On Friday, June 29th, German Chancellor Angela Merkel acquiesced to changes to a permanent Eurozone bailout fund—"before the ink was dry," as critics complained. Besides easing the conditions under which bailouts would be given, the concessions included an agreement that funds intended for indebted governments could be funneled directly to stressed banks.
According to Gavin Hewitt, Europe editor for BBC News, the concessions mean that:
[T]he eurozone’s bailout fund (backed by taxpayers’ money) will be taking a stake in failed banks.
Risk has been increased. German taxpayers have increased their liabilities. In future a bank crash will no longer fall on the shoulders of national treasuries but on the European Stability Mechanism (ESM), a fund to which Germany contributes the most.
In the short term, these measures will ease pressure in the markets. However there is currently only 500bn euros assigned to the ESM. That may get swallowed up quickly and the markets may demand more. It is still unclear just how deep the holes in the eurozone’s banks are.
The ESM is now a permanent bailout fund for private banks, a sort of permanent "welfare for the rich." There is no ceiling set on the obligations to be underwritten by the taxpayers, no room to negotiate, and no recourse in court. Its daunting provisions were summarized in a December 2011 youtube video originally posted in German, titled "The shocking truth of the pending EU collapse!":
The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply. Governments cannot take action against it. Europe’s national budgets [are] in the hands of one single unelected intergovernmental organization.
[Article 8] "The authorised capital stock shall be EUR 700 000 [700 billion Euros]."
[Article 9]: "ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them . . . such demand to be paid within seven days of receipt."
[Article 10]: "The Board of Governors . . . may decide to change the authorised capital and amend Article 8 . . . accordingly."
[Article 32, paragraph 3]: "The ESM, its property, funding, and assets . . . shall enjoy immunity from every form of judicial process . . . ."
[Article 32, paragraph 4]: "The property, funding and assets of the ESM shall . . . be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action."
[Article 30]: " . . . Governors, alternate Governors, Directors, alternate Directors, as well as the Managing Director and other staff members shall be immune from legal proceedings with respect to acts performed by them in their official capacity and shall enjoy inviolability in respect of their official papers and documents."
And that was before Merkel’s recent concessions, which allow this open-ended indebtedness to be funneled directly to the banks.
Why Did Merkel Cave?
"Reactions back home were devastating," reported der Spiegel. "[T]he impression was that [Merkel] had been out-maneuvered by Italian Prime Minister Mario Monti and Spanish Prime Minster Mariano Rajoy."
As of June 21, 13 of 17 countries still had not ratified the ESM; and the most important ratification needed was Germany’s, the largest economy in the Eurozone. Earlier, Angela Merkel had opposed using the bailout fund to pump money directly into struggling European banks. But at the EU summit that began on Thursday and dragged on well into the night, she finally relented. Late Friday evening, German lawmakers voted 493-106 in favor of the €700 billion ($890 billion) permanent bailout fund.
What caused Merkel to back down? According to an article in The Economist, the late night was "filled with bluff and bluster," in which
Mariano Rajoy, the Spanish prime minister . . . , along with Italy’s Mario Monti, had threatened to block any agreement at the summit unless their demands were met. Mr Rajoy obtained satisfaction, but the same is not quite true of Mr Monti, who had been the most adamant of the two.
Mr Monti declared himself satisfied, but caused considerable irritation to partners. Among the deals he had blocked was the "growth pact", a mixture of stimulus measures.
What Monti achieved by this maneuver was not clear:
"Who needs the growth pact? Not Germany," said one bemused participant. The euro zone’s fiscal hawks say the bond-buying mechanism will be little different from the existing system. "Mario Monti raised a gun to his head and threatened to shoot himself. In the end he wounded himself in the shoulder," said one scornful diplomat.
Maybe. Or maybe the bond-buying mechanism was not what he was really after.
The Unsafe Child: Less Outdoor Play is Causing More Harm than Good 2015-09-02 0:39
The third grade classroom that was visiting our nature center for the day consisted of mostly boys–rowdy, loud and rambunctious boys. As we started out into the woods, the children spoke loudly to each other in anticipation of what was to come. After playing a quick game and explaining the ground rules, it was time for free play. As soon ...
Rights group demand police need warrant to access data 2015-09-01 23:48
American citizens should be able to rest safe in the knowledge that no one has the right to pry into their digital records, where they have been and how long they stayed there.
The Supreme Court has just received a brief from the Electronic Frontier Federation (EFF) stating that this should certainly be the case. However, in the case of Davis v. ...
Murder Rates Rising Sharply in Many U.S. Cities 2015-09-01 23:33
Cities across the nation are seeing a startling rise in murders after years of declines, and few places have witnessed a shift as precipitous as this city [Milwaukee]. With the summer not yet over, 104 people have been killed this yearâ€“after 86 homicides in all of 2014.
More than 30 other cities have also reported increases in violence from a year ...
Bulgaria - Islamic State Terrorists Caught Crossing Into Europe Posing As Refugees 2015-09-01 23:47
Bulgarian authorities near the Gyueshevo border checkpoint detained the five men, aged between 20 and 24, late on Wednesday, Bulgarian broadcaster NOVA TV reported.
The men were stopped by a border guard, who they attempted to bribe with a “wad of dollars.” However, they were searched and Islamic State propaganda, specific Jihadists prayers and decapitation videos were found on their phones.
How This NY Mom Made the Case for Her Sonâ€™s Religious Vaccine Exemption 2015-09-01 22:27
An unidentified, Russian immigrant mother who practices the Russian Orthodox faith, has secured a religious vaccine exemption for her autistic son. New York has a bill on the table to eliminate religious exemption and to root out those who weren’t refusing vaccines on strictly devout, religious grounds. Yet, this woman’s plight goes back before talk of eliminating the exemption – two ...