Thursday, September 01, 2011

Hysteria is sweeping Germany

Christian Wulff, Germany's president, stunned the country last week by accusing the European Central Bank of going "far beyond its mandate" with mass purchases of Spanish and Italian debt, and warning that the Europe's headlong rush towards fiscal union strikes at the "very core" of democracy. "Decisions have to be made in parliament in a liberal democracy. That is where legitimacy lies," he said.

The Bundesbank condemned the ECB's bond purchases and warning the EU is drifting towards debt union without "democratic legitimacy" or treaty backing.

Joahannes Singhammer, leader of the CSU's Bundestag group, accused the ECB of acting "dangerously" by jumping the gun before parliaments had voted. The ECB is implicitly acting on behalf of the rescue fund until it is ratified.

"An unlimited transfer union and pooling of debts for any length of time would imply a shared financial government and decisively change the character of a European confederation of states," said a CSU draft, obtained by Der Spiegel.

IMO: A pity if this marks the end of the Eurozone. This could hurt the UK as it could wipe out 1/3 of UK banks assets. This will be OK if there is not a big run on the bank and Cameron does not panic and order banks to raise huge amounts of capital in a few weeks. Cameron has done nothing much but panic since he has been in office. We should at least get a Tobin tax. I am also a little worried about the Chancellor's proposed deal with Switzerland on numbered accounts as I hardly think it will help, probably the reverse.  The Germans may wind up better in the long run if they do not panic, but they need a Tobin tax and tighter external control. Soon it will be like when if the English went to France, they had to try for a toast 'a bas Wilson' so they could cadge free beers, as they were only allowed a £5 travel allowance! Maybe it will be 'a bas Merkel' now. either way. It looks like a good idea to continue to try for the USE anyway by now, but more care and preparation should have been done long ago.

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