A group of eurozone Nannycrats has agreed to meet later this month to devise a master plan for a eurozone fiscal and banking union.
Here is a synopsis from my post on Sunday Details of the Secret “Nannyplan” Emerge; Proposed Nannygroup Uniforms
- Plans will create a “genuine fiscal union” in which individual member states would no longer be able to independently take on new borrowing.
- Governments would only be able to decide how to spend money that is covered through their revenues.
- Any country that needs more money than it takes in would have to report that need to the group of euro finance ministers.
- Finance ministers will decide which financial levels are justified and would then issue joint euro bonds to finance these new borrowing needs.
- “The exclusive group of ministers would be led by a full-time chair, who could ultimately rise to the position of European finance minister”
- This “powerful group of finance ministers” would be controlled by a new European body in which representatives of national parliaments would have seats.
- The proposal is to create group of nannies (similar in theory to the Fed except the decisions are primarily fiscal).
- The group of nannies will be headed by a master-nanny (think someone like Bernanke or in this case Jean-Claude Trichet). The nanny-master will originally be a full-time chair. However, that person could ultimately rise to the position of “European Finance Minister (EFM)”, but also known as “Grand Poobah”.
- The nannies will be controlled by elected politicians who will no doubt appoint a master-nanny who will do what the majority wants.
List of Nannycrats Working on the Master Nannyplan
- European Union Commission President Jose Manuel Barroso
- European Council President Herman Van Rompuy
- Euro group head Jean-Claude Juncker
- European Central Bank President Mario Draghi
Notably missing is anyone representing Germany although the plans include eurobonds. Even if one ignores the eurobond issue, the nannyplan cannot possibly fly.
Barroso Pushes Nannyplan in Financial Times Interview
Yesterday, EU Commission President Barroso pitched his Banking Union idea in a Financial Times Interview making a preposterous claim that his plan “could be achieved without treaty changes”.
All 27 EU countries should submit their big banks to a single cross-border supervisor as part of a banking union to be enacted as soon as next year, the president of the European Commission has urged.
The plan, which would also include an EU-wide deposit guarantee scheme and a rescue fund paid for by levies on financial institutions, could be achieved by next year and without changes in the bloc’s existing treaties, Mr Barroso said.
He also wants to accelerate action on existing proposals for the deposit guarantee scheme and bank resolution, which are primarily handled at a national level.
George Osborne, the UK chancellor, insists Britain will not be part of any banking union that makes its taxpayers liable for recapitalising eurozone banks or puts major British banks under the watch of an EU supervisor.
Bundesbank Warns on Banking Union
UK chancellor UK George Osborne immediately shot down the idea for the UK. One day later the Bundesbank, Germany’s Central Bank, did the same.
Please consider Bundesbank warns on EU banking union
Germany’s Bundesbank has warned of possible risks from banking union in the EU, saying it would be tantamount to a back-door pooling of sovereign debt, unless accompanied by fiscal union that allowed control over national budgets.
Sabine Lautenschläger, vice-president of the Bundesbank, said banking union could only work in tandem with fiscal union – meaning some common cross-border binding rules on how countries could set budgets.
The “decisive question” of banking union was the “interplay between liability and control” because a crisis in one country’s banks could require financial help from taxpayers in other countries, Ms Lautenschläger said. “Whoever accepts liability also has to have a right to control, especially when it is potentially a question of very large sums as in the case of a banking crisis.”
“The extremely important discipline of the market would be partially lost. Even more seriously, joint liability for banks would, at least, partially extend to the sovereign bonds of these countries,” she said. “The result would be joint sovereign liability through the back door – without the possibilities for intervention and control, and therefore the protection, of a fiscal union.”
Ms Lautenschläger also cast doubt on how quickly any banking union could be implemented, saying “comprehensive EU treaty changes” would be needed.
“Dead Before Arrival”
Note that this is not a case of “dead-on-arrival”. Rather, this is a case of the Bundesbank declaring the proposal is “dead-before-arrival” given the nannyclowns have not yet gotten together to finalize their plans.
Barroso claims the EU needs to learn the lessons of the sovereign debt crisis. On that I agree. The difference is Barroso failed to learn the proper lessons.
Eight Lessons the EU Needs to Learn
- The euro helped ruin Greece, Spain, Portugal, and Ireland.
- 17 nations will never agree to give up sovereignty to a group of eurocrats in Brussels.
- Even France does not want to give up sovereignty. Instead, France wants more socialism, free money, and eurobonds.
- Socialism and capitalism do not mix easily or well. France, Spain, and Greece are against badly needed work and pension reforms. France is taking a giant step back on work-related issues right now.
- France is dead-set-against the end of crop subsidies, an untenable position in a “United States of Europe” type proposal.
- Fiscal unions will not pass and would not solve all the structural problems even if they did pass. There are simply too many cultural and philosophic differences that cannot possibly be fixed in any reasonable timeframe, if ever.
- The Euro is a failed concept and cannot possibly work.
- The proper thing to do is dismantle the eurozone and get rid of all the nannycrats before the market further takes matters into its own hands
The Key points are 6, 7, and 8 with the market providing a big warning on number 8 right now.
Mike “Mish” Shedlock
http://www.globaleconomicanalysis.blogspot.comlink to original article