The Gang of Four: Presidents propose power of eurozone authorities over national governments
2012 06 27

By Ian Traynor | Guardian.co.uk






Leaders draft federal plan to "save the eurozone"


Herman Van Rompuy of the European Council has proposed, with three other European presidents, that the eurozone takes on more centralised powers. Photograph: Rex Features




European leaders have drafted a radical plan to turn the 17 countries of the eurozone into a full-fledged political federation within a decade in an attempt to placate the financial markets by demonstrating a political will to save the single currency in the medium-term.

The incendiary proposals for banking, fiscal, and economic unions resulting in a "political union" are to be debated at an EU summit on Thursday and Friday. Following two bad-tempered meetings of European leaders in Mexico and Rome over the past week, the Brussels summit looks likely to see major clashes over the future of Europe as well as the immediate crisis surrounding sovereign debt, bad banks and the euro’s survival.

The crisis has shifted from the periphery of the EU to its very heart, with Berlin and Paris seriously at odds for the first time since the Greek drama started 30 months ago. The logic of the draft proposals will also pose major dilemmas for David Cameron, perhaps putting Britain at a crossroads in its relationship with the continent.

The seven-page document [PDF], obtained by the Guardian, has been drafted by the "gang of four" – a quartet of European presidents: Herman Van Rompuy of the European Council, Mario Draghi of the European Central Bank, José Manuel Barroso of the European commission, and Jean-Claude Juncker of the 17-country eurogroup.

It calls for a quick start on establishing a new European banking union, says that the ECB could be given supervisory authority over EU banks quickly, and proposes common resolution funds (for winding up bad banks, funded by a banking levy to spare EU taxpayers) as well as a common deposit guarantee scheme for Europe’s savers.

Berlin is already pooh-poohing the notion, unwilling to "mutualise" liability for other country’s savers or banks any time soon. The paper also says that the eurozone’s new permanent bailout fund, the European Stability Mechanism (ESM), could be used as the "fiscal backstop" for a banking union, opening the way to direct recapitalisation of troubled banks, also opposed by the key power, Germany.

Britain is adamantly opposed to joining a banking union and placing much of Europe’s biggest financial centre, the City, under the authority of the ECB. Arguing that the union should be purely eurozone as a response to the euro crisis, Cameron will demand "safeguards" quarantining the British financial sector while ensuring that any new financial regime does not impair Britian’s interests in the EU’s single market.

The Germans appear reluctant to offer any concessions, though, and the draft says the banking union should extend beyond the eurozone.

"An integrated financial framework should cover all EU member states, whilst allowing for specific differentiations between euro and non-euro area member states on certain parts of the new framework that are preponderantly linked to the functioning of the monetary union and the stability of the euro area rather than to the single market."

Analysts say that a banking union cannot work without a eurozone fiscal union and the paper proposes sweeping new eurozone powers, including options, fiercely resisted by Berlin, for sharing liability for the debt of eurozone countries – eurobonds. The paper seeks to accommodate German objections by bowing to chancellor Angela Merkel’s new mantra – "no liability without controls".

"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," the paper says.

"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."

Full fiscal union, the paper says, will ultimately require what is tantamount to a eurozone finance ministry – "the development at the euro area level of a fiscal body, such as a treasury office".

On budgetary and economic policy-making, the proposals ramp up the powers of EU or eurozone authorities to dictate and enforce national decision-taking, for example, on labour markets or "tax co-ordination".

It also suggests that European authorities could intervene to ensure national civil service and other reforms, as is currently being tried as part of the Greek bailout.

"Measures to strengthen the political and administrative capacity of national institutions and foster national ownership of reforms could be taken where necessary, as this is a vital condition for the efficient implementation of growth-enhancing reforms."

The gang of four paper calls for much more intrusive eurozone powers over national budgets, fiscal and economic policy-making.

"Upper limits on the annual budget balance and on government debt levels of individual member states could be agreed in common. Under these rules, the issuance of government debt beyond the level agreed in common would have to be justified and receive prior approval. Subsequently, the euro area level would be in a position to require changes to budgetary envelopes if they are in violation of fiscal rules."

The four presidents ask for a mandate from this week’s summit to draw up "a specific and time-bound road map for the achievement of genuine Economic and Monetary Union", stating they should deliver an interim report in October and more detailed plans by the end of the year.

There are certain to be major conflicts over the proposals before that happens. The likelihood is that the banking union can be established without having to resort to the hazardous step of re-opening the EU’s Lisbon Treaty. But the other ambitions would require reopening the EU’s decade-old quandary over a European constitution.


[...]

Read the full article at: guardian.co.uk






Also tune into:

Alex Newman - Hour 1 - Sweden’s Big Government ’Utopia’ Unmasked

Ian Crane - Hour 1 - Financial Terrorism

Diana Johnstone - The Toulouse Murders, The French Election & EU

Alex Newman - Rio+20, UN Conference on "Sustainable Development"

John Perkins - An Economic Hitman on Predatory Capitalism & Corporate Monopoly

Birgitta Jonsdottir - Financial War Against Iceland

Joseph P. Farrell - Babylon’s Banksters, Nazi International & Global Finanical Blackmail









Related Articles
Germany rules out pooling of eurozone debt
Mario Monti: we have a week to save the eurozone
Germany says "no" to throwing money at euro crisis
George Soros calmly suggests the EU has only 3 days to form a fiscal union
Soros Warns of Violent Riots In America, Financial Collapse, Government Clampdown
France and Germany call for "True Economic Government" - Rise of the Fourth Reich?
Top Nazis Planned EU-Style Fourth Reich
Six of the 17 nations in the eurozone are going bust
German minister calls for Lisbon treaty EU army


Latest News from our Front Page

Pre-historic tokens used in conjunction with cuneiform
2014 07 22
An archaeological dig in southeast Turkey has uncovered a large number of clay tokens that were used as records of trade until the advent of writing, or so it had been believed. But a new find of tokens, dates from a time when writing was commonplace – thousands of years after it was previously assumed this technology had become obsolete. Researchers ...
Are immigration opponents Nazis?
2014 07 22
It seems the usual suspects are calling anyone who opposes unlimited immigration to be a "Nazi". The Left seems to be in constant fear of "Nazis" that lurk in public policy discussions and I assume under their beds. If you oppose any Leftist position, you are a.... take a wild guess...wait for it.... a NAZI! Tim Wise recently went ...
What Did US Spy Satellites See in Ukraine?
2014 07 22
Exclusive: The U.S. media’s Ukraine bias has been obvious, siding with the Kiev regime and bashing ethnic Russian rebels and Russia’s President Putin. But now – with the scramble to blame Putin for the Malaysia Airlines shoot-down – the shoddy journalism has grown truly dangerous, says Robert Parry. In the heat of the U.S. media’s latest war hysteria – rushing to ...
Oh, Great: Robots Are Set to Conduct National Security Clearance Interviews
2014 07 22
Advancing a career in the US government might soon require an interview with a computer-generated head who wants to know about that time you took ketamine. Psychologists at the National Center for Credibility Assessment (NCCA) are developing an interview system that uses a responsive on-screen avatar for the first stage of the national security clearance process. Initial screening for a variety ...
Is Anything on the Internet Real Anymore?
2014 07 22
Is there anybody…out there? I promise I’m a real person asking this question and typing this article…but beyond that, I can’t promise much else about anything you or I see on the Internet. This article on ZDNet, “GCHQ’s dark arts: Leaked documents reveal online manipulation, Facebook, YouTube snooping,” confirms — beyond a shadow of any possible doubt — that a barrage of ...
More News »