In today’s NEIN, NEIN, NEIN, and the death of EU Fiscal Union commentary for the U.K. Telegraph, Ambrose Evans-Pritchard casts a dim view on the hopes for a German-backed solution to Europe’s latest credit market woes, stating somewhat emphatically that the vote taken yesterday in Germany was widely misinterpreted.
Judging by the commentary, there has been a colossal misunderstanding around the world of what has just has happened in Germany. The significance of yesterday’s vote by the Bundestag to make the EU’s €440bn rescue fund (EFSF) more flexible is not that the outcome was a “Yes”.
This assent was a foregone conclusion, given the backing of the opposition Social Democrats and Greens. In any case, the vote merely ratifies the EU deal reached more than two months ago – itself too little, too late, rendered largely worthless by very fast-moving events.
The significance is entirely the opposite. The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.
Repeat after me:
THERE WILL BE NO FISCAL UNION.
THERE WILL BE NO EUROBONDS.
THERE WILL BE NO DEBT POOL.
THERE WILL BE NO EU TREASURY.
THERE WILL BE NO FISCAL TRANSFERS IN PERPETUITY.
THERE WILL BE A STABILITY UNION – OR NO MONETARY UNION.
The latest tack to expand the €440 billion bailout fund to the €2 trillion level that analysts think will ultimately be necessary appears to be one of “leveraging” the committed funds in, what I understand to be, a fractional reserve banking sort of way. It should come as no surprise the Germans are vehemently opposed to this as noted in this story at Reuters.