728x90 AdSpace

Latest News
August 27, 2012

Will Europe Become The United States of Merkel?

By Mike "Mish" Shedlock

Will Merkel get her wish for a Unites States of Europe led by nannycrats in Brussels? I suspect not because a vote would likely go up in flames. Nonetheless, Merkel Pushes for Convention to Draft New EU Treaty
Chancellor Angela Merkel's plans for a new treaty governing the European Union are becoming more concrete. SPIEGEL has learned that the German leader wants the EU to begin working on a draft this year, with the aim of providing Brussels with greater power to monitor budgets. But many countries are deeply opposed to the idea.

A date for the beginning of the convention is expected to be fixed at an EU summit in December. Merkel has been pushing for some time now to complement the recently approved fiscal pact, which harmonizes budget policies within 25 of the EU's 27 countries, with a political union. Germany would like to see, for example, a legal basis that would give the European Court of Justice the jurisdiction to monitor the budgets of member states and to punish deficit offenders.

So far, though, the German proposal has found few supporters in the other EU member states. During a meeting of the so-called Future Group, an informal gathering of 10 foreign ministers from EU countries, the majority opposed a call by German Foreign Minister Guido Westerwelle for a new treaty convention. Other countries, including Ireland, do not want to take the risk of a national referendum, which a new EU treaty would entail in some member states.

When Merkel previously brought up the subject during a December EU summit meeting, many people reacted with indignation. Initially, the other EU countries were unwilling to go along with the calls from Merkel and then-French President Nicolas Sarkozy for automatic sanctions for repeat offenders of budget rules. In the end, the Germans and French found a common position, saying they would push forward with a new EU treaty -- either with the entire bloc or with the 17 members of the euro zone if other countries were unwilling to go along with it.

United States of Merkel

Do the German people want a centralized authority over budgets led by bureaucrats in Brussels or is is it primarily Merkel?

I suggest the latter. Merkel wants as her legacy a United States of Merkel (which I define as a United States of Europe in which she gets primary credit for building). She does not care what it costs Germany as long as it gets her in the history books forever and a day.

Numerous Problems

The problems should be obvious. Many countries, especially the club-med states, do not want austerity or loss of sovereignty. They want printing.

Also note that Holllande wants to continue his tax the rich policies while lowering the retirement age and preventing businesses from firing workers.

Will Hollande's ideas work in a United States of Merkel? 

Let's assume they will work. Indeed that should be Germany's big fear. Put a bunch of nannycrats together and they are likely to decide anything. And whatever rules they decide will apply to every country in the nannyzone that foolishly signs the treaty.

If the treaty is a simple majority rule treaty, Germany would be at risk of being overruled by the club-med states. If  the treaty is by percentages, the club-med states would be at risk of being dominated by what is good for Germany and France (assuming of course Germany and France can agree).

No matter how a treaty is structured, some countries are guaranteed not to like it. 

Mathematically Impossible 
  1. The Bundesbank said there should be no banking union until there is a fiscal union.
  2. Angela Merkel said that there should be no fiscal union until there is political union.
  3. François Hollande said that there should be no political union until there is a banking union.
  4. The German supreme court will not allow a political union nor a fiscal union, nor a banking union without a German referendum.
Assume the Bundesbank will be ignored. Further assume Germany puts this to a vote and it passes. There still remains a big rift between the viewpoints of France and Germany as well as a big rift between Northern and Southern Europe.

In Italy sentiment to leave the euro is very strong. So is the sentiment in Germany. Would Germans really vote for this boondoggle? Would the Netherlands? Austria?

The next election in Italy may very well seal the fate against a new treaty idea even if Merkel and Hollande can work out major differences.

Do-or-Die Political Expediency 

Finally, politicians might want a nannyzone, but citizens of many countries would not, and I strongly suspect that includes Germany. 

Recall that France and Germany pushed through a treaty in December (still not ratified). Also recall that Hollande ran on a platform of renegotiating the treaty.

Germany and France are still bickering. How's that supposed to work? Does Merkel think an agreement now is likely? 

I think not. Instead, her proposal is simply a matter of do-or-die political expediency and her one last chance to push for the United States of Merkel.

About The Author - Mike Shedlock / Mish is a registered investment advisor representative and he writes at Mish's Global Economic Trend Analysis (EconMatters author archive here)

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

© EconMatters All Rights Reserved | Facebook | Twitter | Post Alert | Kindle
  • Blogger Comments
  • Facebook Comments
Item Reviewed: Will Europe Become The United States of Merkel? Rating: 5 Reviewed By: EconMatters