Apr 042012
 April 4, 2012  Posted by at 8:59 pm Finance

BUT, the Euro is still dying. It has been a consistent theme here that any legitimate expression of democracy is fundamentally incompatible with economic growth and stability within the logic our current system. Whether we are talking about national referendums, political elections and the theatrical displays which accompany them or simply some form of legislative oversight on executive policy, they have all become much too costly for those attempting to preserve the status quo [see Democracy Isn’t Dead Yet (It’s Just the Euro), Who Killed the Money Printer, Political Theater Will Kill the Status Quo].

We get yet another example of this dynamic in Germany this week, where the German parliament has secured its legal rights to monitor and “co-determine” future bailout decisions by the EFSF and ESM. Indeed, it would only be fair for the representatives of the German people to have a say on how exactly their money (more than anyone elses’) is being used to prop up the Eurozone. But what’s “fair” has nothing to do with how to preserve the current system, and that’s why the pundits are so concerned about these democratic mechanisms in action. Der Spiegel reports:

Bundestag’s Rights Could Threaten Euro Rescue


This time the problem won’t be the German government but rather the German parliament, the Bundestag. Since the Bundestag insists on having a say on every minute detail involving the rescue fund, it’s making life more difficult for the would-be euro rescuers. A number of instruments that the euro-zone governments only agreed to after fierce wrangling will thus probably remain permanently toothless, and possibly never be implemented.


Until now, the Bundestag has enjoyed co-determination rights that exceed virtually every other national parliament in Europe. Representatives of all political parties decided last week that these rights should now be extended. In the future, the Bundestag will have to give its approval to nearly all measures taken within the scope of the temporary euro-zone rescue fund, the European Financial Stability Facility (EFSF).


That is, of course, how things should work in a properly functioning democracy. But the situation also requires viable procedures and effective decision-making bodies — and this is precisely where the problem lies. Veteran parliamentarians have warned that the new rules will be extremely difficult to implement, and the ECB too is alarmed. Central bank representatives have informed the German government that the reform threatens the effectiveness of the bailout packages and shifts the onus right back to the body that was actually supposed to be relieved of this burden: the ECB’s governing council.



But the idea of entrusting a significant proportion of the bailout decisions to a confidential group of experts contravened the rulings of Germany’s Constitutional Court. In a number of earlier decisions, the court had made reference to the special “comprehensive budgetary responsibility of the Bundestag.” This led to an inevitable development: In February, the court in Karlsruhe flatly rejected the parliamentarians’ proposal. After in-depth hearings with a wide range of experts, the judges said that, aside from secondary market purchases, they saw no reason why decision-making powers should be limited to a secret small committee. The court expressly indicated that the parliamentary budgetary committee was far better suited as a representative of the Bundestag.



To make matters worse, the ESM could be completely paralyzed if the German democratic approach becomes a precedent for other countries in the euro zone. Until now, it has mainly only been the Finnish parliament that has enjoyed co-determination rights similar to those of the Bundestag’s.


But additional countries — such as France — could pattern themselves after the Germans. It seems to be only a matter of time before most national parliaments have a say in every step of the euro rescue.


“Of course it won’t be easy if even more parliaments vote (on these issues),” says CDU Bundestag member Antje Tillmann. “But as German parliamentarians we can’t assert rights that we don’t grant to others.”



Indeed, a far more basic lesson can be learned from the difficulties faced by Europe’s rescue funds: Over the long term, a European problem cannot be resolved with national parliaments. “We need a rescue fund that is financed with European resources and democratically legitimized at this level,” says Green Party financial expert Gerhard Schick.


Someday in the distant future, budgetary experts at the European Parliament, or a new body representing the euro-zone countries, will most likely decide on these issues.

Actually, the most basic lesson to be learned here is that the Eurozone cannot survive without becoming a completely totalitarian state, with no democratic representation whatsoever. And that is something which, naturally, will not sit well with any European populations. There is no doubt that the Eurocrats will nevertheless continue to push towards this end-state for Europe, but the clock appears to be ticking at a rate that is much faster than they are comfortable with.

As long as strains of democracy remain alive and well within Eurozone nations, the Euro will be buried that much deeper in its grave. And for every inch deeper it goes, it will take much more than an inch to get back to where it was before. Remember, it takes a lot of effort/coordination to keep the Euro alive, and very little to let it die. In the “distant future”, there most likely won’t be anyone deciding any issues for an entire continent of people.

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    BUT, the Euro is still dying. It has been a consistent theme here that any legitimate expression of democracy is fundamentally incompatible with econo
    [See the full post at: Democracy Still Isn’t Dead in Europe]

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