Lotar Mattey's Blog

PARIS, Jul (Reuters) - Angela Merkel Will deny it, Thursday's goal euro zone rescue deal to Greece again from the brink of bankruptcy puts Europe on the bumpy road to a fiscal union. By Giving Their new bailout fund to help scope Countries Before They are shut out of Credit Markets, recapitalize banks and buy bonds in the secondary market, leaders of the 17-nation currency area the ugly foundations of a European Monetary Fund. THEY made clear aussi This Was not the final internship in fiscal integration, with French President Nicolas Sarkozy Promising new Franco-Germanic Proposals on Economic Governance by September. "The EU summit Was a historic victory for the French vision of EMU (Economic and Monetary Union) - Meaning That It Is Now on course to turn Into a tax / transfer union," Said analyst Brendan Bowen of Mitsubishi UFJ Securities International. The German Chancellor has leap forward Accepted Which she HAD blocked in March, When Promised a "comprehensive package" to solve the euro zone's sovereign debt crisis WAS Reduced to half-measures failed to stop That Spreading contagion. In return, Merkel Scored A Political victory by forcing a reluctant Her partners and European Central Bank to accept That the Private Sector Should share the burden of a second Greek bailout, at a high cost to the public purse. Banks and Insurers Will Have to write down about 21 percent of the value of Their holdings of Greek bonds.Many economists Doubt whether the Resulting reduction in Greece's debt pile Will Be Sufficient to Avoid a hard Restructuring at a Later date. TRUMP POLITICS FINANCE Private Sector Involvement WAS politically essential to secure Parliamentary backing in Germany, the Netherlands and Finland, Where Public Hostility to Any Further bailout is High, Even Though It Will Cost Taxpayers More than it saves Greece. The political Need to Show That Banks and Insurers Were Being made to pay the Financial trumped logic, the participants in Negotiations said. Merkel Played down the implications of the Brussels deal, insisting on Friday Europe That Should not Become a union in Which IS redistributed wealth from richer to Poorer states. "A transfer union Would Be An automatic rebalancing Financial ...and this Shall Not Happen According To my belief, "She Told a news conference. Other European Officials are intended Convinced That the euro zone Is Moving Toward Some form of mutual and common debt Guarantee Debt Issuance in the long run. That Is bound to heighten a eurosceptical Which is Already vocal backlash across northern Europe. Conservative German economist Hans-Werner Sinn, head of the Ifo institute RespectED, Said outcome of the summit: "The socialization of debt in Europe IS Continuing merrily.The extra money for Greece IS Almost a gift and Will Never Come Back. " Euro zone member states are Already on the point of enacting tax Much closer mutual surveillance, Giving power to the Brussels review national budgets Before They go to parliament. The EU / IMF Assistance Programs Have Already put Greece, Ireland and Portugal Under Much More intrusive international supervision, cramping Their Sovereignty in the name of Ensuring That Reform Commitments are RespectED. This is Leading the euro zone Deeper Into Political What Harvard economist Dani Rodrik calls the "globalization paradox." Rodrik Arguedas in a book this year That Economic Globalization, Sovereignty and national democratic politics are incompatible. You Can Have any two, but not all three. A common Euro Bond Would Reduce the Costs of borrowing euro area member states MOST and make it harder to speculate Against Markets for Individual Countries. Experts say it Might not Significantly raise borrowing Costs for the euro area's six AAA-rated sovereigns Because Of The Benefits of Creating a deep, liquid pool of high-grade debt instrument That Would Be attractive to big Chinese, Japanese, Arab and U.S. investors. Italy, Greece, Spain and Luxembourg Have all Publicly advocated the emission of common euro zone bonds, Germany's Social Democratic and Greens opposition party support 'em, and the European Commission Will publish a report on the idea Before the end of the year build outdoor fireplace. "The Germans will go on saying" nein "until in the end They Say" ja, "" a European Commission official Involved in the project said. PENULTIMA RATIO Henrik Enderlein, Hertie assistant dean of the Business School in Berlin, Merkel Said HAD Numerous U-turns made DURING the euro zone and crisis Would Eventually accept euro bonds. The chancellor, ET Noted, Had changed Her mind is aiding Greece in the first place, Creating a euro zone rescue fund, Increasing STI effective lending capacity, allowing the fund to buy bonds in the primary market now and penal interest rates for Removing assisted states , intervening in the secondary market, recapitalizing banks and Precautionary Giving credit lines. For More than a year, Merkel's mantra That WAS the only fund Could Be Used, In Her favorite Latin phrase, "last resort" - as a last resort. Now That She Has Accepted it makes sense to help floundering swimmers Before They are drowning. Call it "penultima ratio." Other Steps Toward closer integration euro zone are tax aussi Being Actively debated. ECB President Jean-Claude Trichet called Set for May in the creation of a European finance minister to Oversee a more integrated Economic and fiscal policy of the euro zone. Another senior ECB PolicyMaker, Lorenzo Bini Smaghi, Suggested That this month euro zone states hand over Should Their debt-issuing Powers to Brussels while bailouts Should No Longer require unanimous support. It Will take a long time, if ever, Before Germany, the EU's biggest paymaster, Gives up icts veto over European Financial rescues, purpose Bini Smaghi Noted That European states Accepted The Principle of weighted Majority voting When Committing funds to International Monetary Fund bailouts. Jacques Delors, the European Commission headed Who in the heyday of European integration in 1985-94, the U.S. Historically Observed That Takes icts biggest steps forward in crises. The French "empty chair" crisis of the 1960s hastened the Common Agricultural Policy, the 1970s oil crisis and the end of the Bretton Woods Monetary System Brought about the European Monetary System, a grid with limited currency fluctuation bands. The fall of the Berlin Wall spurred the creation of the euro and led to the EU's "big bang" enlargement eastward. The September 11, 2001, attacks on the United States Prompted a pan-European arrest warrant, sweeping away lengthy extradition procedures. For a long time, it HAS Looked as if the sovereign debt crisis Would Bring about a disintegration of the U.S., with fiscal loosening the bonds of strains and Solidarity Strengthening the forces of Euroscepticism. The rise of parts Such as the True Finns in Finland and the Freedom Party in the Netherlands Which Have made spectacular gains by Opposing euro zone bailouts could HAS mainstream New Constraints on Political Leaders. Those forces May Grow Stronger, order this week's summit shows euro area Governments That Have When Their backs to the wall, Their Commitment to preserve European Monetary Union Through Greater integration Cdn prevail. The dogs bark, the European goal caravan goes on Its Way. Strikingly, It Was a British outsider Rather Than a euro zone insider Who Drew the lesson of the sovereign debt crisis. British Chancellor of the Exchequer (finance minister) George Osborne Said this week the "Remorseless logic" of the single currency was great fiscal union. While Britain Did not want to take part, it Had an interest in a Stronger, more integrated euro area, He Said. (Editing by Mike Peacock) Analysis: Summit puts eurozone impact on bumpy road to fiscal union