Monti's Tour Yet to Persuade Germany of the Need for Fiscal Activism


The unelected Italian Prime Minister, Mario Monti, has urged European leaders to get on board with plans to expand the power and responsibility of the European Central Bank. The Germans and Finns are understandably skeptical, while the French and Spanish are more enthusiastic. French President Hollande seems especially keen, saying:

We cannot allow ourselves one minute of inattention.

President Obama has called Monti relating his support for swift and decisive action in Europe.

Monti has been on a tour of many European countries in an attempt to rally support for a plan that would almost certainly allow the ECB to restart a bond buying agenda, thereby shoring up Spanish and Italian debt, and for the proposed European Stability Mechanism to have a banking license. The European Stability Mechanism is currently being examined by Germany's highest court, which will rule on its constitutionality on September 12. 

The attitudes of Northern European countries should give those, like Monti, who want more central bank activism reason to worry.

Germany's Vice-Chancellor, Philipp Roesler, said today that granting a banking license to the European Stability Mechanism would be wrong:

The chancellor, the finance minister and I agree that … a so-called banking license for the ESM cannot be our way.

The Finns have already added conditions to additional funds for the Greeks who have failed to meet initial deficit and government spending targets.

As was noted by Andrew Frye and Chiara Vasarri over at Bloomberg:

In AAA-rated Finland, leaders too have been more resistant to facilitating rescues. Finland, the northernmost euro member, demanded collateral for Greece's second bailout last year and has since insisted it will only contribute to Spain's banking rescue if it gets similar security. Finland also wants rescue funds to come with strict terms such as austerity and burden sharing for bondholders. 

The euro crisis has brought to light two of the dominating features of Europe that the European Union and the single currency were both designed to dilute. 

First, there is a difference, economic and cultural, between what is typically referred to as 'northern' and 'southern' Europe. Many agree that the south was let into the single currency too soon, and that we are now seeing the consequences. Italy, Spain, and Greece are all now looking to how Germany, Finland, and the Netherland react to their pleas for fiscal activism and an increase in aid funds. 

Secondly, nothing gets done in Europe, productive or otherwise, when the Germans and the French are not in agreement. Socialist France is now decidedly in opposition to the German approach to handling the euro crisis. How long it will take for the north to be dragged kicking and screaming by central bankers and Eurocrats no one knows, though the ruling on September 12 will be an important indicator. 

NEXT: Court Pushes on TSA's Public Comment Snub, Greek Leaders Live Large in London, More Dispensaries Shut Down by Feds: P.M. Links

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  1. Hope the north sticks to its principles. Seems like the ‘crisis’ in the southern states is thought of, by them, as some sort of accident or natural disaster or evil fat cats.

    1. Heh, Heinlein can never be repeated too often –

      “Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded- here and there, now and then- are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.This is known as “bad luck.”.”

  2. More idiots that think you can fix an economy by tinkering with the currency.

  3. You know who else toured to persuade Germany of the Need for activism…

  4. President Obama has called Monti relating his support for swift and decisive action in Europe.

    That’s our boy, Barry. Because swift and decisive is better than cautious and reasonable.

  5. So what would happen if the EU simply didn’t bail out Greece and Spain and whoever else comes abegging? Why do so many people scream it will be The End Of The World As We Know It? All I can see happen is that Greece and Spain would have some serious belt tightening, but seeing as how the bailout so far hasn’t done anything except whet their appetite, and seeing as how Harding’s austerity in 1920 left the economy to sort itself out in just 18 months, seems to me some enforced austerity would be just the ticket. Of course, as long as Hollande and Monti beg and plead and hold out hope, the beggars will see no reason to get their hands dirty with actual self-improvement.

    1. A shitload of bankers would suddenly not have their big bonus checks coming in when their Spanish and Greek sovereign debt investments’ value went to zero.

  6. In a related development, the Organization of Nigerian Oil Princes has issued a press release expressing its wholehearted support for confused retired ladies depositing tens of thousands of dollars into accounts so said princes can access millions in gold bullion, thus sharing it with the retired dowagers.

  7. It’s producers vs. Parasites all the way down.

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