The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
For a few weeks now, the debate about whether a bail out of an EMU country is a likely option has accelerated. A few days after we had argued in a syndicated piece for Project Syndicate which was printed by a number of papers across the world that the no-bail-out clause has no relevance in the current crisis and EU member states would bail out a EMU member with solvency or liquidity problems. Germany's Finance Minister recently added flavour to the debate. Only yesterday, it was reported that Steinbrück confirmed that EMU countries might bail-out a fellow euro-area country (read for instance Bloomberg on this).
FT.com / Brussels - ECB warns Germany against EU bail-out (February 20 2009)
The European Central Bank gave a thinly veiled warning to the German government on Friday not to violate the European Union's "no bail-out" clause, which prevents members of the eurozone from supporting other members that are facing rising public debt.Jürgen Stark, ECB executive board member, told Spiegel magazine in an interview released on Friday that the clause was an "important basis for the functioning of the monetary union".The warning follows reports that Germany was considering ways to help members of the eurozone that are facing fast-rising refinancing costs as investor fears rise about deteriorating public finances. Peer Steinbrück, finance minister, said this week that Germany would not remain inactive if the eurozone was in danger of breaking up.
Jürgen Stark, ECB executive board member, told Spiegel magazine in an interview released on Friday that the clause was an "important basis for the functioning of the monetary union".
The warning follows reports that Germany was considering ways to help members of the eurozone that are facing fast-rising refinancing costs as investor fears rise about deteriorating public finances. Peer Steinbrück, finance minister, said this week that Germany would not remain inactive if the eurozone was in danger of breaking up.
Let us, first of all, reframe the issue. If an EMU member country heads for a situation in which it cannot refinance its debt, it may not need a full bail out, but would indeed need financial assistance. For such an emergency action, Article 100 TEC, section 2 could be used as a legal base: "Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control, the Council, acting by a qualified majority on a proposal from the Commission, may grant, under certain conditions, Community financial assistance to the Member State concerned. The President of the Council shall inform the European Parliament of the decision to be taken." The fact that EU member countries and the EU as such is not liable for the commitments of other member states (as stated in Article 103), hence does not imply that the Treaty assumes that fellow member states should go bankrupt.
The issue really is the political stance that results in the EU (Commission, Council and Central Bank) consciously IMF'ing the member states in difficulties.
All this to prevent a default.
Economics is politics by other means
by Cyrille - Sep 21 28 comments
by Migeru - Sep 21 20 comments
by Frank Schnittger - Sep 19 13 comments
by afew - Sep 22 3 comments
by A swedish kind of death - Sep 15 17 comments
by Democrats Ramshield - Sep 18
by ChrisCook - Sep 14 55 comments
by Frank Schnittger - Sep 11 129 comments
by afew - Sep 223 comments
by Cyrille - Sep 2128 comments
by Migeru - Sep 2120 comments
by Frank Schnittger - Sep 1913 comments
by Democrats Ramshield - Sep 18
by A swedish kind of death - Sep 1517 comments
by ChrisCook - Sep 1455 comments
by Frank Schnittger - Sep 11129 comments
by Luis de Sousa - Sep 969 comments
by Crazy Horse - Sep 610 comments
by Migeru - Sep 438 comments
by Metatone - Aug 305 comments
by Xavier in Paris - Aug 293 comments
by gmoke - Aug 26