FacebookTwitterGoogle+RedditEmail

Another Summit Fiasco

When the book is finally closed on this week’s EU summit, it’ll be interesting to see what people remember the most. Will it be the proposed changes to the Lisbon Treaty, the new steps towards fiscal integration or the disgraceful behavior of David Cameron?

My money’s on Cameron. The UK’s brash Prime Minister did his level-best to derail the collective effort by– setting aside the interests of his country or those of crisis-stricken Europe–and acting as chief toady for the financial service industry. Cameron doesn’t even try to hide the fact that he is owned by big finance. The only thing he really cares about is sabotaging any attempt to regulate financial speculation. Here’s how he defended himself:

“What is on offer isn’t in Britain’s interests so I didn’t agree to it. Of course we want the eurozone countries to come together and to solve their problems. But we should only allow that to happen
inside the European Union treaties if there are proper protections for the single market and for other key British interests.”

Right. The PM was only fulfilling his patriotic duty, don’t you know. Only that’s not how everyone else saw it. They thought Cameron was just kowtowing to his own deep-pocket constituents. Here’s how French President Nicholas Sarkozy summed it up:

“Very simply, in order to accept the reform of the treaty, David Cameron asked for what we thought was unacceptable: a protocol to exonerate the UK from financial services regulation. We could not accept this as at least part of the problems [Europe is facing] came from this sector.”

Now Cameron will have to figure out a way to climb down from his hardline position or face further isolation from his trading partners in the EU block.

As for the summit itself, it was a typical euro-fiasco, long on grand proclamations and photo ops and short on meaningful reform. German Chancellor Angela Merkel has gotten it into her head, that all the eurozone’s problems can be traced to the wastrel spending habits of countries in the South. She has yet to consider
that the capital flows that triggered the crisis all came from German, French and UK banks trying to make a buck on sovereign bonds that were just basis points above rock-solid German bund. The same phenom inflated the housing bubble in the US from 2001 to 2006. The $600 billion current account deficit kept capital flowing into Wall Street’s garbage assets (MBS, CDOs) while economists waved their hands overhead warning of an impending implosion. No one listened. The rest is history.

On Friday, stocks rose sharply indicating that investors take a generally positive view of the summit’s outcome. Unfortunately, we’ve seen this movie before. The surge usually lasts one-full trading session before the selloff begins. While the European Central Bank (ECB) did throw a lifeline to the banks by extending emergency loans for up to 3 years, by slashing interest rates, and by accepting any manner of dodgy collateral for loans; ECB chief Mario Draghi stopped short of backstopping sovereign debt or acting as lender of last resort. In fact, markets plunged yesterday after Draghi announced that he has no intention of keeping rates on sovereign debt low via quantitative easing.

“We have a treaty and Article 123 prohibits financing of governments. It embodies the best tradition of the Bundesbank. We shouldn’t try to circumvent the spirit of the treaty,” he said. He also shrugged off using the IMF as an instrument to conduct stealth QE. According to the Telegraph, Draghi said:

“Let us not forget that the ECB is not a member of the IMF. One cannot channel money in a way to circumvent the treaty provisions. If the IMF were to use this money to buy exclusively European bonds, we think is not compatible with the treaty.”

So, no lender of last resort, no QE, and no allowing the emergency fund (ESM) to be used as a bank. (which would maximize leverage) At the same time, member states are being asked to ratify changes to the existing treaty that would compromise their sovereignty if budget deficits exceed 5 percent of GDP. This is a rather clumsy and intrusive way of establishing a central fiscal authority. Merkel sees this kind of control over national budgets as the only way to avert another crisis in the future. Opposition to the plan is likely to be ferocious.

All in all, the summit was a spectacular waste of time barely confusing enough to send stocks on a one-day tear. Here’s how Reuter’s blogger Felix Salmon summarizes the 2 day confab:

“…it is now, officially, too late to save the Eurozone: the collapse of the entire edifice is now not a matter of if but rather of when….

The fundamental problem is that there isn’t enough money to go around. The current bailout fund, the European Financial Stability Facility, is barely big enough to cope with Greece; it doesn’t have a chance of being able to bail out a big economy like Italy or Spain….

And there’s more bad news, too. All of Europe’s hopes right now are being placed in something called the European Stability Mechanism — a permanent successor to the temporary EFSF…. (But) the European leaders seem determined, today, to prevent the ESM from operating as a bank at all. Which means it will never get the firepower it needs to be taken seriously….

It all adds up to one of the most disastrous summits imaginable….Europe’s leaders have set a course which leads directly to a gruesome global recession, before we’ve even recovered from the last one.” (“Europe’s Disastrous Summit”, Felix Salmon, Reuters)

Merkel and Sarkozy have cobbled together a needlessly punitive agreement that fails to address the fundamental issues that are tearing the eurozone apart. It’s only a matter of time before soaring bond yields and bank failures send them rushing back to the drawing board.

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, forthcoming from AK Press. He can be reached at fergiewhitney@msn.com

More articles by:

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

Weekend Edition
December 07, 2018
Friday - Sunday
Steve Hendricks
What If We Just Buy Off Big Fossil Fuel? A Novel Plan to Mitigate the Climate Calamity
Jeffrey St. Clair
Cancer as Weapon: Poppy Bush’s Radioactive War on Iraq
Paul Street
The McCain and Bush Death Tours: Establishment Rituals in How to be a Proper Ruler
Jason Hirthler
Laws of the Jungle: The Free Market and the Continuity of Change
Ajamu Baraka
The Universal Declaration of Human Rights at 70: Time to De-Colonize Human Rights!
Andrew Levine
Thoughts on Strategy for a Left Opposition
Jennifer Matsui
Dead of Night Redux: A Zombie Rises, A Spook Falls
Rob Urie
Degrowth: Toward a Green Revolution
Binoy Kampmark
The Bomb that Did Not Detonate: Julian Assange, Manafort and The Guardian
Robert Hunziker
The Deathly Insect Dilemma
Robert Fisk
Spare Me the American Tears for the Murder of Jamal Khashoggi
Joseph Natoli
Tribal Justice
Ron Jacobs
Getting Pushed Off the Capitalist Cliff
Macdonald Stainsby
Unist’ot’en Camp is Under Threat in Northern Canada
Senator Tom Harkin
Questions for Vice-President Bush on Posada Carriles
W. T. Whitney
Two Years and Colombia’s Peace Agreement is in Shreds
Ron Jacobs
Getting Pushed Off the Capitalist Cliff
Ramzy Baroud
The Conspiracy Against Refugees
David Rosen
The Swamp Stinks: Trump & Washington’s Rot
Raouf Halaby
Wall-to-Wall Whitewashing
Daniel Falcone
Noam Chomsky Turns 90
Dean Baker
An Inverted Bond Yield Curve: Is a Recession Coming?
Nick Pemberton
The Case For Chuck Mertz (Not Noam Chomsky) as America’s Leading Intellectual
Ralph Nader
New Book about Ethics and Whistleblowing for Engineers Affects Us All!
Dan Kovalik
The Return of the Nicaraguan Contras, and the Rise of the Pro-Contra Left
Jeremy Kuzmarov
Exposing the Crimes of the CIAs Fair-Haired Boy, Paul Kagame, and the Rwandan Patriotic Front
Jasmine Aguilera
Lessons From South of the Border
Manuel García, Jr.
A Formula for U.S. Election Outcomes
Sam Pizzigati
Drug Company Execs Make Millions Misleading Cancer Patients. Here’s One Way to Stop Them
Kollibri terre Sonnenblume
Agriculture as Wrong Turn
James McEnteer
And That’s The Way It Is: Essential Journalism Books of 2018
Chris Gilbert
Biplav’s Communist Party of Nepal on the Move: Dispatch by a Far-Flung Bolivarian
Judith Deutsch
Siloed Thinking, Climate, and Disposable People: COP 24 and Our Discontent
Jill Richardson
Republicans Don’t Want Your Vote to Count
John Feffer
‘Get Me Outta Here’: Trump Turns the G20 into the G19
Domenica Ghanem
Is Bush’s Legacy Really Much Different Than Trump’s?
Peter Certo
Let Us Argue Over Dead Presidents
Christopher Brauchli
Concentration Camps From Here to China
ANIS SHIVANI
The Progress of Fascism Over the Last Twenty Years
Steve Klinger
A Requiem for Donald Trump
Al Ronzoni
New Deals, From FDR’s to the Greens’
Gerald Scorse
America’s Rigged Tax Collection System
Louis Proyect
Praying the Gay Away
Rev. Theodore H. Lockhart
A Homily: the Lord Has a Controversy With His People?
David Yearsley
Bush Obsequies
FacebookTwitterGoogle+RedditEmail