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Posted by
Olog-hai
on Tue Nov 15 14:25:57 2011, in response to Re: EUEUEUEUEU Germany and Britain clash over future of EUEUEUEUEUEU, posted by Olog-hai on Tue Nov 15 14:14:03 2011.
edf40wrjww2msgDetailOT:detailStr fiogf49gjkf0d As if two politbureaux (the Commission and Council Of Ministers) weren't enough.
spectator.co.uk
Europe’s hit squadIf you thought the EU couldn’t get any less democratic, meet the Frankfurt Group.Fraser Nelson
12 November 2011The Old Opera House in Frankfurt — once Germany’s most beautiful postwar ruin and now its most stunning recreation — has become a symbol of European rebirth. And it was here, last month, that Angela Merkel and Nicolas Sarkozy met the EU’s bureaucratic elite in what would, in another era, be described as a putsch. They had grown tired of eurozone summits, with leaders flying here and there but getting nowhere. A smaller group needed to be formed, who would wield power firmly but informally. That evening, as they gathered to hear Claudio Abbado conduct the Mozart Orchestra of Bologna, a new EU hit squad was born.
As Silvio Berlusconi has now found out, this so-called Frankfurt Group means business. Only a few months ago, it would have been unthinkable that the head of one European government would try to destabilise or depose another. Now, two EU leaders have fallen in a week. As Sarkozy knows from recent experience, to enforce regime change one need only give a helping hand to the rebels.
The group cannot be accused of being secretive. At the G20 summit in Cannes, its officials walked around with lapel badges saying “Groupe de Francfort (GdF)” and met four times. Britain was not included but the Foreign Office’s officials spoke as if they were in on the act. As one official put it: “We’re on our way to moving out Berlusconi.”
Such a statement may once have been seen as outrageous, but by last weekend it was undeniable that an operation to remove Berlusconi had begun. When Merkel and Sarkozy were asked if they had confidence in him, they rolled their eyes and gave each other wry smiles. The European Central Bank, which is also part of the Frankfurt Group, gave only minimal support to Italy — leaving the bond markets to do their worst to Berlusconi. The International Monetary Fund, whose new leader was also at the Opera house that night, made it clear that it would be sending its auditors to Rome on a regular basis to inspect the books. All this combined to send an unmistakable Old Europe message: we have ways of making you quit.
When that night in Frankfurt’s Alte Oper on 19 October was booked, no one was intending to form a new hit squad. The plan was to have just an ordinary taxpayer-funded extravaganza, a shindig to mark Jean-Claude Trichet’s retirement from the European Central Bank. Helmut Schmidt, the 92-year-old former chancellor of Germany who is now seen as a godfather of the European project, told the assembled dignitaries that “a crisis in the ability to act of the EU’s political bodies” was “a much bigger danger for the future of Europe than over-indebtedness”. It was time to get tough.
When Merkel spoke, she admitted frustration with European summits and their cumbersome democratic mechanics. “The EU’s ability to act and room for maneuvering has proven slow and complicated,” she complained. “If we want to seize the crisis as an opportunity, we must be prepared to act more quickly and even in unconventional ways.” Sarkozy arrived late, but just in time for the stitch-up of the decade.
Also in attendance was the new head of the ECB, Mario Draghi, an Italian with no love for Berlusconi. Then Christine Lagarde, the new (French) director of the International Monetary Fund, who is in charge of bailouts and can impose humiliating conditions (as she went on to do to Berlusconi). There was Jose Manuel Barroso, the increasingly thuggish European Commission president, and his economic sidekick Olli Rehn. The omnipresent Jean-Claude Juncker, Prime Minister of Luxembourg and head of the 17-nation eurozone group, was there with Herman Van Rompuy, who was elected EU president because he has no opinions on anything.
So the Frankfurt Group is, in effect, a merger between the EU hierarchy and German financial power: a kind of Brussels on the Rhine. It would not have been possible in the pre-crisis era when there were qualms about German might. Now the Germans are no longer apologetic. “The question of who could accept a German model has been settled by the market,” said a German government spokesman recently. “We are really only talking about the details and the extent of the measures, not about their nature.” This new, pugilistic tone is felt everywhere. Anonymous EU officials are now being quoted as saying things like: “Yes, wake up and smell the coffee. This is what you all signed up for.”
Poor old Mr Papandreou had provided target practice when he threatened to hold a referendum on the bailout. Only this summer, he had berated the EU for “indecisiveness and errors”. He found out just how decisive the slimmed-down Frankfurt Group could be when he was denied any bailout money, hastening his likely replacement with Lucas Papademos, a Frankfurt-trained former ECB official. Even Barroso had taken the remarkable step of destabilizing Papandreou by calling for a coalition, breaking both protocol and the pretense that the EU Commission respected the sovereignty of its member states.
Berlusconi was a harder target. He has dodged enemies for most of his 17 years in politics, from the opposition to the Italian vice squad. Furthermore, Italy is not really bust. Strip out the debt interest, and its national books would not just be in balance but have one of the greatest surpluses in the eurozone. Its prosperous north is one of the richest parts of the Continent, and would be far richer if there were a lira to devalue and help exporters. Its households are savers, with an astonishing €8.6 trillion squirrelled away. Government debt, at 100 percent of economic output, is high — but stable. Debt comes in many forms, and the average Italian owes half as much as the average Brit.
It is not at all clear who deemed Italy to be in crisis if the bond market charged above a supposedly fatal threshold of 7 percent on its government debt. But one answer might lie in a declaration which Merkel made last year: “We must re-establish the primacy of politics over the market.” Politicians have tried to do this, with little success, for generations. But it’s far easier now that the eurozone has created a giant apparatus whereby the strings of power can be pulled by a handful of people. The euro bailout fund, with its supposed €1 trillion of firepower, has just 15 staff. It might now be possible to wield immense power over a continent of nation states by assembling a few like-minded people in the back room of a Frankfurt opera house. And all in the name of European unity.
Democracy is viewed with caution — even distaste — by the Frankfurt Group, as are the markets. Juncker’s own views on pesky voters are famous since he phrased the problem of government thus: “We all know what to do, but we don’t know how to get re-elected once we have done it.”
We can now see a solution to the Juncker problem. You just enstool various leaders who were not properly elected in the first place and who won’t be seeking votes again. And have them do what you like.
But all this is, of course, fraught with danger. The idea of a prime minister chosen by foreign powerbrokers will be no more popular in Rome than it would be in Berlin. The idea of an ersatz politburo in Frankfurt will unnerve those EU members who lived under a real one in Moscow. Already, a third of Germans want out of the euro. That proportion will swell if Greece defaults within the euro, a trick that can only succeed with a massive compulsory foreign aid budget from Germany. Ireland’s finance minister is already speaking out against what he sees as a Franco-German coup, a democratically indefensible mutation of the European rulebook.
David Cameron will know that, as Merkel said at the opera, there is opportunity in every crisis. If France and Germany have no respect for the EU’s rules, then why should Britain? If the Prime Minister were to declare that certain EU directives were suspended in Britain for an emergency period while it returned to growth, then what would the EU do? Through its EU membership, Britain already sends more foreign aid to the continent — £9 billion a year — than it does to the third world. Is the lesson of the Frankfurt Opera House not that the EU’s main paymasters can do what they like? George Osborne’s welcome belligerence at Tuesday’s euro summit, where he flatly rejected a financial transactions tax, should be the start of a new negotiating stance.
The EU that the Lib Dems so revere is now vanishing before our eyes. In its place comes a far more unequal union, with bullying lenders and enfeebled debtors. This illiberal, deeply undemocratic phase in the EU’s development fits a historical trend. In their definitive history of financial crises, This Time Is Different — Eight Centuries of Financial Folly, Carmen Reinhart and Ken Rogoff show that almost all modern downturns go through a cycle: financial crisis, followed by sovereign debt crisis, followed by “financial repression”. The last phase is always unpopular, and usually means severe cuts or finding ways to raid people’s savings — enacted by an undemocratic hit squad. This is what Sarkozy and Merkel and their allies in the bailout industry have now become.
Except this time it is different. When an Argentinian government imposes “financial repression” on Argentinian people, it is unpopular enough, but tolerated. Should Germans impose such repression on thrifty Italian households, the political reaction may be incendiary.
Merkel and Sarkozy have both been fond of saying that they “will do everything necessary” to save the eurozone. Neither Berlusconi or Papandreou would now doubt them. But a situation where even British officials talk about helping regime change in Italy is not one that can — or should — last long. Berlusconi’s demise marks the EU now entering its endgame. When empires collapse, they can do so very suddenly. David Cameron had better be ready.
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