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  • Creaking Door
    Rank 5 Registered User
    • Sep 2006
    • 9873

    EU 26-State ‘Accord’ (and UK Veto)

    I’m going to start another thread to hopefully discuss the ‘accord’ agreed by the twenty-six EU states and the UK veto.

    Please, please, please do not turn this into another ‘UK should leave the EU’ thread; use the other thread!

    The main points of the accord seem to be:

    - a structural deficit for Eurozone countries no greater that 0.5% of GDP

    - automatic sanctions for any Eurozone country with a deficit exceeding 3% of GDP

    - a requirement to submit national budgets to the EU (which will have the power to request that they be revised)


    So the first and most important question is; will this accord solve the current Euro / EU crisis?

    My thoughts are no it will not; certainly in the short term. I do not see that an accord to limit EU deficits to 3% (because surely most nations will exceed the ‘suggested’ 0.5% deficit limit) in future will do anything to solve deficits now.

    Before this accord the EU had a limit on deficits of.....3%! However that didn’t stop some EU states exceeding this so what will stop them now? Sanctions? Fines? Take Greece as an example; the EU is worried that it may default, that cannot be allowed to happen because of the massive implications for all Euro states, so how would sanctions prevent this because sanctions (or the only sanctions that would matter), withholding a bailout, would automatically cause a default!

    The EU had deficit limits before but they were broken by many countries intentionally and broken unintentionally when the interest-rates went up because the EU does not control international interest-rates!

    I am sure I do not need to explain what a loss of sovereignty ‘submitting national budgets to the EU’ is; our national budget would effectively be controlled by the EU.

    As for the proposed EU-wide Financial Transaction Tax (FTT) this would tax every transaction in the EU but most of those transactions (75% plus) happen in the UK. And where would the tax revenue go; I presume into the EU (not UK) coffers!

    This was apparently the sticking-point in the negotiations. I am not surprised why the UK was the only country that did not want this agreement; the UK would be the only country to suffer from it. And our economy is too heavily based on banking.

    Also if the FTT was agreed it would force these banks out of Europe to the US or Asia; the reason that there are so many European (non UK) banks in London is to escape the stronger regulation in the rest of the EU.

    And how will any of this help the EU / Euro; I’d be particularly interested to hear from our Eurozone members.
    WA$.
  • MSR777
    No longer active member.
    • Jan 2000
    • 3010

    #2
    CD, you really seem to have a handle on this, so I'll ask you. Why were these, or similar rules and regs not imposed at the birth of the Euro. IMO it looks as though this is another attempt by EU politicians, to bolt the stable door, well after the horse has become but a distant memory. Who had the most input into the original formulation for the single currency, was it qualified economists and financial 'wizz kids' or myopic, self serving politicians? Personally, I suspect it was the latter, but I'm more than happy to be corrected. Sorry its answering your well thought out question with another.
    "Behold! The Wings of Horus"

    Comment

    • Creaking Door
      Rank 5 Registered User
      • Sep 2006
      • 9873

      #3
      Well, I’m trying to get a handle on it!

      With regard to regulation about deficits; I believe that there is already a 3% of GDP deficit limit imposed on all EU countries but that this limit was not enforced (or proved impossible to enforce). Your analogy about the horse and the stable-door is very fitting.

      Moody, one US credit-rating agency, seems singularly unimpressed by the summit.....and no mention of the veto.

      http://www.bbc.co.uk/news/business-16137947

      One thing I am struggling with is the fact that France and Germany stuck to the one thing in the negotiations that they knew that the UK couldn’t sign-up to, the FTT, but to my mind this tax isn’t the problem within the Eurozone at the moment...

      ...the problem is surely that certain EU states have borrowed beyond their means. Trying to tax the banks isn’t going to solve that but having an agreement between all 27 states may have helped; it almost seems to me that the Eurozone is looking for a scapegoat, the UK as usual, or the banks...

      ...remember interest-rates can go up as well as down!

      And blaming your bank when you get in debt doesn’t suddenly make you a good credit-risk!
      Last edited by Creaking Door; 12th December 2011, 14:08.
      WA$.

      Comment

      • paulc
        Rank 5 Registered User
        • Feb 2003
        • 1072

        #4
        And the first country to raise serious objections to the results of the EU summit are.......Germany!!

        Bundesbank rejects Europe's IMF funding ruse

        Germany's Bundesbank has raised serious objections to EU summit plans to shore up Italy and Spain by channelling up to €200bn (£170bn) from central bank reserves through the International Monetary Fund (IMF).

        Europe's leaders agreed in Brussels to mobilise the reserves of the 17 national banks of the eurozone system to finance the IMF, hoping that this will then lever fresh money from China, Japan, and other global powers.

        Andreas Dombret, a Bundesbank board member, said Germany's central bank cannot take part in any form of covert funding for EMU states in trouble through the bank-door of the IMF, saying further money can be used only to support the normal operations of the Fund. "The money cannot migrate into some sort of special pot that is used exclusively for Europe. That would be a clear breach of the prohibition of monetary financing of states. The German Bundesbank has explicitly ruled this out," he told the Handelsblatt newspaper. Mr Dombret said the Bundesbank's share of any such IMF package would be €45bn and is "inherently risky". It would require an indemnity of some kind from the German parliament. This in turn would breach the €211bn ceiling already set by the Bundestag on EU bail-outs.

        Mario Draghi, the head of the European Central Bank (ECB), raised similar concerns last week, warning that the ECB is not willing to use the IMF as a conduit for covert sovereign rescues in Europe. One cannot channel money in a way to circumvent the treaty provisions. If the IMF were to use this money to buy exclusively European bonds, we think is not compatible with the treaty," Mr Draghi said.

        Adding to complications in Germany, Bundestag president Norbert Lammert has demanded that the summit package should undergo scrutiny by Germany's constitutional court, warning that new powers for European commissars to intrude in national budgets might conflict with German fiscal sovereignty.

        The summit item on the role of the IMF appears to have been slipped into the conclusions without full preparation and is meeting blistering criticism from IMF experts, as well as hostility in Washington.

        US President Barack Obama said: "Europe is wealthy enough that there is no reason why they can't solve this problem. It's not as if we are talking about some impoverished country that doesn't have any resources." The US said it will not contribute to the EU package. A group of Republicans on Capitol Hill want to go further and slash America's existing funding for the IMF.

        Mario Bleijer, former head of Argentina's central bank and an IMF expert, said Europe should not try to shift liabilities onto the rest of the world.

        "The proposal to use the IMF as a conduit for ECB resources – thereby circumventing restrictions imposed by EU treaties – while providing the ECB with preferred-creditor status, would exacerbate the Fund's exposure to risky borrowers. This arrangement could be seen as an unwarranted abuse of Fund seniority that unfairly frees the ECB from the need to impose its own conditionality on one of its members," Mr Bleijer said
        http:www.jetphotos.net/showphotos.php?userid=481

        Comment

        • duxfordhawk
          Rank 5 Registered User
          • Sep 2003
          • 2334

          #5
          For me so far I can not see what this accord has done to move things forward and as far as I see it things are just as bad as before this meeting as there is still no easy way to resolve the issues of Greece and Italy etc who literally we more than can ever imagine paying back no talking will solve that, and as I see it the rest of Europe is growing more unwilling or unable to pay these debts too.

          Ultimately in simple terms I see it as too many poor countries joined a rich mans/womans club and they were let in even though they did not have the membership fee.
          Now the EU is top heavy with more countries with debts than are stable and the only way I see the Euro and ultimately the EU surviving is if they drop the countries that are in trouble from the Euro and reduce amounts of money going to poorer countries. But doing this will still leave the poor countries in freefall and leave potentially dangerous unstable neighbours for the remaining Euro countries.

          As to the UK parts in the whole thing its hard to know if the veto was the right thing or not, for sure its not a decision I would of wanted to make. The worry is initially cracks are showing in the government now which could be bad and in long term will Europe ignore the Uk's needs totally.

          Whatever happens we are at the start of things not the end and I fear worse to come yet sadly
          Martin
          To see my photos go to,

          http://www.flickr.com/photos/dxhawk/

          Comment

          • bazv
            olde rigger
            • Feb 2005
            • 5886

            #6
            I fear that there is no solution to the EU's fiscal problems...as posted by Dhawk...the EU expanded far too much,and the poorer countries budgets should have been ruled by a rod of Iron if the Euro was ever going to work.
            The Euro dream () has become a nightmare and the only possible winners are Germany and france because they have a cosy relationship (at the moment ).

            rgds baz

            Comment

            • ppp
              ppp
              Rank 5 Registered User
              • Jul 2008
              • 1331

              #7
              Look how the "friends" of Britain, the big leaders of the political parties in the EU parliament nod in agreement with the idea of screwing the UK over!

              http://www.youtube.com/watch?v=OkP3IWuJqg8

              Comment

              • Creaking Door
                Rank 5 Registered User
                • Sep 2006
                • 9873

                #8
                And another attempt at a serious discussion about the financial problems facing the EU nosedives the way of the last thread!
                WA$.

                Comment

                • ppp
                  ppp
                  Rank 5 Registered User
                  • Jul 2008
                  • 1331

                  #9
                  Yea, it's terrible how people dare to have a different opinion to you
                  Last edited by Deano; 13th December 2011, 22:41. Reason: CoC Rule 15

                  Comment

                  • Creaking Door
                    Rank 5 Registered User
                    • Sep 2006
                    • 9873

                    #10
                    I don’t mind you having a different opinion to me, I even attempted to discuss your opinion in the other thread, but I started this thread to actually discuss the recent EU accord.

                    You could post your YouTube clip in the other thread as that seems to be dominated by discussion about whether the UK should stay in the EU or not, I may even post a comment about it, but I didn’t see anything in that clip that could be considered a discussion of the accord...

                    ...only more ‘proof’ that everybody (now including the Scots) hates England so we should leave the EU!
                    WA$.

                    Comment

                    • Distiller
                      Talent on Loan from God
                      • Oct 2003
                      • 4760

                      #11
                      Will not solve anything. 3% it was before and no-one cared. And that FTT is just socialist robbery.

                      But I'm all for further integration. Not because I love the EU so much, but out of necessity.

                      What at least should have been done, even though I knew it wouldn't, is to take budget sovereignty away from those EU members that are net recipients. Plus work on a EU-wide tax harmonization scheme (e.g. retail consumption tax based). In the long term only sovereign European money could help.
                      "Distiller ... arrogant, ruthless, and by all reports (including his own) utterly charming"

                      Comment

                      • duxfordhawk
                        Rank 5 Registered User
                        • Sep 2003
                        • 2334

                        #12
                        Ok the discussion on the UK(not just England) leaving the EU goes like this, its NOT going to happen now or in the near future, and no government would think that it would be a good idea. So discussion on that is over.

                        Now to the Accord and Veto. With every day that has passed since then it does seem the most of the rest of Europe is getting pretty vocal against what David cameron did, but as yet not one new idea has come along as to what will sort out the Euro and the EU and its clear that in 2012 there will be huge sumits to try and find a way forward. Until those its hard to see how the UK will be involved.

                        For now it feels the light at the end of the tunnel could well be a gravy train about to derail.
                        Maybe next year will prove a better one, But for now its looking bleak and even words like depression are being bounded around.

                        This diagram on BBC simplifies the what could be's

                        http://www.bbc.co.uk/news/business-16098582
                        Last edited by duxfordhawk; 13th December 2011, 15:28. Reason: spellings
                        Martin
                        To see my photos go to,

                        http://www.flickr.com/photos/dxhawk/

                        Comment

                        • Creaking Door
                          Rank 5 Registered User
                          • Sep 2006
                          • 9873

                          #13
                          Originally posted by Distiller View Post
                          Will not solve anything. 3% it was before and no-one cared.

                          In the long term only sovereign European money could help.
                          I found this interesting (interactive) EU Deficit chart on the BBC:

                          http://www.bbc.co.uk/news/business-13366011

                          It only goes up to 2010 but it interesting to see how many EU countries broke the 3% GDP deficit limit going back over the last decade.

                          I don’t see how the indebted countries of the EU can ever get out of their debt; the proposed EU accord option seems to be to lend them more money but at the same time forcing them to make massive cuts in spending to reduce their deficits. Nothing wrong with cutting their deficits but this has a disastrous effect on their GDP and on their ability to pay back the money that they have already borrowed; not to mention the interest-rate at which they can borrow new money.

                          Question: can a country borrow its way out of debt?

                          To me, this says a great deal about how the ‘growth’ of these countries was achieved in the first place; not that the UK is immune from this kind of ‘growth’ in the economy.

                          To put it in perspective the deficits for the UK, France, Italy, Greece and Ireland at the end of 2010 were 10%, 7%, 5%, 10%, 32% respectively!

                          I do not have any more accurate figures but how do we suddenly make these all 0.5%.....the new EU target!
                          WA$.

                          Comment

                          • duxfordhawk
                            Rank 5 Registered User
                            • Sep 2003
                            • 2334

                            #14
                            I honestly think its impossible to borrow yourself out of debt, Even if money was put into trade and manufacturing you still need a market to sell to. At the moment its hard to see any market big enough to be able to take such sales.
                            The only way countries will end up out of debt is if all debts are written off and the slate left clean, ultimately I wonder if thats the only way out of this mess but even then can countries handle such losses?

                            I still think that France and Germany will eventually set a two tier Europe with poor countries firmly in a different trading group from richer ones, but without support this will cause more problems than solutions.
                            Martin
                            To see my photos go to,

                            http://www.flickr.com/photos/dxhawk/

                            Comment

                            • ppp
                              ppp
                              Rank 5 Registered User
                              • Jul 2008
                              • 1331

                              #15
                              @Creaking Door

                              Or I'll just post it here since it's general discussion

                              Originally posted by Creaking Door View Post
                              I do not have any more accurate figures but how do we suddenly make these all 0.5%.....the new EU target!
                              That's because you only know half of the picture.
                              Last edited by ppp; 13th December 2011, 21:15.

                              Comment

                              • Creaking Door
                                Rank 5 Registered User
                                • Sep 2006
                                • 9873

                                #16
                                Originally posted by ppp View Post
                                That's because you only know half of the picture.
                                Are you saying that you know the full picture?
                                WA$.

                                Comment

                                • Creaking Door
                                  Rank 5 Registered User
                                  • Sep 2006
                                  • 9873

                                  #17
                                  Originally posted by duxfordhawk View Post
                                  The only way countries will end up out of debt is if all debts are written off and the slate left clean, ultimately I wonder if thats the only way out of this mess but even then can countries handle such losses?
                                  But even then would the slate be clean? Defaulting on debt is not a good way of preparing to borrow more money...

                                  ...and large defaults would certainly cause a huge banking crisis, or even a collapse, across much of the EU.

                                  Interesting piece from the BBC (October 2011) considering the current situation:

                                  http://www.bbc.co.uk/news/business-14934728

                                  To quote from the article:

                                  Indeed, just such a ‘stability pact’ of budget rules, insisted on by Germany at the euro's creation, was quickly broken with impunity by Germany itself.
                                  WA$.

                                  Comment

                                  • Creaking Door
                                    Rank 5 Registered User
                                    • Sep 2006
                                    • 9873

                                    #18
                                    Interesting piece from the BBC on the Euro crisis:

                                    http://www.bbc.co.uk/news/business-16290598
                                    WA$.

                                    Comment

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