Europe: Four steps to fiscal union

Inquiring minds are reading "Towards a Genuine Economic and Monetary Union" by the gang of four nannycrats: European commission president Herman Van Rompuy, ECB president Mario Draghi,  José Manuel Barroso of the European commission, and Jean-Claude Juncker, the leader of the 17-country eurogroup. Don't expect any details. There aren't any. Instead the document consists of a wish list wrapped in a wordy package that says virtually nothing.

By Simon Johnson Most experienced watchers of the eurozone are expecting another serious crisis to break out in early 2011.  This projected crisis is tied to the rollover funding needs of weaker eurozone governments, i.e., debts falling due in March through May, and therefore seems much more predictable than what happened to Greece or Ireland in 2010.  The investment bankers who fell over themselves to lend to these countries on the way up, now lead the way in talking up the prospects for a serious crisis.

On December 8 Merkel and Sarkozy will have reached a 6-point agreement requiring ratification of a new treaty. However, details will not be finalized until March. At that time, if all goes to plan (and it won't), a vote by all 27 EU nations will take place. If that fails (and hopefully the UK torpedoes it), various aspects of the treaty might still be ratified by (and apply only to) the 17-member Eurozone nations. However, fiscal rules will still require individual referendums in Ireland and in my opinion Germany. Got that?

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter Why is it that 17 nations have to fundamentally reorganize themselves and shift sovereignty away from national parliaments to new layers of centralized bureaucracies beyond democratic controls that can decide at will to extract untold wealth from taxpayers—just to save the banks?

I frequently disagree with Financial Times writer Wolfgang  Münchau, especially on keeping the eurozone and EU intact. Today, I largely agree (but sometimes for opposite reasons) with Münchau's take in Britain’s bluster serves the eurozone well.

Report Shows Netherlands Would Benefit by Leaving Eurozone Inquiring minds are reading a 73 page detailed report The Netherlands & The Euro that explains country by country why Italy, Greece, Portugal, and Spain are going to need lots more money, and the Netherlands and Germany will end up footing the bill.

France has encouraged Spain to apply for aid as soon as possible. In Germany, Wolfgang Schäuble wants anything but a timely application. Note that unless a country requests a bailout, and agrees to terms set by the IMF (something Spain does not want to do), the entire OMT plan of Draghi is useless. Finally, at the latest EU finance meeting on Saturday, battles between eurozone and non-eurozone countries erupted over the banking union.

Realization the Eurozone is no longer tenable is at long last recognized. In fact, "intense discussions" have been underway for months but are just mow admitted to by senior EU officials.Bloomberg reports U.S. Stocks Extend Declines on Concern Nations May Exit EuroU.S. stocks extended declines following a report that German Chancellor Angela Merkel’s party wants to make it possible for European nations to exit the euro area.