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Thread: Did Germany sow the seeds of the eurozone debt crisis?

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    Default Did Germany sow the seeds of the eurozone debt crisis?

    Who is to blame for starting the current crisis in the eurozone? Greece? Italy? The real answer may lie further north.

    It was not the behaviour of the eurozone's southern members that first plunged the single currency into crisis.

    There was, from the beginning, a way for the EU to police the economies of member states by following the rules that had been laid down for the single currency in the Maastricht Treaty.

    It was called the Stability and Growth Pact, and it was not Italy or Greece that torpedoed it - it was Germany.

    In 2003, France and Germany had both overspent, and their budget deficits had exceeded the 3% of GDP limit to which they were legally bound.

    'Told to shut-up'

    The Commission - then led by the former Italian Prime Minister Romano Prodi - had the power to fine them.

    But the finance ministers of what was then the 15 eurozone member countries gathered in Brussels and voted the Commission down.
    Former EU Commission president Romano Prodi Romano Prodi says he was prevented from fining France and Germany for breaking euro rules

    They voted to let France and Germany off.

    They voted not to enforce the rules they had signed-up to and which were designed to protect the stability of the single currency.

    Britain's then-Chancellor, Gordon Brown - still at this stage committing sterling to its love affair with prudence - voted with the French and German position.

    The EU is often criticised for the power wielded by the unelected and allegedly unaccountable European Commission.

    On this vital and, as it would turn out, pivotal occasion, the Commission ran up against something much more powerful - the combined will of the democratically elected governments.

    "Clearly," Romano Prodi told me, "I had not enough power.

    "I tried and they [the finance ministers] told me to shut up."

    Jacques Lafitte was a young French finance ministry official seconded to Brussels in the 1990s to help construct the single currency.

    He said the technocrats working on the project knew that some central mechanism was needed to make sure member governments complied with the rules.

    "We made a number of suggestions to the member states at the time," says Mr Lafitte.

    "But these were all rejected, because they would have involved transferring sovereignty from national governments to Brussels or maybe Frankfurt."

    "We knew deep inside. Again we could not say so publicly.

    "We were mere technocrats. We were supposed to shut up and listen to the member states who, almost by definition, knew better. I was convinced it was not enough."

    Maastricht 'gravely undermined'

    Sir John Grant was Britain's ambassador to the EU at the meeting of finance ministers.

    "The credibility of the Commission and the readiness of the members states to accept the authority of the Commission as the independent enforcer of the Maastricht criteria was obviously gravely undermined," he says.

    It was also a signal to everyone else in Europe.

    "The view was that, ok, if the big boys won't adhere and impose discipline on themselves, they're going to be more relaxed in enforcing the treaty [on us]," recalls the former Deputy Finance Minister for Greece, Peter Doukas.

    "I mean, no-one can impose sanctions on Germany and France. They are the European superpowers. So they won't adhere.

    "The pressure was simply not there," Mr Doukas adds.

    Europe is wise after the event. The power the nations retained to police their own budgets - which, as we now know, included the power, in some cases, to cook the books - is being stripped away.

    Governments in the eurozone will, in future, be required to submit their budgets in advance to Brussels for approval.

    But how long before national populations revolt, in the name of democracy?

    From Helsinki to Athens revolt is already stirring - and often it is shot through with anti-German sentiment.

    "Germany is the locomotive of pain for other people's problems," says Peter Doukas.

    "It will ask to have a much bigger say in what's happening in Greece and Italy and Spain.

    "The centre of gravity of Europe is rapidly moving towards Berlin," he added.

    "In the fiscal union they will be the ones dictating the terms, with France as a junior partner."

    The historical resonance of a powerful Germany throwing its weight around in Europe spooks the Germans themselves. They do not seek, and do not want, leadership in Europe.

    But leadership has been thrust upon them.

    In November, in a powerful speech in Berlin, Polish Foreign Minister Radislav Sikorski appealed to Germany to act.

    "I will probably be the first Polish foreign minister in history to say so, but here it is," said Mr Sikorski.

    "I fear German power less than I am beginning to fear German inactivity."

    It was as though he was saying "we've got over the Nazi nightmare; so should you."

    The unfolding paradox is this: that a process that was motivated 20 years ago by a desire to Europeanise Germany looks likely to have precisely the opposite effect.

    Much of Europe will now be required to Germanise its economic governance.

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    Veteran Member Libertas's Avatar
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    Excellent post that should be widely noted.
    MEAN WHAT YOU SAY AND SAY WHAT YOU MEAN.:

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    All countries of the EU are completely broke. They have no money, they are printing as much as the Americans, hence the relative stable parity. It is all a castle of cards.
    They should not call it debt, it is money printing pure and simple. THey owe to each other like in a circular firing squad...
    The european people should revolt before it is too late. The Euro has to drop 50 percent in value, things will double at the supermarket.

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    Quote Originally Posted by Treffie View Post
    The unfolding paradox is this: that a process that was motivated 20 years ago by a desire to Europeanise Germany looks likely to have precisely the opposite effect.

    Much of Europe will now be required to Germanise its economic governance.
    They wanted to put their stamp on our country but now it backfires to the originators, including Great Britain. That's just punishment. What goes around, comes around.
    No tolerance for Muslims and Islam. For our home, our culture, our countries and our children.


    Down with the Muslim sickness in Europe!

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    Veteran Member Libertas's Avatar
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    Your country wanted to put ITS stamp on Europe hence we had 2 World Wars which have made Europe a political and military irrelevance in the world.



    It seems as if economic irrelevance will soon follow.
    MEAN WHAT YOU SAY AND SAY WHAT YOU MEAN.:

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    Default Did Social Overspending Cause the Euro-Crisis?

    [YOUTUBE]VoMjQrxUuQM[/YOUTUBE]
    Did Social Overspending Cause the Euro-Crisis?

    Carlo Panico: Most media pays no attention to scientific economic literature

    More news at http://therealnews.com
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    I agree with the general idea that the Euro doesn't benefit most countries. It, in general, benefits two countries: France and Germany. Second: there is an discrepancy between fiscal policy and the right to taxation. Brussels cannot tax it's member states (and thank f**k for that !) but it can set the fiscal policy. My solution: get rid of the Euro and give the right to determine the fiscal policy as a whole back to the member states. Second: disband the EU but keep a common market without the free movement of people or else completely democratise the institution and still get rid of the free movement of people (and give the right to patrol the border and give the right to set ones own immigration policies back to the member states).
    Quel autre pays ou l’on puisse jouir d’une liberté si entière’
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    "Who panics first- panics best"

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    unrepentant reactionary Winterwolf's Avatar
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    Quote Originally Posted by Tuan Belanda View Post
    I agree with the general idea that the Euro doesn't benefit most countries. It, in general, benefits two countries: France and Germany.
    That’s a myth! The common currency wasn’t a German idea to begin with, but a French condition for reunification.
    Germany also doesn’t profit the most from it, to the contrary our export statistics show clearly that since the introduction of the € in 1999 our exports into the Euro-zone declined, while those into the rest of the World increased.
    The rules were broken even before France and Germany (ruled by a socialist government back then, so what do you expect?) weren’t fined for their temporary debt policy, since Greece was accepted in the Euro zone, although everyone knew that their statistics were faked in order to join.
    Eine Nation aber, die ihre komplette Geschichte verwirft und unter moralischen, ja kriminellen Generalverdacht stellt, konzediert ihre eigene Unmöglichkeit und gibt den moralischen Anspruch auf eine selbstbestimmte Zukunft preis.

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    Quote Originally Posted by Winterwolf View Post
    That’s a myth! The common currency wasn’t a German idea to begin with, but a French condition for reunification.
    Germany also doesn’t profit the most from it, to the contrary our export statistics show clearly that since the introduction of the € in 1999 our exports into the Euro-zone declined, while those into the rest of the World increased.
    The rules were broken even before France and Germany (ruled by a socialist government back then, so what do you expect?) weren’t fined for their temporary debt policy, since Greece was accepted in the Euro zone, although everyone knew that their statistics were faked in order to join.
    This say the Germans now. The eternal German victim myth. Who benefits from this crisis ? German banks. What country still has economic growth ? Germany. Qui bono ? Germany.
    Quel autre pays ou l’on puisse jouir d’une liberté si entière’
    (In welk ander land kan men genieten van een zo totale vrijheid)
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