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I have realised that one objection of mine is that I don't think it will fit the collapse of the EMU, but at the same time I am quite uncertain of how that crash will unfold.

So trying for a scenario that might include a Seuro.

Step 1: Syriza wins in Greece, refuses austerity, ECB refuses Greek debt as collateral crashing the Greek banks. Greece has to print to re-capitalise and either prints new dracham or prints euro and is kicked out of the third step of the EMU (common coins).

Greece stays in the EU and becomes a thorn in the side in the Council proceedings and ECB Governing Council meetings. In the Council the following areas still demand unamity according to wikipedia:

Voting in the Council of the European Union - Wikipedia, the free encyclopedia

Certain policy fields remain subject to unanimity in whole or in part, such as:

  • membership of the Union (opening of accession negotiations, association, serious violations of the Union's values, etc.);
  • taxation;
  • the finances of the Union (own resources, the multiannual financial framework);
  • harmonisation in the field of social security and social protection;
  • certain provisions in the field of justice and home affairs (the European prosecutor, family law, operational police cooperation, etc.);
  • the flexibility clause (352 TFEU) allowing the Union to act to achieve one of its objectives in the absence of a specific legal basis in the treaties;
  • the common foreign and security policy, with the exception of certain clearly defined cases;
  • the common security and defence policy, with the exception of the establishment of permanent structured cooperation;
  • citizenship (the granting of new rights to European citizens, anti-discrimination measures);
  • certain institutional issues (the electoral system and composition of the Parliament, certain appointments, the composition of the Committee of the Regions and the European Economic and Social Committee, the seats of the institutions, the language regime, the revision of the treaties, including the bridging clauses, etc.).

Step 2: Spain and Italy follows the same way.

Now the rejects has 68 votes on the Council, needing just 25 more to stop any proposal. And given that expansion of the EU was sometimes hold up because some countries wanted to revisit fishing quotas discussions, using a blocking minority in one area to get leverage on another is established pracise.

Given this I wonder what ability the remaining EMU members has to punish the rejected ones? And also if the EU would still have enough policy cohesion to keep implementing austerity in new account deficit countries. Or really any ideas of how these dominos would fall once the first country leaves/is thrown out.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Sep 24th, 2013 at 03:07:21 PM EST
Now the rejects has 68 votes on the Council, needing just 25 more to stop any proposal.
You cannot have Greece, Spain and Italy out of the Euro and Portugal in. And you need to count Cyprus too.

That means the Mediterranean block has:

  • 5 member states
  • 23.95% votes
  • 25.5% population

Blocking minorities are:

  • 15 or 10 states
  • 26% votes
  • 38% population

It is really close on votes.

In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 03:34:29 PM EST
[ Parent ]
Migeru:
You cannot have Greece, Spain and Italy out of the Euro and Portugal in. And you need to count Cyprus too.

I went by countries with political movements anti austerity, but yes that sounds reasonable.

And it would give Bulgaria and all other countries that are larger then that a free veto when the Mediterranean block is opposed.

Courtesy of the German government there is a Majority Calculator. Playing around, the only real effect of the population limit is if Germany and France and one more of UK, Italy and Spain are opposed to something. Otherwise I can't find any combination where it matters. So that one can be ignored unless Germany and France consists the nucleus of the blocking minority.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Tue Sep 24th, 2013 at 03:54:32 PM EST
[ Parent ]
Eurointelligence - Professional: Germany, the day after (September 24, 2013)
Angela Merkel is expected to dominate European politics. "Chief of Europe" reads the title on the front page of Le Monde.  The French government lost any appetite to take initiative in Europe or even to oppose Merkel, writes Cecile Cornudet in Les Echos. Francois Hollande did not pick up on the German elections concentrating on the European elections next May instead. His earlier push for a Eurozone government has fallen off the agenda with Merkel's victory. Instead under the new theme "reorienting Europe" Hollande sets his accent on employment, just like he promised in his election campaign.
On the last point: Fear of Germany used to be the reason why France wanted a strong Europe. Now fear of Germany is what slows down European integration. The reason is that the European integration on offer is German-dominated.


In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 04:01:49 PM EST
[ Parent ]
Migeru:
You cannot have Greece, Spain and Italy out of the Euro and Portugal in. And you need to count Cyprus too.
I went by countries with political movements anti austerity, but yes that sounds reasonable.
Portugal has que se lixe a Troika!

In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 04:05:29 PM EST
[ Parent ]
And you need to count Cyprus too.

And Malta is likely to go along as well. What would Ireland and Belgium be likely to do in such a situation?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Sep 24th, 2013 at 11:59:25 PM EST
[ Parent ]
Malta is not in so much trouble as Slovenia right now, though there have been rumblings.

In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Wed Sep 25th, 2013 at 02:30:53 AM EST
[ Parent ]
What I meant was that, were all the other Mediterranean to belong to the Seuro, it might make sense for Malta to join. Neuros would go a long way in Malta then for tourists while Italians, if members of the Seruo, would not suddenly find it too expensive to visit or trade with.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 25th, 2013 at 11:10:21 AM EST
[ Parent ]
Given this I wonder what ability the remaining EMU members has to punish the rejected ones?
Suppose Greece does rebel against the Troika. Can its voting rights at the Council or at the EcoFin be rescinded?

In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 03:47:16 PM EST
[ Parent ]
I realised this has come up here before but ina different discussion, so I went googling.

And somebody had already provided the answer on the mechanisms.

Migeru:

I wonder whether the rest of the council could vote to have their voting rights suspended. There are provisions in the treaties for this, the question is whether the "breach" qualifies as a trigger for those provisions.

European Commission: Consolidated  version of the Tresty on European Union

Article 6
  1.   The Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the Member States.
  2.   The Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to the Member States, as general principles of Community law.
  3.   The Union shall respect the national identities of its Member States.
  4.   The Union shall provide itself with the means necessary to attain its objectives and carry through its policies.

Article 7
1.   On a reasoned proposal by one third of the Member States, by the European Parliament or by the Commission, the Council, acting by a majority of four fifths of its members after obtaining the assent of the European Parliament, may determine that there is a clear risk of a serious breach by a Member State of principles mentioned in Article 6(1), and address appropriate recommendations to that State. Before making such a determination, the Council shall hear the Member State in question and, acting in accordance with the same procedure, may call on independent persons to submit within a reasonable time limit a report on the situation in the Member State in question.
The Council shall regularly verify that the grounds on which such a determination was made continue to apply.
  1.   The Council, meeting in the composition of the Heads of State or Government and acting by unanimity on a proposal by one third of the Member States or by the Commission and after obtaining the assent of the European Parliament, may determine the existence of a serious and persistent breach by a Member State of principles mentioned in Article 6(1), after inviting the government of the Member State in question to submit its observations.
  2.   Where a determination under paragraph 2 has been made, the Council, acting by a qualified majority, may decide to suspend certain of the rights deriving from the application of this Treaty to the Member State in question, including the voting rights of the representative of the government of that Member State in the Council. In doing so, the Council shall take into account the possible consequences of such a suspension on the rights and obligations of natural and legal persons.
The obligations of the Member State in question under this Treaty shall in any case continue to be binding on that State.
  1.   The Council, acting by a qualified majority, may decide subsequently to vary or revoke measures taken under paragraph 3 in response to changes in the situation which led to their being imposed.
  2.   For the purposes of this Article, the Council shall act without taking into account the vote of the representative of the government of the Member State in question. Abstentions by members present in person or represented shall not prevent the adoption of decisions referred to in paragraph 2. A qualified majority shall be defined as the same proportion of the weighted votes of the members of the Council concerned as laid down in Article 205(2) of the Treaty establishing the European Community.
This paragraph shall also apply in the event of voting rights being suspended pursuant to paragraph 3.
6.   For the purposes of paragraphs 1 and 2, the European Parliament shall act by a two-thirds majority of the votes cast, representing a majority of its Members.

It is hard to see that there is a breach of paragraph 6, but it might very well be used anyway. If they are really underhanded, of course the humanitarian situation that is a result of the austerity policy can be used to argue that the member state is breaching "the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law". But to make it stick, they need 2/3s in the EP, and that might be tricky.

I see nothing in there about cancelling voting rights for breaking treaties as such. The Commission could take them to the Court, but max penalty there is (afaik) fines. Also, Sweden is in ongoing violation of the third step of the EMU treaty so it would lock a tad like selective enforcement.

They could be shut out of Eurogroup (not Ecofin) meetings.

Eurogroup - Wikipedia, the free encyclopedia

A formal legal basis was granted for the first time under the Lisbon Treaty when it came into force on 1 December 2009. Protocol 14 of the treaty lays out just two articles to govern the group;

Article 1: The Ministers of the Member States whose currency is the euro shall meet informally. Such meetings shall take place, when necessary, to discuss questions related to the specific responsibilities they share with regard to the single currency. The Commission shall take part in the meetings. The European Central Bank shall be invited to take part in such meetings, which shall be prepared by the representatives of the Ministers with responsibility for finance of the Member States whose currency is the euro and of the Commission.
Article 2: The Ministers of the Member States whose currency is the euro shall elect a president for two and a half years, by a majority of those Member States. --Protocol 14 of the Consolidated Treaties of the European Union (as amended by the Treaty of Lisbon)[13]

Furthermore, the treaty amended the Council of the EU's rules so that when the full Ecofin council votes on matters only affecting the eurozone, only those states using the euro (the Eurogroup countries) are permitted to vote on it.[14]

It would however do wonders agaisnt TINA to haev a country on the Ecofin loudly procalim that there are better options after each meeting.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Sep 25th, 2013 at 04:46:43 PM EST
[ Parent ]
If they do lose voting rights and get a running tab of fines that is larger then net money they get from the EU, then forming a SEU (with or without a Seuro) could be meaningful as they have effectively been kicked out of the EU. Depends on political logic of course, I suspect there would be a lot against any union.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Wed Sep 25th, 2013 at 04:54:09 PM EST
[ Parent ]
eKathimerini: Greece will negotiate after achieving primary surplus, says Stournaras (September 4, 2013)
Greece will embark on a major negotiation with its partners and creditors, known as the troika, after a primary surplus is achieved later this year, said Finance Minister Yannis Stournaras speaking on Skai on Wednesday.


In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 03:49:42 PM EST
[ Parent ]
Greek reporter: Stournaras Readies For Troika Talks (September 20, 2013)
While Greece is hopeful, a primary surplus - not including interest, social security, the cost of state enterprises and some military expenditures - hasn't yet been reached although Stournas said he believes it will, allowing Greece to talk about imposing losses on the Troika as well.


In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 03:51:32 PM EST
[ Parent ]
eKathimerini: Troika skeptical on primary surplus (September 23, 2013)
The troika has doubts about Greek projections for a primary surplus this year and next and has begun the process of discussing with Athens the contents of the 2014 budget, which Greece's lenders believe contains several areas that need closer inspection.

High-ranking Finance Ministry sources said that while the representatives of the European Commission, European Central Bank and International Monetary Fund agree that Greece will produce a primary surplus at the end of the year, they think it will be minimal. The troika is also skeptical about Greek projections for a primary surplus of 1.5 percent of GDP at the end of next year.

It is thought that one of the reasons Greece's lenders are downplaying the possibility of Athens producing a sizable surplus is that they are alarmed by the debate in Greece about how this amount will be allocated and whether social spending could be increased.



In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 05:45:22 PM EST
[ Parent ]
Of course another world financial shock would throw all of these expectations into the tank.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 25th, 2013 at 12:15:05 AM EST
[ Parent ]
Craig Willy: Turning Points & Bargaining Power: What primary deficits tell us about the eurozone crisis (November 18th, 2012)
Primary deficits are incredibly important in the crisis' constant negotiation because:

  • A country with a primary surplus, strictly speaking, does not need foreign help. It can theoretically default and not have to institute further spending cuts.
  • A country which can show it has a reliable primary surplus is more likely to benefit from the financial solidarity of other countries (such a guarantee can then in turn reassure financial markets and allow the country to cheaply refinance itself through private lenders).

Primary deficits are then critical to assessing the balance of power between countries and the moment (if ever) at which we will reach a salutary "turning point" in the crisis. ...

...

Category I: Financial bubbles, high primary deficits and submission to the Core

[Spain and Ireland]

Category II: Primary surpluses and some leeway

[Italy, Portugal, Greece]

Category III: Not in the euro & "fiscally irresponsible"

[Great Britain]

Category IV: Top of the World

[Germany, Austria, Netherlands, Luxembourg]

Conclusion

Germany will continue to set the tune on eurozone policy and the elaboration of the new permanent "federal" structures. France is in a precarious position. Spain has no choice but to submit completely and wholeheartedly to Berlin and Frankfurt's demands, whatever they might be, and it's not even sure then that they will risk helping the country. The rest of the crisis countries - Italy, Portugal and Greece - have achieved much with their efforts and theoretically, with their primary surpluses and the passage of the "Six Pack" and the Fiskalpakt, the way should be open for wholehearted aid by the ECB, with Germany's consent. This would bring down refinancing costs and massively reduce the need for austerity, thus easing them and the eurozone as a whole out of the crisis.

According to this, Spain is a weak point in your argument.

In the Neurozone, there can be only one.
by Migeru (migeru at eurotrib dot com) on Tue Sep 24th, 2013 at 03:58:44 PM EST
[ Parent ]
It would be, if the argument did not confuse sovereign and foreign balances, and if it took account of the calorie and BTU balances of the foreign trade.

As it is, meh.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Sep 25th, 2013 at 01:27:22 PM EST
[ Parent ]
I am glad I read this comment before I read the piece, since at the outset one would think it was discussing current account deficits, but then it turns out it is discussing budget deficits.

It would seem that the main premise applies to whether a nation has a current account surplus aside from external interest rate reparation payments to German and other external Banks, since given the current depressed state of labor markets, nations with current account surpluses post default on external obligations can largely monetize their domestic government deficit.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Sep 26th, 2013 at 03:21:59 AM EST
[ Parent ]
Turning Points & Bargaining Power: What primary deficits tell us about the eurozone crisis | Craig Willy | EU affairs writer

These countries, including Greece, have far more bargaining power relative to the European authorities and the Core. This is because they could, theoretically, default tomorrow on their existing debts and not require any external aid. They would be in no worse a position than they are now and could cease paying interest.

In practice, this is politically difficult because it is frowned upon by the ECB and other euro countries, because it would undermine banks in the rest of the continent. This would no longer be problematic if one left the euro which, while legally problematic, would mean the country regains total sovereignty in monetary and fiscal affairs. The only problem then is "political" (the loss of face for the country as "non-European savages" unworthy of the eurozone and, more speculatively, the fear that this would provoke some kind of return to warring dictatorship).

But if a periphery country would default tomorrow, then ECB would not frown, they (unless they blink, which is a possibility) would no longer accept state debt as collateral, which would mean that banks crash. Or to put it in the articles terms, ECB has the means to destroy that precious primary surplus.

In general the author seems to think that the problem for the countries in the periphery is that they can't fund their public sector, ie the running a state as a business falacy. While the real problem is that while they are running a current account deficit, they can't leave without large immediate pain, and the EPP-PES politicians prefer to kick the bucket down the road while accepting some (ever increasing) pain for the forseeable future.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Sep 25th, 2013 at 04:19:07 PM EST
[ Parent ]
In the case of Greece there is a geo-political card that could be played -- Russian support. Russia could easily supply Greece with oil and gas as well as refined petroleum products if needed, or arrange for them to be supplied. A similar possibility exist with Iran, especially if there is some measure of normalization with Rouhani now in office.

As to banking, during the Civil War in the USA Salmon P Chase arranged a massive loan in gold backed dollars from the big New York banks. Once the loan was granted he demanded the gold, which he withdrew. This put the civilian economy of the US onto a fiat currency basis but gave the US Government the means to finance needed imports of military goods. Foreign exchange became much more difficult for the private sector, which discouraged imports. A year later he created 2% Federal bonds, the purchase of which by banks gave the bank the right to issue bank notes up to the amount of the bond. The Congress also passed a tax on private bank notes. This created the National Banking system which, ignoring the return to the gold standard and the problems of a bi-metalic standard, essentially endured until the Fed became operational in the fall of 1914. It is true that the issue of Greenbacks directly by the Treasury during the Civil War did result in an approximately 50% loss of value compared to gold, but there were many who benefited from this inflation. There are ways a savy Central Banker can deal with FX problems, but I still maintain it would be easier were Greece to be able to help found an alternative currency union operated according to the needs of countries more like itself. Most southern peripheral countries in the Euro would qualify under that definition.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Sep 25th, 2013 at 05:49:47 PM EST
[ Parent ]

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