Germany to use EU to annex poor nations

[Stavroforos]

The leaders of 26 European countries bowed resentfully today to German determination to rewrite the EU's Lisbon Treaty to shore up the euro.

Angela Merkel declared she was happy after a summit meeting of EU leaders in Brussels agreed to establish a stiff new regime aimed at immunising the euro against the threats that brought the currency to the brink of collapse this year.

Under the new system, to be in place by 2013, the Germans insist that highly indebted eurozone countries struggling to repay will be forced to restructure their debt in a process of "managed insolvency" and that their creditors will need to take large "haircuts".

continued

The German chancellor said this was a quantum leap in the way the euro was run. "The inclusion of private institutions is very important to me," Merkel said. "We won't allow only the taxpayers to bear all the costs of a future crisis." The biggest shift in the way the euro operates since the 16-country currency was born a decade ago came in response to the Greek debt emergency in the spring which rippled around the Mediterranean and nearly destroyed the monetary union. In May, the EU and the IMF put up an €860bn umbrella to protect Greece and defend the currency. Those emergency funds lapse in 2013. If there is no agreement on the German terms for a permanent replacement, Berlin, the biggest contributor, will refuse to take part in a new insurance system. The summit agreed on "limited [Lisbon] treaty change" to "establish a permanent crisis mechanism to safeguard the financial stability of the euro area as a whole." Most government leaders had been deeply reluctant to return to the Lisbon Treaty less than a year after it came into force and after eight gruelling years negotiating the quasi-constitition. But Merkel struck a deal last week with President Nicolas Sarkozy of France and prevailed at the summit. "I can understand that the speed with which we acted came as a surprise," she said today. "They're all frightened of Merkel and Sarkozy," said a senior European diplomat. Under the deal, the treaty will be amended by EU governments in the months ahead while avoiding the nightmare scenario of holding referendums. The new rules, entailing possible financial penalties for fiscal sinners and big losses for banks in the event of orderly insolvency, will favour the strong dictating to the weak on budget, debt and public finances discipline, while also entrenching eurozone exposure to the pressures of the bond and financial markets. "The real gamechanger long-term is that the markets have a much more direct role," said Jean Pisani-Ferry, a leading economist and director of the Bruegel thinktank in Brussels. "In the end that will strengthen the eurozone more than sanctions." However, senior EU officials are concerned that the programme being pushed through by the Germans could be counterproductive. "The eurozone is still in crisis," said one official. "The markets are still nervous and some member states are under close scrutiny. Sometimes we in the EU are good at creating new difficulties just when we have overcome past difficulties." The Germans believe that forcing creditors to share the losses in the event of a sovereign debt rescheduling or default will make lenders less reckless, expose profligate countries to higher risk premiums, and encourage fiscal rigour. Jean-Claude Trichet, the head of the European Central Bank, objected to Merkel's formula. "There was a warning from Trichet about the role of the private sector," said a summit participant. Trichet told the EU leaders that they did not understand the gravity of the euro crisis, prompting Sarkozy to interrupt him to declare that he was more concerned about the views of the French public than he was about those of central bankers. Merkel had to set aside a further demand that countries whose fiscal misconduct put the euro at risk should forfeit their voting rights in the EU. That was too much for the others to contemplate, and would have triggered referendums in Ireland and perhaps elsewhere.

I do agree with establishing some sort of permanent fund to counter possible future collapses as might be the case in other EU countries, but forcing countries to become completely dependent on EU control and having no say in any EU policies as a result of this is too much. This is perhaps the biggest threat to national sovereignty which has come out of the EU to date.

What do you guys think?

[Armenum]

I can't say I trust that they will stabilize the Euro, I still stand by the viewpoint that the Euro currency should be abolished altogether. The whole EU economic system should be fundamentally restructured in order not to create such dependency, but still promote free trade, and retain some of the benefits of a more integrated economy. Again, EU must be careful not to cross the line of "too much" integration and I believe they may be crossing the line again.

[Mangalore]

so where is germany annexing anyone when the EU - majorly consisting of non Germans in her bureaucracy - has guidelines to crack down on Euro countries violating Euro standards they signed up to upon joining?

I might not fancy all the measures taking, for some of the things Junkcers had a pretty sensible objection that things like banning from council votes has already been reserved for heavy human rights violations so putting economic infringements on the same level is disproportionate aka devalueing far worse developments. But overall ideas like putting the risk back to the guys who speculated makes sense, as does putting something in place to use the whip if someone screws things up for everyone.

As it is things will run via the EU council which will severly weaken any strong response as a EU controlled oversight would as the EU council can simply decide to overturn any measures these new agreements might demand so it is actually not as deceisive as it could be.

I guess Merkel and Sarkozy are acting under the demands of their respective populaces. At least most Germans are furious about how much money they are supposed to spend on other EU countries for their troubles (it's a bit simpleminded but there you go) so much so that they are willing to use the heavy hand which germany normally reserves for backroom diplomacy because we know that us annexing everyone is not that an unrealistic proposition when coming from us... don't worry we are reducing our military again!

[Azog 150]

Its time like this I am very glad we aren't in the Eurozone.

[Haldred]

Merkel is one crazy banana.

[Mr Tom]

The Germans have given up on conquest by force and moved to conquest by subversion. Simples.

[Principe Alessandro]

It's not likely that the richer EU countries are going to give money to states that have failed to manage their finances without any kind of guarantees.

[Heavy Weapons Guy]

I would be glad if Germany would annex my country Latvia.

[magickyleo101]

I look forward to the coming Eurmany as a counterweight to China.

[Sphere]

I am not seeing how this strategy makes any long term sense. Essentially what is being suggested is instituting a program whereby heavily indebted countries will be fined and could have their debt forcibly restructured. They are quite right that this will increase the cost of borrowing for small nations as the risk to bond holders becomes immense. Nobody will want to be stuck holding the bonds of a country the EU is looking to punish. The Germans seem to think this will force fiscal responsibility, which may or may not work. What is for certain though, is that it will hurt economic growth for these nations if they have to pay more for debt.

A far more sensible solution here is to take the new "Euro-fund" to the next logical stage, a unified Euro-bond akin to Fed Bonds. If sovereign debt in the Eurozone was funded by selling a single unified bond, instead of the current 16 different bonds, the price of a bond across the entire Eurozone would essentially be the price the Germans pay for their debt (3-4%), or perhaps even lower. This is because, just like US Fed Bonds, nobody could conceive of the Eurozone has a whole defaulting and thus bond returns would be bare minimum of 3-4%. But obviously the bond markets could conceive of a small nation like Greece defaulting, which sent its bond returns up to 12%+.

I mean what is the point of having a unified currency and a unified market if you cannot leverage it to reduce borrowing costs? Across the Eurozone you could save quite a bit in interest payments (perhaps even half them for some nations) which could amount to hundreds of billions of dollars in savings.

[RomanSoldier9001]

Germany? I didnt knew only the Fatherland was the "Boss" of EU how about France? Of course this is terrible but heck people are conformists now so it will sucessed.

[JP226]

While I do think the EU is the same Napoleon and Hitler tried, only this time with a velvet glove, this is more an issue of how the currency is and why currency unions ultimately fail. They are "euro"engineering (<-- Americans will get that one) the same mechanisms that a real central bank supplies. WHich is why the Euro is doomed to fail anyhow. And ultimately the breakup of the EU, atleast what we're coming to think of the EU as.

[General Brittanicus]

While I do think the EU is the same Napoleon and Hitler tried, only this time with a velvet glove, this is more an issue of how the currency is and why currency unions ultimately fail. They are "euro"engineering (<-- Americans will get that one) the same mechanisms that a real central bank supplies. WHich is why the Euro is doomed to fail anyhow. And ultimately the breakup of the EU, atleast what we're coming to think of the EU as.

It is probable that the euro will fail and i wont be shedding any tears if the eu is broken up, but you never know, they could create their mediterranean union eventually and expand to include all those countries around their-then they would have to change the euro name anyway.

Also i found it humurous when they were talking about the new EU budget on the news- they said countries like Poland and the smaller nations who stood to benefit from a bigger budget were outraged that the bigger countries wanted to keep the increase to a bare minimum, i almost died from a rage attack.

"I wished to found a European system, a European Code of Laws, a European judiciary: there would be but one people in Europe,"

-Napoleon

"Europe thus divided into nationalities freely formed and free internally, peace between States would have become easier: the United States of Europe would become a possibility."

-Napoleon

Its time like this I am very glad we aren't in the Eurozone.

Not yet. Its a shame our leaders lack back-bone and a good chunk of the populace are morons, plus if the euro does go down it will take be taking us down with it anyway.

[Thorn777]

Maybe Germany gets annexed by Germany too, but I think that paradoxal is why we take national-debt seriously and recently wrote in the constitution to decrease our debt quite substantially. Wouldn't make sense though if we then need to rescue others again not as committed with new debt. Thx for nothing...better worry about your own spending than Germany trying to make sense on you'll. Sense conquiring the Euro-zone is moar what we're looking at.

[CiviC]

Uhhh, the big bad Krauts are takin' over Europe, again ...! Uhhh!!! Hide the women and children!

[humvee2800]

first of all I think its time we stopped judging germany by actions by another government altogether 70 years ago.

Second of all I too think this is stupid, however It is not entirely unfair, theres alot of backwards countries in south africa siphoning off aid and loans but making very little progress.

[Holger Danske]

Uhhh, the big bad Krauts are takin' over Europe, again ...! Uhhh!!! Hide the women and children!

That could possibily be the best thing that will ever happen to this continent.

[Exarch]

[/CONTENTBOX]
I do agree with establishing some sort of permanent fund to counter possible future collapses as might be the case in other EU countries, but forcing countries to become completely dependent on EU control and having no say in any EU policies as a result of this is too much. This is perhaps the biggest threat to national sovereignty which has come out of the EU to date.

What do you guys think?

i think it's a great idea,

Germany is the only country in the entire European subcontinent that deserves to be the hegemon; its art, culture, philosophy, women, military are world class.

also, it'd be super if they could change the name to 'Holy Roman Empire'

[Heavy Weapons Guy]

i think it's a great idea,

Germany is the only country in the entire European subcontinent that deserves to be the hegemon; its art, culture, philosophy, women, military are world class.

also, it'd be super if they could change the name to 'Holy Roman Empire'

4th Reich sounds cooler.

[Exarch]

4th Reich sounds cooler.

then who'd be the Kaiser?
are you offering yourself for the job, even though you're the kaiser of some place called "Crunk"?

yeh i think the '4th reich' sounds kewl, i just hope to see a little more of the 2nd reich's influence, rather than the 3rd reich's