A Uniao Europeia, como ela se apresenta, realmente

Certamente o melhor exemplo da União Europeia atualmente:

Niall Ferguson: The "new" (des)United States of Europe...

Niall Ferguson peers into Europe's future and sees 

Greek gardeners, German sunbathers—

and a new fiscal union. 

Welcome to the other United States.

The Wall Street Journal, NOVEMBER 19, 2011
THE SATURDAY ESSAY

2021: The New Europe

By NIALL FERGUSON

Map illustration by Peter Arkle

'Life is still far from easy in the peripheral states of the United States of Europe (as the euro zone is now known).'

Welcome to Europe, 2021. Ten years have elapsed since the great crisis of 2010-11, which claimed the scalps of no fewer than 10 governments, including Spain and France. Some things have stayed the same, but a lot has changed.

The euro is still circulating, though banknotes are now seldom seen. (Indeed, the ease of electronic payments now makes some people wonder why creating a single European currency ever seemed worth the effort.) But Brussels has been abandoned as Europe's political headquarters. Vienna has been a great success.

"There is something about the Habsburg legacy," explains the dynamic new Austrian Chancellor Marsha Radetzky. "It just seems to make multinational politics so much more fun."

The Germans also like the new arrangements. "For some reason, we never felt very welcome in Belgium," recalls German Chancellor Reinhold Siegfried von Gotha-Dämmerung.

Life is still far from easy in the peripheral states of the United States of Europe (as the euro zone is now known). Unemployment in Greece, Italy, Portugal and Spain has soared to 20%. But the creation of a new system of fiscal federalism in 2012 has ensured a steady stream of funds from the north European core.

The U.S. has lost its position as the best place to do business, and China and the rest of the East have so mastered the ways of the West that they're charting a whole new economic paradigm, Harvard historian Niall Ferguson says in an interview with WSJ's John Bussey. Photo courtesy of Jeff Bush.

Like East Germans before them, South Europeans have grown accustomed to this trade-off. With a fifth of their region's population over 65 and a fifth unemployed, people have time to enjoy the good things in life. And there are plenty of euros to be made in this gray economy, working as maids or gardeners for the Germans, all of whom now have their second homes in the sunny south.

The U.S.E. has actually gained some members. Lithuania and Latvia stuck to their plan of joining the euro, following the example of their neighbor Estonia. Poland, under the dynamic leadership of former Foreign Minister Radek Sikorski, did the same. These new countries are the poster children of the new Europe, attracting German investment with their flat taxes and relatively low wages.
But other countries have left.
David Cameron—now beginning his fourth term as British prime minister—thanks his lucky stars that, reluctantly yielding to pressure from the Euroskeptics in his own party, he decided to risk a referendum on EU membership. His Liberal Democrat coalition partners committed political suicide by joining Labour's disastrous "Yeah to Europe" campaign.

Egged on by the pugnacious London tabloids, the public voted to leave by a margin of 59% to 41%, and then handed the Tories an absolute majority in the House of Commons. Freed from the red tape of Brussels, England is now the favored destination of Chinese foreign direct investment in Europe. And rich Chinese love their Chelsea apartments, not to mention their splendid Scottish shooting estates.

In some ways this federal Europe would gladden the hearts of the founding fathers of European integration. At its heart is the Franco-German partnership launched by Jean Monnet and Robert Schuman in the 1950s. But the U.S.E. of 2021 is a very different thing from the European Union that fell apart in 2011.
*****

It was fitting that the disintegration of the EU should be centered on the two great cradles of Western civilization, Athens and Rome. But George Papandreou and Silvio Berlusconi were by no means the first European leaders to fall victim to what might be called the curse of the euro.

Since financial fear had started to spread through the euro zone in June 2010, no fewer than seven other governments had fallen: in the Netherlands, Slovakia, Belgium, Ireland, Finland, Portugal and Slovenia. The fact that nine governments fell in less than 18 months—with another soon to follow—was in itself remarkable.

But not only had the euro become a government-killing machine. It was also fostering a new generation of populist movements, like the Dutch Party for Freedom and the True Finns. Belgium was on the verge of splitting in two. The very structures of European politics were breaking down.

Who would be next? The answer was obvious. After the election of Nov. 20, 2011, the Spanish prime minister, José Luis Rodríguez Zapatero, stepped down. His defeat was such a foregone conclusion that he had decided the previous April not to bother seeking re-election.

And after him? The next leader in the crosshairs was the French president, Nicolas Sarkozy, who was up for re-election the following April.

The question on everyone's minds back in November 2011 was whether Europe's monetary union—so painstakingly created in the 1990s—was about to collapse. Many pundits thought so. Indeed, New York University's influential Nouriel Roubini argued that not only Greece but also Italy would have to leave—or be kicked out of—the euro zone.

But if that had happened, it is hard to see how the single currency could have survived. The speculators would immediately have turned their attention to the banks in the next weakest link (probably Spain). Meanwhile, the departing countries would have found themselves even worse off than before. Overnight all of their banks and half of their nonfinancial corporations would have been rendered insolvent, with euro-denominated liabilities but drachma or lira assets.

Restoring the old currencies also would have been ruinously expensive at a time of already chronic deficits. New borrowing would have been impossible to finance other than by printing money. These countries would quickly have found themselves in an inflationary tailspin that would have negated any benefits of devaluation.


Some bumpy moments in recent EU history.

For all these reasons, I never seriously expected the euro zone to break up. To my mind, it seemed much more likely that the currency would survive—but that the European Union would disintegrate. After all, there was no legal mechanism for a country like Greece to leave the monetary union. But under the Lisbon Treaty's special article 50, a member state could leave the EU. And that is precisely what the British did.

* * *

Britain got lucky. Accidentally, because of a personal feud between Tony Blair and Gordon Brown, the United Kingdom didn't join the euro zone after Labour came to power in 1997. As a result, the U.K. was spared what would have been an economic calamity when the financial crisis struck.

With a fiscal position little better than most of the Mediterranean countries' and a far larger banking system than in any other European economy, Britain with the euro would have been Ireland to the power of eight. Instead, the Bank of England was able to pursue an aggressively expansionary policy. Zero rates, quantitative easing and devaluation greatly mitigated the pain and allowed the "Iron Chancellor" George Osborne to get ahead of the bond markets with pre-emptive austerity. A better advertisement for the benefits of national autonomy would have been hard to devise.

At the beginning of David Cameron's premiership in 2010, there had been fears that the United Kingdom might break up. But the financial crisis put the Scots off independence; small countries had fared abysmally. And in 2013, in a historical twist only a few die-hard Ulster Unionists had dreamt possible, the Republic of Ireland's voters opted to exchange the austerity of the U.S.E. for the prosperity of the U.K. Postsectarian Irishmen celebrated their citizenship in a Reunited Kingdom of Great Britain and Ireland with the slogan: "Better Brits Than Brussels."

Another thing no one had anticipated in 2011 was developments in Scandinavia. Inspired by the True Finns in Helsinki, the Swedes and Danes—who had never joined the euro—refused to accept the German proposal for a "transfer union" to bail out Southern Europe. When the energy-rich Norwegians suggested a five-country Norse League, bringing in Iceland, too, the proposal struck a chord.

The new arrangements are not especially popular in Germany, admittedly. But unlike in other countries, from the Netherlands to Hungary, any kind of populist politics continues to be verboten in Germany. The attempt to launch a "True Germans" party (Die wahren Deutschen) fizzled out amid the usual charges of neo-Nazism.

The defeat of Angela Merkel's coalition in 2013 came as no surprise following the German banking crisis of the previous year. Taxpayers were up in arms about Ms. Merkel's decision to bail out Deutsche Bank, despite the fact that Deutsche's loans to the ill-fated European Financial Stability Fund had been made at her government's behest. The German public was simply fed up with bailing out bankers. "Occupy Frankfurt" won.

Yet the opposition Social Democrats essentially pursued the same policies as before, only with more pro-European conviction. It was the SPD that pushed through the treaty revision that created the European Finance Funding Office (fondly referred to in the British press as "EffOff"), effectively a European Treasury Department to be based in Vienna.

It was the SPD that positively welcomed the departure of the awkward Brits and Scandinavians, persuading the remaining 21 countries to join Germany in a new federal United States of Europe under the Treaty of Potsdam in 2014. With the accession of the six remaining former Yugoslav states—Bosnia, Croatia, Kosovo, Macedonia, Montenegro and Serbia—total membership in the U.S.E. rose to 28, one more than in the precrisis EU. With the separation of Flanders and Wallonia, the total rose to 29.

Crucially, too, it was the SPD that whitewashed the actions of Mario Draghi, the Italian banker who had become president of the European Central Bank in early November 2011. Mr. Draghi went far beyond his mandate in the massive indirect buying of Italian and Spanish bonds that so dramatically ended the bond-market crisis just weeks after he took office. In effect, he turned the ECB into a lender of last resort for governments.

But Mr. Draghi's brand of quantitative easing had the great merit of working. Expanding the ECB balance sheet put a floor under asset prices and restored confidence in the entire European financial system, much as had happened in the U.S. in 2009. As Mr. Draghi said in an interview in December 2011, "The euro could only be saved by printing it."

So the European monetary union did not fall apart, despite the dire predictions of the pundits in late 2011. On the contrary, in 2021 the euro is being used by more countries than before the crisis.

As accession talks begin with Ukraine, German officials talk excitedly about a future Treaty of Yalta, dividing Eastern Europe anew into Russian and European spheres of influence. One source close to Chancellor Gotha-Dämmerung joked last week: "We don't mind the Russians having the pipelines, so long as we get to keep the Black Sea beaches."

***

On reflection, it was perhaps just as well that the euro was saved. A complete disintegration of the euro zone, with all the monetary chaos that it would have entailed, might have had some nasty unintended consequences. It was easy to forget, amid the febrile machinations that ousted Messrs. Papandreou and Berlusconi, that even more dramatic events were unfolding on the other side of the Mediterranean.

Back then, in 2011, there were still those who believed that North Africa and the Middle East were entering a bright new era of democracy. But from the vantage point of 2021, such optimism seems almost incomprehensible.

The events of 2012 shook not just Europe but the whole world. The Israeli attack on Iran's nuclear facilities threw a lit match into the powder keg of the "Arab Spring." Iran counterattacked through its allies in Gaza and Lebanon.

Having failed to veto the Israeli action, the U.S. once again sat in the back seat, offering minimal assistance and trying vainly to keep the Straits of Hormuz open without firing a shot in anger. (When the entire crew of an American battleship was captured and held hostage by Iran's Revolutionary Guards, President Obama's slim chance of re-election evaporated.)

Turkey seized the moment to take the Iranian side, while at the same time repudiating Atatürk's separation of the Turkish state from Islam. Emboldened by election victory, the Muslim Brotherhood seized the reins of power in Egypt, repudiating its country's peace treaty with Israel. The king of Jordan had little option but to follow suit. The Saudis seethed but could hardly be seen to back Israel, devoutly though they wished to avoid a nuclear Iran.

Israel was entirely isolated. The U.S. was otherwise engaged as President Mitt Romney focused on his Bain Capital-style "restructuring" of the federal government's balance sheet.

It was in the nick of time that the United States of Europe intervened to prevent the scenario that Germans in particular dreaded: a desperate Israeli resort to nuclear arms. Speaking from the U.S.E. Foreign Ministry's handsome new headquarters in the Ringstrasse, the European President Karl von Habsburg explained on Al Jazeera: "First, we were worried about the effect of another oil price hike on our beloved euro. But above all we were afraid of having radioactive fallout on our favorite resorts."

Looking back on the previous 10 years, Mr. von Habsburg—still known to close associates by his royal title of Archduke Karl of Austria—could justly feel proud. Not only had the euro survived. Somehow, just a century after his grandfather's deposition, the Habsburg Empire had reconstituted itself as the United States of Europe.

Small wonder the British and the Scandinavians preferred to call it the Wholly German Empire.


—Mr. Ferguson is a professor of history at Harvard University and the author of "Civilization: The West and the Rest," published this month by Penguin Press.

Alemanha quer colocar ordem na integracao europeia (faz muito bem...)

An Economic Government for the Euro Zone?
PETER MÜLLER, RALF NEUKIRCH, CHRISTIAN REIERMANN, MICHAEL SAUGA, CHRISTOPH SCHULT, ANNE SEITH
Der Spiegel online, 31/01/2011

Merkel's Plan Could Transform the European Union

German Chancellor Angela Merkel wants to stabilize the euro through a "pact for competitiveness" that would force EU members to coordinate their national policies on issues like tax, wages and retirement ages. The plan would transform the EU if it becomes reality, but resistance will be fierce -- including from within Merkel's own governing coalition. By SPIEGEL Staff

It was intended to be a pleasant evening. At their meeting in the German government's guesthouse in Meseberg near Berlin last Tuesday, German Chancellor Angela Merkel and European Commission President José Manuel Barroso had set aside plenty of time to resolve their dispute on how to save the euro. The comfortable fireplace room had been prepared, with sparkling wine and beer ready to be served. Only their closest advisers were allowed to attend.

Barroso began with a correction. The Portuguese politician said reports that he disagreed with the chancellor on the euro rescue fund had been incorrect. He said that he had been misunderstood. Although Merkel had a different impression, she let the matter rest.

She was interested in a productive atmosphere for talks because she wanted to win over Barroso for a far greater plan. It is a plan that has evolved slowly -- Merkel had to warm up to the idea herself -- and she knows that it won't appeal to the head of the Commission. Dubbed the "pact for competitiveness," the plan that Merkel has in mind could permanently change the structure of the European Union.

The idea, which the chancellor conveyed to her guest in English, calls for closer cooperation among the member states of the euro zone. It would entail more closely harmonizing their financial, economic and social policies. Merkel hopes that this would prevent the economies of the euro countries from diverging as much as they have over the past few years. If fully adopted, it would take European cooperation to a whole new level.

A New Merkel

Above all, it would mark the emergence of a new German chancellor. Up until now, Merkel has shown herself to be exceedingly hesitant in dealing with the euro crisis. After all, she has never been a fully committed supporter of the European project. During her early life in communist East Germany, before the fall of the Berlin Wall, Merkel was mainly interested in West Germany and the US, which she regarded with a sense of longing. Yet she didn't lend nearly as much attention to the region that lay between these two countries.

As chancellor, Merkel saw it as her duty to protect Germany's coffers. When the financial crisis erupted in September 2008, she said, during a flight to St. Petersburg, that the Germans would not bail out ailing Irish banks. That set the tone for her approach to crisis management at the time, and also during the current euro crisis. She has had reservations about aid for Greece and hesitations with regard to the European euro rescue fund. When it comes to safeguarding the European common currency, Merkel has always seemed like a politician who reacts, not one who acts.

But now she intends to fundamentally change things. With her plan, the chancellor wants to do more than just go on the offensive politically. She has also set out to rectify the weakness that the former long-serving Commission President Jacques Delors considers a basic "design flaw" in the monetary union: Although there is a common currency in Europe, there is no corresponding common economic policy.

The Merkel pact aims to remedy this shortcoming, at least in part. According to the plan, the euro-zone countries would coordinate their economic policies far more closely in the future, thus playing a leadership role within the entire EU. What Merkel has in mind is essentially nothing other than the "two-speed Europe" that her finance minister, Wolfgang Schäuble, similarly proposed many years ago.

Political U-Turn

Merkel has made a political U-turn that is virtually as dramatic as the change in course made by her predecessor in office, Gerhard Schröder, when he introduced his radical -- and hugely unpopular -- "Agenda 2010" reforms of the labor market and welfare system. Just as Schröder, a member of the center-left Social Democratic Party (SPD), abandoned what he saw as the outmoded social policy positions of the SPD, Merkel has discarded a number of her fundamental convictions about Europe.

Until recently, the chancellor had strictly opposed any closer cooperation among the 17 countries in the euro zone. She wanted to include all 27 EU member states. Her concern was that this would otherwise lead to a union within the Union. Her fear was that countries that are not members of the euro club, such as Poland, could be sidelined.

As recently as May 2009, Merkel said in a speech given at the Humboldt University in Berlin that she would oppose any "divisions in Europe." She went on to say that she was also against "often ill-conceived demands for more intensive coordination of economic policies" in the euro zone.

Now it's a different story altogether. Now Merkel wants to make the center of the current crisis, the euro zone, into the focus of efforts to combat the common currency's woes. That notwithstanding, the pact is intended to be open to all EU countries, not just the members of the euro zone. That's something which is important for Merkel.

Her plan is ready, but there is still discussion about how to make it reality. Barroso told Merkel during last week's meeting in Meseberg that the European Commission wants to direct the process. Merkel, on the other hand, claims this role for herself and the other heads of state and government. There was reportedly a heated discussion concerning this point. "I will not allow the European Commission to be sidelined," Barroso told his aides afterwards. At least Merkel assured him in Meseberg that the Commission would oversee progress toward the plan's goals in the individual countries. She also said that he could attend meetings when the leaders of the euro-zone countries convene in the future.

Plan to Be Presented to EU Leaders This Week
The schedule for the chancellor's plan is as follows: Merkel and French President Nicolas Sarkozy will present the rough outlines of the plan at the EU summit in Brussels this Friday. The proposal is not on the official agenda. The 27 heads of state and government will confidentially and informally discuss the issue over lunch. Then it will primarily be up to Germany and France to hammer out the details of the plan. But other governments will also participate in the process. The plan is to be discussed in detail at the next regularly scheduled EU summit in late March. The chancellor, however, is also considering calling a special summit before then. Sarkozy is Merkel's most important partner on this issue.

The French president has long advocated intensifying cooperation among euro countries. Although he has failed to push through his pet idea of a central bank that would be independent of political control, the so-called competitiveness pact contains many elements of the "economic government" that France has wanted for so long.

In addition to being aimed at EU players, the plan is designed to send a signal to the financial markets. Interest rates for debt-ridden euro countries have been rising for months because investors don't believe that Europe can agree to a joint economic policy. Now this document, which was prepared by the Europe experts in the Chancellery and sent by e-mail to the Foreign, Finance and Economics Ministries (marked high priority), promises a fundamental improvement. According to the paper, the besieged countries have little chance of paying back their debts over the long term if they "do not improve their competitiveness and achieve a higher rate of growth."

To overcome investor mistrust, the authors write that, as well as a stricter stability and growth pact, "financial, economic and social policies need to be more closely coordinated at a national level." Each country has to "adhere to the respective best practices to improve the overall performance of the euro zone."

The improvements made by member countries in these respects are to be assessed using "objective targets" based on verifiable indicators. If all goes well, this will allow the euro countries to ensure that their wage costs do not diverge too strongly in the future, that funding for pension systems remains stable in the long term and that sufficient investments are made for the future. According to the paper, the important thing is to have goals that have "a close objective connection to the issues of competitiveness, growth and sound fiscal policy."

Fast-Tracking Measures

In order to achieve these objectives as quickly as possible, Merkel is seeking support for an immediate program "that will be implemented on the national level within 12 months" (see graphic). This would entail the member countries adapting "the retirement age to demographic trends" and introducing financial policy rules that are modeled after Germany's so-called debt brake (an amendment to Germany's constitution that requires the government to virtually eliminate the structural deficit by 2016). Furthermore, within one year the countries would have to mutually recognize each other's educational and professional qualifications, as well as introducing a standardized means of assessing corporate tax to avoid so-called tax dumping (i.e. when countries try to attract companies by having an artificially low tax rate).

The report goes on to say that the euro countries should commit to goals that are "more ambitious and more binding" than those already agreed upon among the 27 EU members. And to ensure that the member countries deliver on their pledges, sanctions will not be ruled out.

On this point, however, the paper remains rather vague. Nonetheless, the issue of sanctions is key to the whole endeavor. After all, the competitiveness pact is not the first attempt to harmonize economic and financial policies on the continent. Ever since European leaders agreed nearly 20 years ago to create a common currency, they have been trying to coordinate their economic policies. So far, their efforts have been in vain.

Nothing demonstrates this as clearly as the Stability and Growth Pact, which the EU countries agreed to in the mid-1990s. The agreement was designed to ensure that national governments did not amass too many debts. But when Berlin and Paris violated the deficit criteria in 2003, they did not submit to the agreed-upon sanctions. Instead, the two most powerful countries in the EU managed to have the Stability Pact suspended. Thanks to their efforts, it was subsequently watered down.

The story of the so-called Lisbon Strategy was just as disappointing. In 2000, EU leaders meeting in the Portuguese capital resolved to make Europe the world's most competitive economic region. The lofty intention was never implemented, however, because the member states were unwilling to introduce the required reforms.

Sanctions Unclear

Now Merkel is making a new attempt to coordinate the policies of the member states. The pact is designed to complement the so-called "European semester," which the 27 EU leaders already agreed on last September. The process requires that all draft budgets by EU countries be approved by Brussels in the future.

But this alone is not enough to effectively stabilize the euro, at least according to Merkel's analysis of the situation. There is also a need for coordinated tax, wage and social policies that the national states must agree to.

If the chancellor manages to push through her plan, it would send a strong signal that the Europeans are really prepared to pursue a common approach, each in their own area of responsibility. The Commission would ensure that national governments keep their finances in order. The Eurogroup would see to it that its members remain competitive on the global level.

That's the theory. The problem is that Merkel and her strategists face numerous problems in practice. When the experts in the European capitals examine the proposals from Berlin during the coming days, they will raise the questions that often plague European visions: Are the proposals capable of winning majority support? How binding are the agreements? And last but not least: Who will ensure that they are adhered to?

Wishful Thinking
It is primarily the answer to the last question that remains totally unclear. Sources in the German government argue that EU leaders would adhere to the agreed objectives to avoid losing face in front of their colleagues. The experts say that peer pressure would ensure that the pact is a success.

That, to put it bluntly, is wishful thinking. If push comes to shove, national leaders would rather keep their own voters happy than gratify their colleagues in Europe. On the domestic front, it won't be easy to push through the proposals included in the pact.

Even getting EU member states to mutually recognize each others' professional qualifications within the stated timeframe of 12 months would be a significant challenge. But the goal of raising the retirement age within the same period appears totally unrealistic. The heated debates on raising the retirement age in Germany and other countries demonstrated that such a move is hardly possible without political turmoil.

Overly Broad Targets

Things don't look any better on other fronts. Merkel's plan to prevent tax dumping is aimed at countries like Ireland, where the corporate tax rate is a mere 12.5 percent. The question is where legitimate tax competition ends and dumping begins.

According to sources in the German government, these difficulties mean that, on most of the issues involved, no concrete targets will be agreed upon. Instead, there will be a target range for countries to aim at. Since all countries have to agree on these goals, there is a danger that these target ranges will be extremely broad, which would render them virtually ineffective. There are already proposals for how to proceed should the euro-zone countries be unable to agree on common standards. In this case, according to French Finance Minister Christine Lagarde, there would have to be an arbitration process within the euro zone.

Merkel's plan totally fails to address another problem: There is no strategy for how to bolster Europe's shaky banks. Yet it is precisely in this area that the European Commission feels that member states have a responsibility to act. "Wherever necessary, the member states will have to recapitalize, restructure or liquidate banks," reads a strategy paper.

Nevertheless, the chancellor has a good chance of pushing through her plan in Brussels. After all, she has a bargaining chip. Germany will only agree to additional guarantees for the euro rescue fund -- as the Commission and other parties have called for -- if its partners approve its competitiveness pact. The Chancellery estimates that 23 EU countries will go along with it. Denmark and Sweden are said to be on the fence, while the UK and the Czech Republic are reportedly reluctant.

Resistance in Berlin

There may actually be greater resistance to the plan in Berlin than in Brussels. Merkel, who heads the conservative Christian Democratic Union (CDU), still has to win support for her proposals from her coalition partner, the pro-business Free Democratic Party (FDP). Last Wednesday, the chancellor discussed the plan with Finance Minister Wolfgang Schäuble (CDU), Vice Chancellor Guido Westerwelle (FDP) and Economy Minister Rainer Brüderle (FDP). The two FDP politicians appeared reserved.

In principle, they have nothing against closer cooperation within the euro zone, but the campaign against tax dumping is problematic for the FDP. After all, they have been singing the praises of low corporate taxes for years. It certainly wouldn't be easy for Westerwelle to explain to his already disappointed supporters that he now intends to oppose low tax rates for companies. As it is, there is already growing euroskepticism within the FDP's parliamentary group. The week before last, FDP parliamentarians agreed to take a tough stance on the euro rescue fund. The liberals are not prepared to approve further amendments to the fund.

The issue of economic government is just as unpopular. "The FDP doesn't want an economic government, and it won't approve it in the Bundestag," says the party's spokesman on financial issues in the German parliament, Frank Schäffler. "It would not be acceptable for us to be liable (for other countries) and yet have no influence on (those countries') spending," says Volker Wissing, an FDP politician who is the chairman of the Bundestag's finance committee.

Since a deep sense of euroskepticism is shared by many people in the FDP, Merkel is primarily pinning her hopes on there being other opinions within the ranks of the liberals, for example, among FDP representatives in the European Parliament. An internal paper reads that the euro requires "greater harmonization and coordination of national economic and financial policies."

FDP euroskeptics are also under pressure because German industry supports the Merkel plan. "There is no question that we need closer cooperation in the economic sector," says Deutsche Bank CEO Josef Ackermann. "Everything that leads to better coordination makes sense," says Paul Achleitner, who is chief financial officer at the insurance giant Allianz, while Nikolaus von Bomhard, CEO of leading reinsurance company Munich Re, argues that one shouldn't allow oneself to be deterred by "shock words" like economic government.

Power Struggle with France

It remains to be seen, however, whether the competitiveness pact will actually lead to better coordination. It is also very possible that the Germans are about to enter into a prolonged conflict with France. Merkel's plan touches on more than just the economic health of the euro-zone countries. It also concerns the issue of how power is divided between Paris and Berlin.

On a number of occasions, Sarkozy has already tried to create structures within the EU that increase France's political weight. For instance, two-and-a-half years ago he campaigned to establish a "Mediterranean Union" -- an organization with its own institutions, where France would have assumed the leading role. The plan was thwarted thanks to Merkel's veto.

To foil France's ambitions, Merkel long opposed a special role for the euro zone within the broader European Union. But since the onset of the financial crisis, Germany's resistance has been crumbling. At first, Berlin was generally opposed to special summits for the euro-zone countries. Later, the German government agreed to meetings of national leaders in the event of particularly sensitive issues.

Now such summits will be held on a regular basis. Just how often this will occur is something that Merkel and Sarkozy will have to agree to over the coming months. The French president would prefer to have the euro-zone leaders reach agreements ahead of each EU summit. Then the 27 members of the broader EU would, in principle, merely rubber stamp what the 17 euro-zone members had already decided.

Getting a Bigger Say

That would appeal to Sarkozy, as France would have more influence within this small group. EU member states like Poland, the UK and Sweden, which are more closely aligned with Germany on important economic and financial policy questions, would be excluded, as they don't have the euro.

Working within the smaller group would also make it easier for the French to address issues where their views have differed from the Germans for many years, for example, on topics such as trade and industrial policy.

But these are issues that actually concern every member of the EU. Indeed, Merkel has been pushing for every EU member to be allowed to attend the euro summits. She also wants to prevent these events from being held too often. Ideally, she would like the euro meetings to take place after the regular EU summits. Then the euro-zone countries could not make any pre-arrangements that would affect the entire Union.

The European Commission also has its objections. Although the Eurocrats in Brussels are pleased with Merkel's promise to allow them to oversee the decisions of the Eurogroup, they are afraid that they could lose influence over economic policy in the future voting process. "The Commission has the best expertise to guarantee economic and fiscal surveillance," says Marco Buti, the European Commission's director-general for economic and financial affairs. "Moving it to an inter-governmental level would be a mistake."

'We Will Defend the Euro'

But Merkel is not about to let such objections put the brakes on her plan. At the World Economic Forum in Davos last Friday, she made a plug for her plan in front of top business and political leaders from around the world. In order to protect the euro, new approaches must be adopted, she said. Merkel added that nothing less than Europe's position in the world is at stake.

The often hesitant chancellor appeared highly determined. She said the euro was "the embodiment of Europe today." Then she even allowed herself an uncharacteristic touch of pathos. "We will defend the euro," she said. "There can be no doubt about it."

Translated from the German by Paul Cohen

Europa: razoes das agruras economicas - Stratfor

Uma das melhores análises, que ja li, sobre as origens estruturais dos desequilíbrios europeus.
Paulo Roberto de Almeida

Europe, The New Plan
By Peter Zeihan
Stratfor, December 21, 2010

Europe is on the cusp of change. An EU heads-of-state summit Dec. 16 launched a process aimed to save the common European currency. If successful, this process would be the most significant step toward creating a singular European power since the creation of the European Union itself in 1992 — that is, if it doesn’t destroy the euro first.

Envisioned by the EU Treaty on Monetary Union, the common currency, the euro, has suffered from two core problems during its decade-long existence: the lack of a parallel political union and the issue of debt. Many in the financial world believe that what is required for a viable currency is a fiscal union that has taxation power — and that is indeed needed. But that misses the larger point of who would be in charge of the fiscal union. Taxation and appropriation — who pays how much to whom — are essentially political acts. One cannot have a centralized fiscal authority without first having a centralized political/military authority capable of imposing and enforcing its will. Greeks are not going to implement a German-designed tax and appropriations system simply because Berlin thinks it’s a good idea. As much as financiers might like to believe, the checkbook is not the ultimate power in the galaxy. The ultimate power comes from the law backed by a gun.

Europe’s Disparate Parts
This isn’t a revolutionary concept — in fact, it is one most people know well at some level. Americans fought the bloodiest war in their history from 1861 to 1865 over the issue of central power versus local power. What emerged was a state capable of functioning at the international level. It took three similar European wars — also in the 19th century — for the dozens of German principalities finally to merge into what we now know as Germany.

Europe simply isn’t to the point of willing conglomeration just yet, and we do not use the American Civil War or German unification wars as comparisons lightly. STRATFOR sees the peacetime creation of a unified European political authority as impossible, since Europe’s component parts are far more varied than those of mid-19th century America or Germany.

Northern Europe is composed of advanced technocratic economies, made possible by the capital-generating capacity of the well-watered North European Plain and its many navigable rivers (it is much cheaper to move goods via water than land, and this advantage grants nations situated on such waterways a steady supply of surplus capital). As a rule, northern Europe prefers a strong currency in order to attract investment to underwrite the high costs of advanced education, first-world infrastructure and a highly technical industrial plant. Thus, northern European exports — heavily value added — are not inhibited greatly by a strong currency. One of the many outcomes of this development pattern is a people that identifies with its brethren throughout the river valleys and in other areas linked by what is typically omnipresent infrastructure. This crafts a firm identity at the national level rather than local level and assists with mass-mobilization strategies. Consequently, size is everything.
Southern Europe, in comparison, suffers from an arid, rugged topography and lack of navigable rivers. This lack of rivers does more than deny them a local capital base, it also inhibits political unification; lacking clear core regions, most of these states face the political problems of the European Union in microcosm. Here, identity is more localized; southern Europeans tend to be more concerned with family and town than nation, since they do not benefit from easy transport options or the regular contact that northern Europeans take for granted. Their economies reflect this, with integration occurring only locally (there is but one southern European equivalent of the great northern industrial mega-regions such as the Rhine, Italy’s Po Valley). Bereft of economies of scale, southern European economies are highly dependent upon a weak currency to make their exports competitive abroad and to make every incoming investment dollar or deutschemark work to maximum effect.
Central Europe — largely former Soviet territories — have yet different rules of behavior. Some countries, like Poland, fit in well with the northern Europeans, but they require outside defense support in order to maintain their positions. The frigid weather of the Baltics limits population sizes, demoting these countries to being, at best, the economic satellites of larger powers (they’re hoping for Sweden while fearing it will be Russia). Bulgaria and Romania are a mix of north and south, sitting astride Europe’s longest navigable river yet being so far removed from the European core that their successful development may depend upon events in Turkey, a state that is not even an EU member. While states of this grouping often plan together for EU summits, in reality the only thing they have in common is a half-century of lost ground to recover, and they need as much capital as can be made available. As such variation might suggest, some of these states are in the eurozone, while others are unlikely to join within the next decade.
And that doesn’t even begin to include the EU states that have actively chosen to refuse the euro — Denmark, Sweden and the United Kingdom — or consider the fact that the European Union is now made up of 27 different nationalities that jealously guard their political (and in most cases, fiscal) autonomy.

The point is this: With Europe having such varied geographies, economies and political systems, any political and fiscal union would be fraught with complications and policy mis-prescriptions from the start. In short, this is a defect of the euro that is not going to be corrected, and to be blunt, it isn’t one that the Europeans are trying to fix right now.

The Debt Problem
If anything, they are attempting to craft a work-around by addressing the second problem: debt. Monetary union means that all participating states are subject to the dictates of a single central bank, in this case the European Central Bank (ECB) headquartered in Frankfurt. The ECB’s primary (and only partially stated) mission is to foster long-term stable growth in the eurozone’s largest economy — Germany — working from the theory that what is good for the continent’s economic engine is good for Europe.

One impact of this commitment is that Germany’s low interest rates are applied throughout the currency zone, even to states with mediocre income levels, lower educational standards, poorer infrastructure and little prospect for long-term growth. Following their entry into the eurozone, capital-starved southern Europeans used to interest rates in the 10-15 percent range found themselves in an environment of rates in the 2-5 percent range (currently it is 1.0 percent). To translate that into a readily identifiable benefit, that equates to a reduction in monthly payments for a standard 30-year mortgage of more than 60 percent.

As the theory goes, the lower costs of capital will stimulate development in the peripheral states and allow them to catch up to Germany. But these countries traditionally suffer from higher interest rates for good reasons. Smaller, poorer economies are more volatile, since even tiny changes in the international environment can send them through either the floor or the roof. Higher risks and volatility mean higher capital costs. Their regionalization also engenders high government spending as the central government attempts to curb the propensity of the regions to spin away from the center (essentially, the center bribes the regions to remain in the state).

This means that when the eurozone spread to these places, theory went out the window. In practice, growth in the periphery did accelerate, but that growth was neither smooth nor sustainable. The unification of capital costs has proved more akin to giving an American Express black card to a college freshman: Traditionally capital poor states (and citizens) have a propensity to overspend in situations where borrowing costs are low, due to a lack of a relevant frame of reference. The result has been massive credit binging by corporations, consumers and governments alike, inevitably leading to bubbles in a variety of sectors. And just as these states soared high in the first decade after the euro was introduced, they have crashed low in the past year. The debt crises of 2010 — so far precipitating government debt bailouts for Ireland and Greece and an unprecedented bank bailout in Ireland — can be laid at the feet of this euro-instigated over-exuberance.

It is this second, debt-driven shortcoming that European leaders discussed Dec. 16. None of them want to do away with the euro at this point, and it is easy to see why. While the common currency remains a popular whipping boy in domestic politics, its benefits — mainly lower transaction costs, higher purchasing power, unfettered market access and cheaper and more abundant capital — are deeply valued by all participating governments. The question is not “whither the euro” but how to provide a safety net for the euro’s less desirable, debt-related aftereffects. The agreed-upon path is to create a mechanism that can manage a bailout even for the eurozone’s larger economies when their debt mountains become too imposing. In theory, this would contain the contradictory pressures the euro has created while still providing to the entire zone the euro’s many benefits.

Obstacles to the Safety Net
Three complications exist, however. First, when a bailout is required, it is clearly because something has gone terribly wrong. In Greece’s case, it was out-of-control government spending with no thought to the future; in essence, Athens took that black card and leapt straight into the economic abyss. In Ireland’s case, it was private-sector overindulgence, which bubbled the size of the financial sector to more than four times the entire country’s gross domestic product. In both cases, recovery was flat-out impossible without the countries’ eurozone partners stepping in and declaring some sort of debt holiday, and the result was a complete funding of all Greek and Irish deficit spending for three years while they get their houses in order.

“Houses in order” are the key words here. When the not-so-desperate eurozone states step in with a few billion euros — 223 billion euros so far, to be exact — they want not only their money back but also some assurance that such overindulgences will not happen again. The result is a deep series of policy requirements that must be adopted if the bailout money is to be made available. Broadly known as austerity measures, these requirements result in deep cuts to social services, retirement benefits and salaries. They are not pleasant. Put simply: Germany is attempting to trade financial benefits for the right to make policy adjustments that normally would be handed by a political union.

It’s a pretty slick plan, but it is not happening in a vacuum. Remember, there are two more complications. The second is that the Dec. 16 agreement is only an agreement in principle. Before any Champagne corks are popped, one should consider that the “details” of the agreement raise a more than “simply” trillion-euro question. STRATFOR guesses that to deliver on its promises, the permanent bailout fund (right now there is a temporary fund with a “mere” 750 billion euros) probably would need upwards of three trillion euros. Why so much? The debt bailouts for Greece and Ireland were designed to completely sequester those states from debt markets by providing those governments with all of the cash they would need to fund their budgets for three years. This wise move has helped keep the contagion from spreading to the rest of the eurozone. Making any fund credible means applying that precedent to all the eurozone states facing high debt pressures, and using the most current data available, that puts the price tag at just under 2.2 trillion euros. Add in enough extra so that the eurozone has sufficient ammo left to fight any contagion and we’re looking at a cool 3 trillion euros. Anti-crisis measures to this point have enjoyed the assistance of both the ECB and the International Monetary Fund, but so far, the headline figures have been rather restrained when compared to future needs. Needless to say, the process of coming up with funds of that magnitude when it is becoming obvious to the rest of Europe that this is, at its heart, a German power play is apt to be contentious at best.

The third complication is that the bailout mechanism is actually only half the plan. The other half is to allow states to at least partially default on their debt (in EU diplomatic parlance, this is called the “inclusion of private interests in funding the bailouts”). When the investors who fund eurozone sovereign debt markets hear this, they understandably shudder, since it means the European Union plans to codify giving states permission to walk away from their debts — sticking investors with the losses. This too is more than simply a trillion-euro question. Private investors collectively own nearly all of the eurozone’s 7.5 trillion euros in outstanding sovereign debt. And in the case of Italy, Austria, Belgium, Portugal and Greece, debt volumes worth half or more of GDP for each individual state are held by foreigners.

Assuming investors decide it is worth the risk to keep purchasing government debt, they have but one way to mitigate this risk: charge higher premiums. The result will be higher debt financing costs for all, doubly so for the eurozone’s more spendthrift and/or weaker economies.

For most of the euro’s era, the interest rates on government bonds have been the same throughout the eurozone, based on the inaccurate belief that eurozone states would all be as fiscally conservative and economically sound as Germany. That belief has now been shattered, and the rate on Greek and Irish debt has now risen from 4.5 percent in early 2008 to this week’s 11.9 percent and 8.6 percent, respectively. With a formal default policy in the making, those rates are going to go higher yet. In the era before monetary union became the Europeans’ goal, Greek and Irish government debt regularly went for 20 percent and 10 percent, respectively. Continued euro membership may well put a bit of downward pressure on these rates, but that will be more than overwhelmed by the fact that both countries are, in essence, in financial conservatorship.

That is not just a problem for the post-2013 world, however. Because investors now know the European Union intends to stick them with at least part of the bill, they are going to demand higher returns as details of the default plan are made known, both on any new debt and on any pre-existing debt that comes up for refinancing. This means that states that just squeaked by in 2010 must run a more difficult gauntlet in 2011 — particularly if they depend heavily on foreign investors for funding their budget deficits. All will face higher financing and refinancing costs as investors react to the coming European disclosures on just how much the private sector will be expected to contribute.

Leaving out the two states that have already received bailouts (Greece and Ireland), the four eurozone states STRATFOR figures face the most trouble — Portugal, Belgium, Spain and Austria, in that order — plan to raise or refinance a quarter trillion euros in 2011 alone. Italy and France, two heavyweights not that far from the danger zone, plan to raise another half-trillion euros between them. If the past is any guide, the weaker members of this quartet could face financing costs of double what they’ve faced as recently as early 2008. For some of these states, such higher costs could be enough to push them into the bailout bin even if there is no additional investor skittishness.

The existing bailout mechanism probably can handle the first four states (just barely, and assuming it works as advertised), but beyond that, the rest of the eurozone will have to come up with a multitrillion-euro fund in an environment in which private investors are likely to balk. Undoubtedly, the euro needs a new mechanism to survive. But by coming up with one that scares those who make government deficit-spending possible, the Europeans have all but guaranteed that Europe’s financial crisis will get much worse before it begins to improve.

But let’s assume for a moment that this all works out, that the euro survives to the day that the new mechanism will be in place to support it. Consider what such a 2013 eurozone would look like if the rough design agreed to Dec. 16 becomes a reality. All of the states flirting with bailouts as 2010 draws to a close expect to have even higher debt loads two years from now. Hence, investors will have imposed punishing financing costs on all of them. Alone among the major eurozone countries not facing such costs will be Germany, the country that wrote the bailout rules and is indirectly responsible for managing the bailouts enacted to this point. Berlin will command the purse strings and the financial rules, yet be unfettered by those rules or the higher financing costs that go with them. Such control isn’t quite a political union, but so long as the rest of the eurozone is willing to trade financial sovereignty for the benefits of the euro, it is certainly the next best thing.