Convincing the Germans to pay also for the unification of Eurozone

Discussion between Angela Merkel, German Federal Chancellor and José Manuel Barroso President of the European Commission, (in the foreground, from left to right). (EC Audiovisual Services).

Discussion between Angela Merkel, German Federal Chancellor and José Manuel Barroso President of the European Commission, (in the foreground, from left to right). (EC Audiovisual Services).

What Angela Merkel, the German Chancellor, said about the uncertainties that an eventual new hair-cut of the Greek state debt may trigger doesn’t exclude this possibility. She stressed that it may set off a “domino effect of uncertainty” and scare off possible investors. But the country has already performed a voluntary hair-cut on the privately held sovereign debt paper without triggering not even a ‘credit event’. Now that most of the Greek debt is held by fellow Eurozone governments and central banks, including the ECB, a hair-cut may appear as a ‘family’ affair and have no repercussions on private investors’ sentiment about this country.

In any case the German government, through the most competent lips of the Federal minister for Finance, Wolfgang Schäuble, has recognised that Athens will certainly need after 2014 a third aid package of soft loans, which understandably will be provided mainly by Berlin. Schäuble, in the good tradition of honesty in the German political life, didn’t want to let his fellow countrymen go to the polling stations on 22 September, without knowing that Germany has more obligations vis-a-vis the Eurozone.

Greece, like banks

Unfortunately for Germany, Greece is not the only dark spot in euro area. As everybody knows all Eurozone banks need a hell lot more new capital and a good trimming down. Not to forget that their ‘assets’ are not only larger than the triple of the euro area’s GDP but they still contain God knows what toxic placements, despite the fact that the ECB has helped them a lot to generously reduce their exposure to Greece, Spain, Italy, Portugal and Ireland.

As Greece, Ireland and Portugal depend on their euro area partners to avoid bankruptcy, Eurozone banks in order to survive in the long run they must find a harbour in the European Banking Union. Obviously very few Eurozone banks, if any, can find in the market enough new capital to cover their toxic assets. As a result they need time and also money from governments and the ECB to consolidate their balance sheets and trim down their size. In the meanwhile the prospect of some of them going bankrupt cannot be excluded. To this effect a strong bank resolution mechanism is urgently needed, if the euro area is to create at last the European Banking Union.

The banking union

European Sting writer Dennis Kefalakos on 12 July observed that “…the European Commission, having understood the problem, proposed the creation of a strong and centrally managed bank resolution authority. The relevant announcement went like that: “The European Commission has today (10/07/2013) proposed a Single Resolution Mechanism (SRM) for the Banking Union. The mechanism would complement the Single Supervisory Mechanism (SSM) which, once operational in late 2014, will see the European Central Bank (ECB) directly supervise banks in the euro area and in other Member States which decide to join the Banking Union. The Single Resolution Mechanism would ensure that – not withstanding stronger supervision – if a bank subject to the SSM faced serious difficulties, its resolution could be managed efficiently with minimal costs to taxpayers and the real economy”.

Despite the fact that the German lenders have a lot of problems themselves, including the ‘mighty’ Deutsche Bank, Berlin opposed strongly the above Commission proposal for a strong and centrally managed bank resolution authority. As in the case of Greece, however, Berlin is gradually watering down its opposition to a central resolution authority. Now Germany clearly agrees to offer Athens a third loan package. As for accepting the Commission’s proposal for a strong European Banking Union, the concession will also materialise soon.

Jörg Asmussen, a German banker and member of the Executive Board of the ECB, recently said that the European Banking Union is the most important development after the creation of the Eurozone and the introduction of euro. Of course everybody agrees with that and that’s why Germany at the end will accept not only to help Greece out of its misery but also to participate in a centrally managed European Banking Union.

Naturally Berlin would have preferred to pay only for the vices of its own banks and why not, let Greece rot in the south-east corner of the continent. But today this is impossible. If the Eurozone disintegrates disorderly it will create a new and worst global credit chaos and nobody wants that. On top of that in case of a, God forbid, new global credit crunch, Germany will pay not only a dear price but it will lose once and for all the seamless, almost internal, market it always dreamed of for its industrial products. China is a very good customer but it’s far away. At the end the German voters will be convinced that the Eurozone and the European Union, which offered them so much during the past 60 years and helped them absorb the reunification cost of their country, comes with a price.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

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

Yemen: Tackling the world’s largest humanitarian crisis

4 things to know about the state of conflict today

5 amazing schools that will make you wish you were young again

Yemen: 11 more ‘terrible, senseless’ civilian deaths reported, following attack in Sana’a – top UN official

Hiring more female leaders is good for profits. Here’s the evidence

Upgraded EU visa information database to increase security at external borders

Towards a zero tobacco public space in Cameroon

On International Youth Day the European Youth Forum calls for true youth participation

Theresa May expresses her optimism about Britain’s economic success while UK business outlook seems ominous

EU Leaders’ meeting in Sofia: Completing a trusted Digital Single Market for the benefit of all

We need a new Operating System for the Fourth Industrial Revolution

European Accessibility Act: Parliament and Council negotiators strike a deal

Interview with ourselves: the mental health of health professionals

Could entrepreneurship be the real cure against the side effects of Brexit?

CLIMATE CHANGE FOCUS: Lake Chad trees keep deadly drought at bay

Another doomed EU attempt to interfere in Libya?

It’s time to strengthen global digital cooperation

A Sting Exclusive: China’s Foreign Minister Wang Yi on South China Sea issue at the ASEAN Regional Forum

In Rwanda, high-speed drones are delivering blood to remote communities

Parliament sets up plan to fight the 3,600 criminal rings of EU

To all far-right partisans who exploit Charlie Hebdo atrocity: a peaceful reply given by a peaceful student

Preparing the future today: World Health Organisation and young doctors

Ensure that widows are ‘not left out or left behind’, UN chief urges on International Day

Member states jeopardising the rule of law will risk losing EU funds

Artificial intelligence: Commission takes forward its work on ethics guidelines

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

EU budget: Commission proposes major funding increase for stronger borders and migration

Trump stumbles badly on his Russian openings; Europeans wary of Putin

EU mobilises €21 million to support Palestine refugees via the UN Relief and Works Agency

Your morning cup of coffee contains 140 litres of water

European Semester Autumn Package: Bolstering inclusive and sustainable growth

This surgeon runs a makeshift hospital for over 200,000 people

Marco Polo’s Dream

5 surprising ways to reuse coffee grounds

Youth Entrepreneurship Issue of the month: JEN, organisers of JADE October Meeting, on why JEs should come together

Global Citizen – Volunteer Internships

From Shadows to Sunlight, Paraguay’s Road to Transparency

UN postal agency ‘regrets’ US withdrawal

6 young leaders who are improving the state of the world on International Youth Day

Main results of EU-Japan summit which took place on 25/04/2019 in Brussels

These are the world’s most positive countries

European Business Summit 2014 Launch Event: “Energising Industrial Growth”

“Smoking steam instead of tobacco, are the E-cigarettes a safer alternative?”

Syria: ‘Deplorable’ violence in Idlib against civilians, humanitarian workers must ‘stop immediately’: UN Coordinator

Climate activist Greta Thunberg urges MEPs to put words into action

How music can help children with autism connect

‘Great cause of concern’ UN chief tells Security Council, surveying ‘bleak’ state of civilian protection

EU-UK: A deal synonymous to ‘remain’, England pays the Irish price

More refugees being helped by family, work and study permits, finds OECD and UNHCR study

UN chief welcomes re-opening of key Gaza border crossing

Human health – litmus paper for the climate change?

5 charts that explain big challenges facing Italy’s new government

UN chief welcomes new push by El Salvador’s political parties to begin fresh dialogue

Working Muslim women are a trillion-dollar market

New EU rules ensure better protection for 120 million holidaymakers this summer

US must abide by humanitarian refugee accords: UN refugee agency

Who is responsible for public health? The tendencies and its benefits –or not– on Health Education around the world

Statelessness for terrorists’ families, never an acceptable option, urges UN rights chief

UN police officer recognized for protecting vulnerable Somali women from abuse

European Youth Forum welcomes the European Commission’s proposed revision of the Union Code on Visas, however it does not go far enough

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