Rompuy Calls For More Socialism, Central Planning For Europe
Yesterday, Herman Van Rompuy, the president of the European Council, issued a report stating “there should be both joint liabilities and more European-level control of national policies” as the ruling class continues their “Great Work” of planetary integration and consolidation.
The report was drafted also by Jose Manuel Barroso, president of the European commission, Mario Draghi, president of the European Central Bank, and Jean-Claude Juncker, president of the Eurogroup (made up of finance ministers of the euro zone). The report therefore represents a piece of diplomacy as Europe seemingly cracks, with differences between Germany and France, the nation-state architects of the euro. In the report, four “building blocks” are laid out for deeper euro-zone integration. Suggested are
- A European system to guarantee bank deposits and manage troubled banks (read: force continental, multinational bailouts – that is, shared sacrifice - and manage the entire economy from the top);
- Fiscal integration to exert greater control on national budgets and steps towards issuing joint debt (read: swift and efficient central planning for the entire continent);
- more integration in economic policy-making to boost competitiveness (see above)
- and more democratic accountability in European-level decisions (read: more social than democracy).
As with most bureaucratic public documents, such as what can be done within existing treaties and how to implement the building blocks, vagueness is pandemic to the document. Words like “appropriate” “and commensurate” litter the meaning, lacking definition as they do. This is a watered-down document indeed, used as a blueprint for the minds of European politicians, businessmen, etc. – in particularly, the “bootlicking” class –as European elites and technocrats work to create a novel order out of chaos.
Going beyond Van Rompuy’s document, many in Brussels are calling for a “banking union.” Such a union consists of a fund which is “primarily funded” by banks as a way of guaranteeing deposits and to manage failing and failed banks. The fund will be backed-up by the euro zone’s permanent rescue fund, the European Stability Mechanism (ESM), which is set to come on-line in the next month.
Fiscally, the report proposes moving beyond the current euro-zone systems, which controls national budgets. Each country’s debt and deficit should be regulated by a ceiling set by European-wide institutions. Governments would have to defer power in order to go beyond their set limits, and elites could affect change across the continent from Brussels. Eurobonds have been used as an example of a way in which to promote monetary consolidation on the continet:
In a medium term perspective, the issuance of common debt could be explored as an element of such a fiscal union and subject to progress on fiscal integration. Steps towards the introduction of joint and several sovereign liabilities could be considered as long as a robust framework for budgetary discipline and competitiveness is in place to avoid moral hazard and foster responsibility and compliance. The process towards the issuance of common debt should be criteria-based and phased, whereby progress in the pooling of decisions on budgets would be accompanied with commensurate steps towards the pooling of risks. Several options for partial common debt issuance have been proposed, such as the pooling of some short-term funding instruments on a limited and conditional basis, or the gradual roll-over into a redemption fund. Different forms of fiscal solidarity could also be envisaged.
The eurozone eventually, suggests the report, could create a singular treasury tied to a central budget. Again, the public version of the document has been watered-down to some extent as “some contentious ideas have been dropped.” From an earlier version, the suggestion of an “immediate and permanent” mutualisation of risk for the banking sector has been edited out. Also previously suggested, that the ESM could re-capitalize banks itself, has as well been taken out.
Mr Van Rompuy, in this report, is calling for the discussion of further fiscal European federalism by at least turning the tables of the public discussion. For instance “just getting Mrs Merkel to agree in principle to discuss things like the mutualisation of debt would be a big achievement, as would getting the French to talk about surrendering the powers of the Fifth Republic.”
By December, according to Mr Van Romuy, a “detailed plan for integration” could be ready for a December presentation. In October, he suggests, a preliminary version could be introduced. The Economist asks if markets are willing to wait that long? According to The Economist:
The likelihood is that this week’s European summit will disappoint, and that could set off another round of panic in the markets. If the euro is to survive, Mr Van Rompuy may have to draft his roadmap rather sooner than he expects.