The Power-Hungry EU

“We have got a monetary federation. We need quasi-budget federation as well …

We need quasi-federation of the budget.”

- European Central Bank President Jean-Claude Trichet, The Guardian, 1-12-2010

“I deeply respect our Irish friends’ independence … but they cannot continue to say ‘come and help us’ while keeping a tax on company profits that is half [that of other countries]. We cannot speak about economic integration without the convergence of fiscal systems.”

- French President Nicolas Sarkozy, The Irish Times, 14-1-2011

“We have a shared currency but no real economic or political union. This must change. If we were to achieve this, therein lies the opportunity of the crisis …

And beyond the economic, after the shared currency, we will perhaps dare to take further steps, for example for a European army.”

German Chancellor Angela Merkel, Open Europe international press survey, 13 May 2010

“The two pillars of the Nation State are the sword and the currency, and we have changed that.”

- EU Commission President Romano Prodi, The Guardian, 1999

Next month, March 2011,  the EU Commission will propose supranational legislation for a uniform system of assessing business taxes in the EU – a Common Consolidated Tax Base.

This proposal for  what are called “destination taxes”  will undermine Ireland’s 12.5% company tax rate. It put on hold in 2008 and 2009 to help get the Lisbon Treaty referendums through in Ireland.

The idea is that firms selling goods in different EU countries would pay corporation tax to those countries’ governments based on the profits on their sales in those countries, and not to the government of the country where the goods were originally made, as happens now.

Countries would continue to decide their own tax rates as at present. This means Ireland could keep its 12.5% Corporation Profits Tax for profits made on sales in Ireland, but not on profits made on sales abroad.  The attraction to foreign investors of Ireland’s low corporation tax regime would be fundamentally subverted by this step, for most of their profits would be taxed in the countries where their goods or services were sold and not in Ireland where they are produced.

This step does not require unanimity amongst all 27 EU States. It can be done  by a sub-group of nine or more Eurozone States under the “enhanced cooperation” provisions of the Treaty of Nice, even though many or most of the other EU Members are against it.  The EU institutions can then be used to  advance further integration by this sub-group. This provision drove the proverbial coach and horses through the notion which some people believed in: namely, that the EU is some kind of “partnership of equals” in which no fundamental change can be made without all 27 Member States agreeing.

In March too the European Council will finalise arrangements for an amendment to the Lisbon/EU Treaties to set up a permanent “Financial Stabilisation Fund” from 2013, to which Ireland would be expected to contribute, without allowing the Irish people to vote on it in a referendum.

The German paper Handeslblatt reports that a “historic” change of EU policy is now under way in Berlin, with Germany no longer opposing Eurozone economic government. The new plan envisages the 17 Eurozone countries being pushed towards “harmonization” of their State Budget policies.  On taxation levels, wages of public officials and retirement ages, Eurozone countries would have to commit to binding common “bandwidths”, with penalties such as fines for any breaches.

The EU/IMF loan – better called a “stitch-up” rather than a “bail-out”! –  that was pushed on the Irish Government by the European Central Bank last November puts Ireland in a weak position to resist these further transfers of power to Brussels and Frankfurt. They underline once more the folly of our joining the Eurozone in 1999, when we could have stayed outside it like 11 of the 27 EU Member States.

It is now clear to all thinking people that joining the Eurozone  was the worst and most irresponsible decision of any Irish Government – ever.

The politicians of the three main parties who pushed that ruinous course upon us are the real perpetrators of “economic treason” in Ireland, of which our emigrating young people, our 400,000 unemployed and our debt-ridden households are the manifest current victims.

N.B. Note that from 2014, just three years time, the Lisbon Treaty/EU Constitution which was also pushed on us by Fianna Fail, Fine Gael and Labour will put EU-law making on a straight population basis, with Germany’s vote on the Council of Ministers doubling from its present 8% to 17%, France’s, Britain’s and Italy’s vote going from their present 8% each to 12% each, and Ireland’s falling from its present 2% to 0.8%.

The proposals mentioned above are but a foretaste of many more EU diktats to come, once Germany, France and the other big EU States obtain this big increase in their EU law-making power.

(11 February 2011)

Wake Up Time for Ireland! Public Enquiry Needed

A public enquiry is needed into how the Irish people have been turned into indentured debtors of the EU, the European Central Bank and the IMF.

We need to know this if we are ever to recover.  We need to know who was ultimately responsible for the situation we now find ourselves in, trapped inside the Eurozone when we did not need to join it.

EU Member States outside the Eurozone like Britain, Denmark, Sweden, Poland and the Czech Republic are not caught up in the current torments of the Euro. They can weather the economic recession better because they have kept their national currencies and with it control of their rate of interest or exchange rate.

Most Irish economists, the National Platform and several non-governmental groups warned at the time of our 1992 Maastrict Treaty referendum that abolishing the Irish pound would be the biggest mistake the Irish State ever made (John FitzGerald’s ESRI was an influential exception). The second biggest mistake – largely a consequence of the first –  was the 2008 blanket guarantee of all the debts of our private banks

The period 1993 to 2000 was the only period in the history of the Irish State when it followed an independent exchange rate policy and effectively floated the Irish currency. That gave us a highly competitive exchange rate and with it  the “Celtic Tiger” growth rates of over 7% a year.

It is impossible to have a lasting monetary union that is not also a fiscal union, part of one State, with common taxes and a common budget.  However Ireland’s Euro-fanatics pushed us into the Eurozone against all the economic arguments.  They were impelled by their zeal to help build an EU superstate led by Germany and France, without any national democratic control.

Such a construct would inevitably lack the mutual identification and solidarity between its members which would sustain transfers from the rich countries to the poorer ones sufficient to compensate the latter for loss of their capacity to run independent budgetary policies or restore their economic competitiveness through currency devaluation.

It was profoundly irresponsible to abolish the Irish pound in order to join a monetary union with States with which we did only one-third of our foreign trade, while simultaneously halving interest rates at the height of an economic boom.

That made things “boomier”, as Taoiseach Bertie Ahern put it. It set us on the borrowing binge that followed, and the catastrophic course Ireland’s Government has since taken with its Banks.

It is the grand panjandrums of Irish Euro-fanaticism: Peter Sutherland of Goldman Sachs, Garret FitzGerald, Alan Dukes, Pat Cox, Brigid Laffan, Brendan Halligan, Ruairi Quinn and David Begg, who ultimately impelled us to surrender our political independence and democracy in the Eurozone.

As influential, although their names are unknown to the public, are the “career federalists” of Ireland’s Foreign Affairs Department in Iveagh House, who form the policy and write the speeches of successive Foreign Ministers. They are keeping their heads down these days and are happy to let the Department of Finance take the rap for our current economic debacle.

However it is they more than any other element in Ireland’s civil service who have steered our ship of state on to the rocks.  Cheering them on throughout have been uncritical elements in our media, above all in the editorial office of the Irish Times.

There is deep irony in the fact that their zeal for ever more EU integration has turned Ireland into a bomb inside the “infernal machine” of the Euro-currency, hastening its inevitable demise, and in the process possibly plunging much of the world into the second phase of a W-shaped recession.

Henceforth we should be more critical of what these people say when they enthuse for ever “more Europe”.

Anthony Coughlan – (01) 830 5792

Emmett O’Connell – (051) 565 844


(First published on Indymedia.ie)

⁂ European Central Bank capitulating in face of crisis

Two similar articles from newspapers on the political Right and Left forwarded for your information by Anthony Coughlan:

TELEGRAPH
Tuesday 24.2.09

ECB faces mutiny from national bank governors as recession deepens
– The European Central Bank is capitulating.

By Ambrose Evans-Pritchard

For months the ECB held sternly to the high ground of orthodoxy as the US, Japanese, British, Canadian, Swiss and Swedish central banks slashed rates towards zero and embraced quantitative easing, but a confluence of fast-moving events is now forcing it to move.

The credit default swaps that measure bankruptcy risk on the debts of Ireland, Austria and a clutch of Latin Bloc states have vaulted to dangerous levels. In the case of Ireland, the slump is spilling on to the streets. Some 120,000 marched through Dublin over the weekend to protest austerity measures.

The slow fuse on Eastern Europe’s banking crisis has detonated, leaving Austrian, Belgian, Italian and other West European banks with $1.5 trillion (£1 trillion) in exposure.

It is happening just as industrial output collapses in the eurozone’s core states. Germany’s economy contracted at 8.4pc annualised in the fourth quarter. ECB president Jean-Claude Trichet said on Monday that “a process of negative feedback” has set in where the banks and the real economy are pulling each other down in a self-reinforcing spiral. Eurozone credit is contracting. Banks are rationing credit as deleveraging gathers pace.

Rob Carnell, global strategist at ING, said the ECB has been painfully slow to acknowledge the global deflation tsunami sweeping across Europe.

“It seems divorced from reality. It is clearly nonsense to talk about inflation now: it has been negative on average for six months. The eurozone purchasing managers’ index has fallen twice as fast as in the US, so the ECB should be acting even faster than the Fed,” he said.

Mr Trichet said the ECB has increased its balance sheet by ¤600bn (£525bn) since the Lehman collapse in September. The bank is providing “unlimited liquidity” in exchange for a wide range of collateral, including mortgage bonds issued for the sole purpose of extracting ECB funds.

But the ECB’s leading voices have adamantly refused to contemplate going to the next stage: buying bonds and other assets with “printed money”. They see that as the Primrose path to hell. This week the tone has abruptly changed, suggesting that a majority of the 16 national bank governors on the ECB council are having second thoughts.

The apparent ring-leader is Cypriot member Anastasios Orphanides, a former Fed official and a world authority on deflation traps. He said on Monday that the ECB may have to go beyond “zero-bound” rates and revealed that an “internal discussion” was under way.

Italy’s Mario Draghi is in the “activist-easing” camp. “The experience in the US in the 1930s and Japan in the 1990s suggests that it is necessary to fight, in the early phases of the crisis, the tendency for real interest rates to rise,” he said.

Finland’s Erkki Liikanen is of the same opinion. “We are facing the worst financial crisis in our time. It is important not to exclude, ex ante, any measures.”

Julian Callow from Barclays Capital said 10 ECB governors are now doves.

This amounts to a mutiny against the Bundesbank-dominated executive in Frankurt. It is no great surprise. They have to answer to their democracies. The plot is thickening.


The Euro, an Illusory Shield against the Crisis ?

L’Humanite, Paris , Thursday 19 February 2009,

by Isabelle Metral (Translated)

Most political leaders of euro-zone countries make it sound as though the single currency has shown its capacity to play a protective role as the financial crisis sweeps across the Old Continent. So much so that today, even the staunchest of the Euro-sceptics (the British, Icelanders, Swedes, or Danes) are supposed to have suddenly realized the advantages of joining the euro…

The claim was made by Joaquin Almunia, European commissioner for economic and monetary affairs, on Tuesday last.

The EU leader’s statement actually betrays a growing concern in the face of signals showing increasing divergences between the different regions or countries of the euro zone. These divergences might eventually lead some countries to consider opting out of the single currency.

The crisis shows up the very serious defects in the original conception of the euro.

Entirely obsessed as they were with the stability criteria put forward by financial markets, those that championed its creation in 1999 were aiming first at a “strong euro” in the hope of luring as much capital as possible to the European market.

Hence the curb on public spending (with the Maastricht treaty), the pressure on wages through the deregulation of labour markets that diminished labour’s negotiating power. “The euro has brought war over exchange rates to an end, but it has exacerbated competition over prices,” rightly claimed Jean-Paul Fitoussi, president of the Observatoire français des conjonctures économiques

Today, the deepening crisis and the effect of the competition between states that sink deeper and deeper into debt have the additional effect – a refinement on the earlier stages – of bringing the pressure of competition to bear on the States’ capacity to meet their debts (in treasury bonds).

Indeed, if euro zone countries are united by the single currency and the European Central Bank, the rates at which they get loans, and the conditions attached to them, vary from one country to the next. Before the crisis, the spreads remained quite limited. But with the plunge into recession, and the gigantic assistance granted by the various states through bank bail-outs or economic stimulus plans, this is no longer true.

Spain and Ireland, for instance, which until a short time ago, were still praised as models of economic success by pro-marketers in Brussels and elsewhere, are now going through a period of fierce turbulence. As a result, they are at a disadvantage on financial markets and find it difficult to raise money.

Sovereign loans in the euro- one consequently tend to be widely spread. The risk premiums demanded from the frailest countries are soaring, unlike those demanded of Germany, which is still considered an exemplary borrower. The benchmark rate for German (Bund) loans over 10 years last Monday stood at 2.98%, much lower than that of France (3.50%), or of Spain (4.13%) or, above all, of Greece (5.47%).

The over-rated credit rating agencies were not slow in down-grading Madrid and Athens. Downgrading a state amounts to casting suspicion on its ability to pay back its debts as settled, in the best conditions.

In such circumstances, some countries that are strangled by the service of an increasingly heavy debt might be tempted simply to leave the euro ship. To ease the stranglehold, they might try devaluing their restored national currency as a last resource, in order to boost their exports.

This prospect has made the fortune of the managers of the Intrade site where, for the last few months, it has been possible to bet on one or several of the sixteen euro-zone countries opting out of the euro. The contract expires at the end of 2010.

[24/08/2005] Euro bank: secretive & sloppy

"SECRETIVE AND SLOPPY" EURO BANK ATTACKED

By Ambrose Evans-Pritchard, Daily Telegraph,23 August 2005

The European Central Bank has been accused of secrecy, ineptitude, and
sloppy use of inflation targeting by one of Britain's leading monetary
experts.

Prof Charles Goodhart, a former member of the Bank of England's monetary
policy committee, said the ECB's claim to manage inflation over the "medium
term" was an empty mantra that let it dodge responsibility for failures.

In an open letter to ECB president Jean-Claude Trichet, published in the
journal, Central Banking, he slammed the "conscious refusal" to be more
precise.

"Is the medium term two years, three years, five years, n years, or what? By
refusing to define the term, you can never be accused of missing your
target. [It] is just an exercise in obfuscation," he said.

He counselled Mr Trichet to have a good night's sleep before handling the
press following key decisions - given past gaffes.

"A meeting of the governing council is likely to be tense, often lengthy,
and almost always extremely fatiguing. You will face the world's media at a
time when you are worn out and stressed. I think it fair to claim that your
predecessor suffered many of his most unhappy occasions at exactly such
press conferences," he said.

Mr Goodhart, emeritus professor at the London School of Economics, said the
ECB should air its internal policy disputes by publishing the minutes rather
than relying on secrecy to give a false sense of unity.

"It is hardly desirable, nor does it lead ultimately to credibility, to
suggest that consensus existed when, in practice, it did not," he said.

An ECB spokesman said secrecy was needed to shield the governors from
national pressure. "Some could be in a hard position in their home countries
if it was known how they argued at meetings," he said. Mr Trichet is
expected to address the criticisms at a press conference on September 1.

The letter was part of a The Euro at Risk series published in the latest
edition of Central Banking.

An article by Henrik Enderlein, a professor at Berlin's Free University,
said the euro's one-size-fits-all monetary regime had blighted Germany from
the outset.

"Germany is the biggest economy in EMU and, as is now becoming obvious, has
suffered most from the current EMU set-up," he said.

Prof Enderlein said interest rates had been 11.2pc too high for German needs
on average since 1999, reaching a peak distortion of 31.2 in early 2001.

He doubted whether structural reform in Germany could be successful until
monetary policy comes to the rescue. "Ultimately, there could be a risk that
EMU splits into two equally-sized groups of countries, one with high growth
and high inflation, the other with low growth and low inflation," he said.

While monetary policy was likely to be wrong for all states, those like
Germany with very low inflation (or high real interest rates) could be
trapped in a "bust cycle".

He said the only solution is for the ECB to drop its one-size-fits all
policy and instead set rates for a homogenous core built around Germany.
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