The first lawsuits against the consent laws for the European fiscal pact and the euro rescue ESM went immediately after adoption in the early hours of Saturday at the Federal Constitutional Court, the first law suits. Around midnight, was a messenger from the constitutional complaint of the CSU politician Peter Gauweiler at the gate of the court. The appeal of the “more democracy” that had attached themselves to the information about 12 000 citizens, was submitted to the highest German court. This action is supported by the former Justice Minister Herta Daeubler-Gmelin (SPD) and represented the Leipzig constitutional lawyer Christoph Degenhart. A lawsuit was faxed to the left, according to a party spokesman also immediately after the Federal Voting to Karlsruhe.
A total of five complaints against the actions in Karlsruhe announced. Federal as Federal had passed laws to multi-billion euro rescue package and the fiscal pact for more fiscal discipline before, each with two-thirds majority. The Federal Constitutional Court had asked President Joachim Gauck, to delay the signing of consent laws to ESM and Fiscal Pact, to the judgment of the decided Eilanträge the plaintiff. It is expected that this still happens in July.
“We complain of the contracts, because they mean a dismantling of democracy in two ways,” said Däubler-Gmelin. “For one thing forever budgetary powers and sovereignty rights of the Bundestag to Brussels to be delivered. Thus, the Bundestag election is canceled. On the other hand, the ratification is quite hectic and over in the population. ” In a press release Gauweilers it was said that fiscal pact as ESM would “cast in serious breach of the principle of democracy.” So wear the ESM contract to dispose of hundreds of billions in tax dollars on a “democratically legitimized not organization”
In other words, was Merkel’s surprising “defeat” on Thursday just a brilliant gambit to get her off the hook, and let the people decide where the chips may fall? It wouldn’t be the first time Germany has fooled Europe about its true motives.
- Was Merkel’s Surprising “Defeat” Merely A Gambit For A German Referendum? (zerohedge.com)
- German parliament approves EU bailout fund – Reuters (in.reuters.com)
- Euro Crisis 2012: German Parliament Approves E.U. Bailout Fund (huffingtonpost.com)