“S’il vous plaît Angie, take zee cheel peel!”
James A. Kostohryz
A good friend of mine who works at the finance ministry of one of Europe’s major economies sent me an article in the Spanish press over the weekend that sent shivers down my spine. According to confidential sources – and given credence by my friend – Germany is preparing a radical assault on ECB governance.
If the sources are accurate, it is my view that this assault on ECB governance is merely one step in a German grand strategy to radically restructure the euro and/or pave the way for a German exit from it.
This story published on Saturday gains a great deal of credence after Merkel ratcheted up the pressure today at her party (CDU) conference for a “breakthrough to a New Europe” characterized by closer political ties, tighter budget rules and less individual sovereignty for member states. Merkel said that the European Union needs to develop new structures – and that would mean more Europe, not less.
According to the cited article from the Spanish press, at the next EU summit on December 9, Germany will propose a series of reforms to the “Treaty of Berlin” aimed at creating a much more unified governance of European economies. According to the article, the CDU is preparing a resolution that calls for a reform of EU laws to make the vote of each member state proportionate to its GDP. This would guarantee German supremacy within the ECB and would allow it to dictate policy to all 17 eurozone nations.
Germany apparently wants to capitalize on the fact that the bailout mechanisms introduced so far are clearly inadequate. In exchange for one-off support on various extended bailout measures, the Germans want new governance rules to recognize German supremacy within the European Union.
One key demand that the Germans will make in exchange for their support for extended bailout measures will be that the vote of member states within the ECB Governing Council would be made proportionate to GDP. Currently each member state has one vote – i.e. Malta’s vote has the same weight within the governing council as Germany’s. Under the new scheme Germany would have 27 votes out of 100 while France would have 21. This means that Germany, France and one more ally could essentially dictate monetary policy to the other 14 member states.
The Germans would apparently be couching this power-grab in the context of more generous bailout concessions to the PIIGS. The proposal is structured as a quid pro quo. Either member states accede to the new structure, or Germany will withhold support for bailouts. According to Ralph Brinkhous a CDU member of the German parliament’s finance committee, Merkel’s message “is that we either we get more Europe now or the project will die.”
In other words, it’s my way or the autobahn.
The driving force behind the ECB power grab is that the Germans have become alarmed over what they see as the wayward initiatives of the ECB in recent months to bail out Italy and Spain by purchasing their bonds on the secondary market.
German outrage over this policy has been well documented…