El Pais: Europa se obceca con la austeridad

Merkel insiste en que hay que firmar el Tratado fiscal antes de poder generar crecimiento

Europa ha jugado este jueves a las grandes palabras en una cumbre que servirá para consagrar la austeridad en los tratados y que viene a ilegalizar el keynesianismo, con la imposición de prohibir los déficits en las constituciones. Hasta aquí los hechos. Todo lo demás es retórica: los mandatarios europeos se han empeñado en un cambio de tono para tratar de convencer a la ciudadanía -y puede que a los mercados--de que los recortes no son la única obsesión en una eurozona muy maltratada por la crisis fiscal, pero que también va de cabeza hacia una recaída en la recesión.

"Lo primero que hay que hacer es firmar el tratado fiscal. Lo segundo es ver cómo generar crecimiento", ha dicho la canciller alemana, Angela Merkel. Ese es el orden. Y "lo segundo" queda para más adelante: el Eurogrupo previo a la reunión de jefes de Estado y de Gobierno ha pospuesto una vez más la entrega del dinero del rescate para Grecia y su crisis interminable, y apenas ha debatido el llamamiento de España a flexibilizar los objetivos de déficit para evitar que el exceso de tijera acabe en un descosido para algunos países.

Europe's dogged pursuit of austerity

Merkel insists on the need to sign the Fiscal Treaty before being able to generate growth

Europa has played the big-word game this Thursday in a Summit which will serve to consacrate austerity in the treaties and to outlaw Keynesianism, with the imposition of constitutional deficit bans. Those are the facts, the rest is rhetoric: European rulers went to pains to change their tone to try to convince the citizenry ---and maybe the markets--- that cuts are not the only obsession in a Eurozone battered by the fiscal crisis, but which is also diving head first into a renewed recession.

"The first think that must be done is to sign the fiscal treaty. The second is to see how to generate growth", said the German Chancellor, Angela Merkel. That's the sequence. And "the second" is left for later: the Eurogroup before the summit of heads of stete and government has postponed once more the disbursement of the rescue moneys for Greece and its neverending crisis, and has barely debated Spain's plea to make the deficit goals more flexible to prevent a scissor abuse ending up leaving some countries naked.

(Reuters) - The most telling thing the ECB did on Wednesday's leap day wasn't the 530 billion euros in party favors they handed out to banks, but rather the paltry sum they were forced to commit to shoring up Portugal's government bond market.

... Portuguese borrowing rates have remained stubbornly high and on Wednesday spiked higher, with 10-year borrowing rates above 13 percent. That brought the ECB into the market to make its first purchases of government bonds in two weeks.

It may be that Portuguese banks are simply too weak to indulge in the government bond carry trade - after all they themselves have been unable to sell debt for two years. That being the case, there are simply no natural buyers of Portuguese risk left, save the ECB, and it may well be that the more the ECB buys the less anyone else will want to.

(h/t Eurointelligence)

Severe instability of the eurozone would hurt everybody, also outside the eurozone. I therefore suggest that non-euro or non-EU European countries and other stakeholders like IMF, Switzerland, Russia and China take the initiative to get this urgent process going by asking the independent and qualified staff of OECD, BIS or EBRD to start working on the scenario of a breakup  urgently. They need to analyse how the pain of a transition can be reduced, in individual countries and in the eurozone as a whole, how the financial system can avoid collapse in such dramatic times, and practical things around printing and issuing new money. They need to collect experiences that can be relevant from Ireland/UK and Czechoslovakia, Yugoslavia and the Soviet Union, where currency areas were reorganised.

We cannot afford the risk of an unlikely but possible chaotic dissolution of the euro taking decision-makers by surprise and thus aggravating an already dramatic situation. Preparations should be made now, and by credible outsiders.

I have respect for the risk that measures to prepare for trouble can become self-fulfilling. But years of avoiding the core, difficult questions have only led to a loss of credibility and a worsening of the crisis. We must now learn that lesson and let others step in, who are independent of prestige and vested interests.

More About Jens Weidmann's request to securitise Germany's Target 2 balance

The entire Target 2 debate sounds very technical, but gets to the heart of the eurozone crisis. Jens Weidmann's proposal to securitise has led to hostile commentary in the press.

Reuters Breakingviews writes that Jens Weidmann is more dangerous to the ECB than Axel Weber. If Weidmann was not concerned about a breakup of the EU, he would not need to talk about securitising Germany's claims on the eurosytem - which would only ever fall foul if the euro were to break up suddenly. The proposal is to make peripheral central banks to hand over their own collateral to the central banks with Target 2 surpluses. "But it could go down like a lead balloon with the weaker central banks. Not only won't they like their credit-worthiness being questioned, they would struggle to find collateral to cover anything like the entire exposure."

Mark Schieritz makes an important in his commentary in Herdentrieb. He says the Bundesbank is effectively asking for a double collateral. If Greece were to leave, and were uncooperative, it would not deliver the securities it had promised. In either case, the Bundesbank's share of the claims would be lost. He says the only to avoid this is to carry the securities to Frankfurt, which would imply that you need to collateralise the surplus with gold holdings, which is hardly realistic.) If Greece, however, is co-operative, than the current system is perfectly adequate. He concludes that the Bundesbank must have come under massive public pressure through the Target 2, which has been raging in Germany.

However, Mr Kenny said the Anglo debt question was an entirely separate matter from the referendum on the treaty. "These are entirely separate matters, in other words, the Irish people are not going to be bribed by anybody," Mr Kenny told reporters in Brussels. "That work is entirely separate from the treaty, and in due course the Government will set out a process by which this will be set before the people."

I recommend writing every voter a cheque for 10,000k. Cheap at the price, and a pretty good bit of stimulus for the economy. "Nice currency you got there, pity if it burned down."

"Now is there any new business," says Giblets.
"Well the boat's sinking," says me.
"Giblets seems to recall that coming up at the last meeting," says Giblets, "which would make that old business."
"Well it's more sinking-er than it was last time," says me. "That's kind of new."
"And under Old Business we agreed to form a Boat Sinking Committee to launch an investigation into the possibility of making a preliminary report on the subject of recommending the formal and official declaration of a Boat Sinking Committee," says Giblets.
"The Boat Sinking Committee has sunk," says me, "along with their half a the boat."
"Well that wraps up the old business!" says Giblets. "Who wants a grilled cheese!"
"The boat's also on fire," says me.
"Perfect," says Giblets. "The water from the sinking and the fire from the burning will cancel each other out, leaving us standing on dry land."
"I feel like there's something wrong with that but I can't put my finger on it," says me. "Because my finger would burn or drown."
"Next order of business!" says Giblets. "Should Giblets grill his grilled cheese on rye bread or cheddar cheese loaf?"
"See, I almost wonder if this isn't the time for grilled cheese," says me, "what with the burning and the sinking and all the fire coming out of the cheese grill."
"Cause cheese loaf is great by itself, but on a grilled cheese it might be overpowering," says Giblets.
"But I don't know whether to try to put out the fire or try to bail out the boat or scream and panic and scream," says me. "Come to think of it this is really the kind of discussion that calls for a Boat Burning Committee."

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