A new arrangement between Eurozone’s haves and have-nots

László Andor, Member of the European Commission in charge of Employment, Social Affairs and Inclusion, at the rostrum, participated in the conference on the Social Investment package entitled "Investment, innovation and Involvement", which was organised by the Irish Presidency of the Council of the EU. Joan Burton, Irish Minister for Social Protection, on the right, also attended the event. (EC Audiovisual Services, 03/05/2013).

László Andor, Member of the European Commission in charge of Employment, Social Affairs and Inclusion, at the rostrum, participated in the conference on the Social Investment package entitled “Investment, innovation and Involvement”, which was organised by the Irish Presidency of the Council of the EU. Joan Burton, Irish Minister for Social Protection, on the right, also attended the event. (EC Audiovisual Services, 03/05/2013).

The next European Council which is to take place in Brussels on Wednesday 22 May will be pivotal for the European Monetary Union (EMU), that is the Eurozone. Despite the fact that according to high-ranking Council officials there won’t be any decision on the EMU this month, there is evidence that the 17 Eurozone leaders will set the base for the Banking Union a major step forward for the institutionalisation of the Eurozone. Not to forget that Ollie Rehn has asked for an independent representation of Eurozone in international bodies.

Officially the agenda for the 27 EU leaders’ next meeting contains discussion on tax policy, with a particular focus on how to “improve the efficiency of tax collection and best tackle tax evasion and fraud with the aim of strengthening member states’ fiscal stance and deepening the internal market”. Another item on the agenda will be energy in the context of the EU’s efforts to promote growth, jobs and competitiveness. Last but not least, the 17 Eurozone leaders will also “take stock of work on the deepening of EMU” as it is officially announced.

More monetary union

However, if one wants to take meticulously stock of the work on the EMU will be astonished by the divergence of views. As the European Sting has repeatedly said, the Eurozone is now divided in two well-formed camps. The austerity lovers of Germany and those who place growth and the creation of jobs as first short-term priority. Obviously growth and creation of jobs is understood that it will be financed by a bit higher government deficits and more sovereign lending. God help us, the devil itself for Berlin.

This is largely facilitated by the new development in the capital markets, where investors offer very cheap loans to Eurozone borrowers. It is characteristic that Portugal yesterday returned to the capital market and sold 10 year government bonds for the first time after years at a comfortable interest rate of 5.26%.

The ‘growth seekers’, favoured by capital markets which offer now low-cost loans to Eurozone governments, have already conquered Brussels. However on the other side of the fence, Germany is not standing idle. It takes as much help as it can from a newly coined ally, the President of Eurogroup and Dutch minister of Finance, Jeroen Dijsselbloem, coming from a socialist party. Obviously the difference between the two sides, namely the ‘austerity lovers’ and the ‘growth seekers’, is to produce a cost for Germany. That is why the Berlin officials don’t even accept to discuss over that. They know that once in this table they will be obliged to give something for the first time. In any case they will not avoid it at the end.

There is no win-win for Berlin

In reality Berlin after having mathematically gained a lot of money from the financial consolidation of countries like Greece, Portugal and Ireland is now trying to also gain from the European Banking Union. The plan is gradually taking a concrete form and Dijsselbloem almost revealed it speaking in a Brussels debate hosted by the European Commission. Given that the place was an ‘enemy camp’ he had to be aggressive. He went like that: “The EU must not waver in its commitment to achieving sound public finances. The future of the Economic and Monetary Union, but also the future of the European social model, depends on us recognizing clearly that we cannot spend and borrow our way to recovery in a sustainable way. Future investments in education, healthcare and active labour markets policy, are all predicated on sound public finances. Fiscal consolidation may weigh on growth in the short-term, but it is an absolute condition for the EU’s prosperity in the middle and long-term”.

This was Dijsselbloem’s monologue in defence of austerity and an effort to place fiscal consolidation ahead of growth, jobs, education, health care and active labour market measures. The obvious target was Commission’s Vice-President, Ollie Rehn, who some days before speaking at the European Parliament had reversed the order of priorities, placing growth first.

The Dutch minister however had more to say in favour of the German banks. He said this: “But the prosperous future of the EMU also depends on us rebuilding and restoring confidence in the banking sector… The Single Supervisory Mechanism will place all systemically important Eurozone banks under the direct supervision of the European Central Bank. It will also ensure that when banks are in trouble the alarm bell is sounded early, immediate action is taken and the worst can be avoided”.

Who is systemic?

Understandably the Single Supervisory Mechanism will place under its direct supervision the systemically important lenders. This is not news however. What is news has to do with the difficult negotiations about which banks are to be considered as systemic and which not. Not to forget that the systemic banks will pay much less for their financing and they will be considered as offering better security to depositors. So who is going to be systemic and who is not? The price in not small.

For example are systemic the four biggest Greek banks recapitalized recently by the European Financial Stability Facility/ European Stability Mechanism (EFSF/ESM) to a generous 12% of assets to capital ratio? The problem with them is that they are…Greek. On top of that the Germans and this Dutch do not want southerners in the systemic bank club. In this was the differential capital cost between the ins and the outs, will be larger and Berlin wants it this way.

The Commission thinks differently

At the same time, though, European Commissioner, László Andor, responsible for Employment, Social Affairs and Inclusion was saying exactly the opposite from the Dutch minister. Andor, speaking at the London School of Economics clearly favoured nothing less than a fiscal unification of Eurozone. Another dangerous devil for Berlin, just read the following text from the Commissioner: “So long as there are no fiscal transfers within the monetary union, this divergence is likely to continue. In the end, everyone is worse off, because as we have seen since 2012, the recession in the periphery engulfs also the core as total demand falls. Recovery would have been closer if the monetary union had transnational automatic stabilisers in place, for example a European unemployment benefit scheme”. What Lazlo said in reality is that, God forbid, the German taxpayer should pay unemployment benefits to the Greek and Spanish unemployed.

In a few days, on 22 May in the European Council, it will be clear that a new compromise has to be struck in Eurozone. The Germans cannot deny for ever that they have nothing to do with the Spanish unemployed and the over-borrowed Greeks.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Syria’s groundbreaking constitutional talks: ‘a clear success of mediation’ says Guterres in Turkey

10 million Yemenis ‘one step away from famine’, UN food relief agency calls for ‘unhindered access’ to frontline regions

“911, What’s your emergency?”

Nearly a third of the globe is now on Facebook – chart of the day

Climate change is forcing 20 million people a year from their homes, Oxfam says

4 ways Africa can prepare its youth for the digital economy

Germany objects to EU Commission’s plan for a Eurozone bank deposits insurance scheme but Berlin could go along

Alcohol abuse kills three million people a year, most of them men – WHO report

2013, a Political Odyssey: What future for Italy?

This is why mental health should be a political priority

Commission welcomes European Parliament adoption of EU4Health programme

Commission welcomes agreement on the modernisation of EU export controls

7 ways to break the fast fashion habit – and save the planet

ECB again to subsidize euro area banks with more than one trillion euro

Thomas Cook bankruptcy: Better consumer and employee protection needed

MWC 2016 LIVE: Ingenu steps up efforts to build LPWA networks across the globe

Greener tourism: Greater collaboration needed to tackle rising emissions

How digital entrepreneurs will help shape the world after the COVID-19 pandemic

MEPs back plans to promote water reuse for agricultural irrigation

The ECB proposes a swift solution for SMEs’ financing

Working fewer hours makes you more efficient. Here’s the proof

COVID-19: A coordinated EU health strategy needed, say MEPs

‘BioSolar Leaves’ are better at cleaning the air than trees, say the technology’s developers

EU leaders agree to delay Brexit until 31 October

Yemen war ‘a test of our humanity’, and we’re ‘badly failing’ warns UN Children’s Fund chief

German Presidency outlines priorities to EP committees

The refugee crisis seen through the eyes of a young doctor from Turkey

EU, Latin America and the Caribbean: Partnering for prosperity, democracy, resilience and global governance

Collective action to enable sustainable growth will be critical to end tropical deforestation

Adoption of new rules to better protect children caught in cross-border parental disputes

Arrest of three Libyans wanted for grave crimes ‘would send strong and necessary message’ to victims, urges top Prosecutor

State aid: Commission approves around €36 million Romanian rescue aid to state-owned flag carrier TAROM

COVID-19: from the chaos of the pandemic to the difficulties in vaccination

Ecofin: ‘The Friday battle’ for the banking union

Haiti cholera outbreak ‘stopped in its tracks’

The UK option: An overarching alternative for the whole Brexit options

Security Council gravely concerned by Ebola outbreak in DR Congo, demands immediate end to violence hampering response

Here’s how to achieve growth in the Middle East and North Africa

Civil society groups matter for Cambodia’s sustainable development: UN expert

European Institute of Innovation and Technology: Commission welcomes political agreement on strategy for 2021-2027

The von der Leyen Commission: for a Union that strives for more

Number of MEPs to be reduced after EU elections in 2019

The challenge of palliative care in universal health coverage

The world needs carbon-neutral flying. Here’s how to bring it one step closer

Facts, not fear, will stop COVID-19 – so how should we talk about it?

Concorde is a reminder that the only way for innovation is up

Parlamentarians to “break up” with reality in the Google antitrust case

Implementation of tax transparency initiative delivering concrete and impressive results

The world has made spectacular progress in every measure of well-being. So why does almost no one know about it?

EU guidance on the handling of visa applications from residents of Ukraine’s Donetsk and Luhansk regions

MEPs to prioritise environment and climate action in next long-term budget

GDP growth slows in most G20 economies in third quarter of 2019

This is why retail is such a sore point in India-US trade relations

Khashoggi murder trials must public and meet international standards, UN expert urges

UN chief seeking ‘renewed commitment’ to global rules and values, as world leaders head to New York

Agriculture and Fisheries Council

A reality check on inclusive innovation

Austerity lovers to put a break on Renzi’s growth vision for Europe? the Sting reports live from World Economic Forum 2015 in Davos

This man is turning cities into giant sponges to save lives

4 key trends on how COVID has impacted women in business

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s