Thank you Germany ... Alone among EU leaders, Chancellor Angela Merkel goes to tonight's summit in Brussels with an iron-clad mandate. It is a remarkable moment. Never before – to my knowledge – has a national parliament demanded and held a prior vote on an EU summit accord. Had this principle been established a long time ago, we might have avoided much of the relentless Treaty creep and EU aggrandizement advanced by secret deals at the Bâtiment Justus Lipsius. Thank you Germany. Thank you too, judges of the Verfassungsgericht, for giving the Bundestag a veto on EU encroachments on fiscal sovereignty. – UK Telegraph/Ambrose Evans-Pritchard
Dominant Social Theme: Finally, Europe has a bailout that is necessary to combat the problem. Why couldn't they just get it done earlier? Politicians are always dragging their feet until the last minute ...
Free-Market Analysis: Of course, by now you know the EU has announced another "miraculous" bailout. But this article, written by one of our favorite mainstream journos, Ambrose Evans-Pritchard, shows why it won't work, can't work and NEVER WILL work. Hats off to Ambrose. Such clarity is not usually the bailiwick of the mainstream press, not even the Telegraph.
In fact, the "miracles" that are announced regularly by the Eurocrat brain trust are nothing more than an elite dominant social theme. Crises are SUPPOSED to be solved by the most brilliant among us ... and top governmental officials have the goods. That's why they are there, to tackle problems too complex for the rest of us.
The realty is otherwise, of course. Governments CAUSE the problems that later demand attention and are in some cases unsolvable. The Euro-crisis, as this article shows us, may be one of the unsolvable ones. A malevolent mixture of monetary rigidity, uncontrollable debt and banking insolvency seems to doom any potential solution to irrelevance.
The article doesn't start propitiously. In fact, it's one of Evans-Pritchard's more confused articles in our view, given the murkiness of exactly what one is supposed to be "thanking" Germany for. But the reason to analyze the article is not to probe Pritchard's gratitude (ironic or not) but to comment on the article's conclusion. Here he justifies all the rest:
The unpleasant truth is that [Merkel/EU's] leverage proposals are idiotic, the worst sort of financial engineering, legerdemain, and trickery. As countless economists have pointed out, it concentrates risk. Germany's €211bn commitment to the fund is not technically breached but the risk of suffering large and perhaps total loss is vastly increased. Creditor states switch from protected senior status on Greek, Portuguese, or Italian debt to the bottom rung on new slabs of sub-prime structured credit.
The bluff might well be called. The consequence will be to bring forward the downgrade of France and other states. It will accelerate contagion to the core, not stop it. Why is Germany pushing for such a destructive policy? Because it dares not cross the €211bn red-line that has become totemic in the Bundestag, and because it has for ideological and cultural reasons excluded the one option that can plausibly halt the eurozone crisis – which is mobilizing the full fire-power of the European Central Bank.