Exclusive: French, Germans explore idea of core euro zone

[Bosonic]

Source: Reuters

(Reuters) - German and French officials have discussed plans for a radical overhaul of the European Union that would involve establishing a more integrated and potentially smaller euro zone, EU sources say.

French President Nicolas Sarkozy gave some flavor of his thinking during an address to students in the eastern French city of Strasbourg on Tuesday, when he said a two-speed Europe -- the euro zone moving ahead more rapidly than all 27 countries in the EU -- was the only model for the future.

The discussions among senior policymakers in Paris, Berlin and Brussels go further, raising the possibility of one or more countries leaving the euro zone, while the remaining core pushes on toward deeper economic integration, including on tax and fiscal policy.

A senior EU official said changing the make-up of the euro zone has been discussed on an "intellectual" level but had not moved to operational or technical discussions, while a French government source said there was no such project in the works.

Read more: http://www.reuters.com/article/2011/11/09/us-eurozone-future-sarkozy-idUSTRE7A85VV20111109

[Myrina]

1. So Europe's going to have its own "Third World' Zone?

" ... a two-speed Europe -- the euro zone moving ahead more rapidly than all 27 countries in the EU -- was the only model for the future ..."


:wtf:

[xchrom]

2. Recommend

[FreeBillClinton]

3. Sounds like a good idea. They expanded too rapidly.

Italy and Spain were high risk from the get go, and then they started expanding into riskier countries without ever straitening out the finances of Italy and Spain.

[DallasNE]

12. Deregulation And

Derivatives equals disaster. The same thing that took down Freddie and Fannie went to work in Europe too. That and their central bank either didn't have the vision of Bernanke or didn't have the political backing to make the necessary changes. Blaming the victim won't solve the problem. It takes political leadership and I don't see any in Europe right now.

[bemildred]

4. Crumble, crumble, crumble ... nt

[frazzled]

5. Jeepers

What a mess. There are no good options.

[banned from Kos]

6. The PIGS are hurting us - they are pure poison to "Core" Europe.

market cratering today.

Italy 10yr bonds at 7.25%. They will have to slash cost.

[JackRiddler]

10. All simplifications are bad, but this one is pretty much the 180-degree opposite of truth.

[DonCoquixote]

11. translation

The countries that were hard socialist were not capitalist enough for the same countries that prop up Karel marx every chance they get (even if they depend on china to maintain his grave in Paris.)

[jman0]

15. Silly post

For one, Karl Marx's tomb is located in LONDON.
For two, not all the eurozone debt crisis is a result of "too much socialism".
Ireland's debt for instance wasn't a result of government over-spending. It was the result of private banks running up massive debts financing a property bubble.

But the over-riding problem with the EU is that it doesn't have regulatory power (real teeth) over it's member states. So it'll be further harmonization (harmonized tax policy and regulatory environ).

Expect to see countries scrambling to hitch themselves onto Germany and France's wagon.
But will countries forfeit control of their tax policies?
Hard pill to swallow for Ireland (MNC's tax haven).

[JackRiddler]

16. London Schmondon. Maybe he has Karel Murx confused with Jim Marxison.

Six of one, half dozen of the other.

[Demeter]

7. Better to eject the core

Everything I know I learned from Star Trek....

[Mosaic]

8. I think the euro will fail

Each country should be on its own again. No neoliberal philosophy should infiltrate any country.

[Hosnon]

9. History is repeating itself in a generalized way.

The current EU is the US under the Articles of Confederation.

They're finding out that sharing a currency without sharing policy can lead to disaster.

[DeSwiss]

13. Hey Sarkozy, here's yer new model......

- I hate watching a break-ups. Even when it's the best thing for everyone involved........


K&R

Iceland Showed The World How To Become Free

Contrary to what could be expected, the crisis resulted in Icelanders recovering their sovereign rights, through a process of direct participatory democracy that eventually led to a new Constitution. But only after much pain. Geir Haarde, the Prime Minister of a Social Democratic coalition government, negotiated a two million one hundred thousand dollar loan, to which the Nordic countries added another two and a half million. But the foreign financial community pressured Iceland to impose drastic measures. The IMF and the European Union wanted to take over its debt, claiming this was the only way for the country to pay back Holland and Great Britain, who had promised to reimburse their citizens.

Protests and riots continued, eventually forcing the Icelandic government to resign. Elections were brought forward to April 2009, resulting in a left-wing coalition which condemned the neoliberal economic system, but immediately gave in to IMF demands that Iceland pay off a total of three and a half million Euros. This required each Icelandic citizen to pay 100 Euros a month (or about $130) for fifteen years, at 5.5% interest, to pay off a debt incurred by private parties vis a vis other private parties. It was the straw that broke the reindeer’s back.

What happened next was extraordinary. The belief that citizens had to pay for the mistakes of a financial monopoly, that an entire nation must be taxed to pay off private debts was shattered, transforming the relationship between citizens and their political institutions and eventually driving Iceland’s leaders to the side of their constituents. The Head of State, Olafur Ragnar Grimsson, refused to ratify the law that would have made Iceland’s citizens responsible for its bankers’ debts, and accepted calls for a referendum.

In the March 2010 referendum, 93% of Icelanders voted against repayment of the banker's debts. The IMF immediately froze its loan. But the revolution (though not televised in the United States), would not be intimidated. With the support of a furious citizenry, the government launched civil and penal investigations into those responsible for the financial crisis. Interpol put out an international arrest warrant for the ex-president of Kaupthing, Sigurdur Einarsson, as the other bankers implicated in the crash fled the country. But Icelanders didn't stop there: they decided to draft a new constitution that would free the country from the exaggerated power of international finance and virtual money. http://www.dailykos.com/story/2011/08/01/1001662/-Icelands-On-going-Revolution">link

[Prometheus Bound]

14. Hey, stop posting that stuff.

What if taxpayers in other countries get the idea that they aren't responsible for paying for their bankers' bad investments? The poor bankers would be fucked!

[DeSwiss]

17. Whoops.

- Cat's out the bag now.....

[pampango]

18. French and German officials deny reports of talks on shrinking the eurozone...

as currency bloc faces "moment of truth".

A German government spokesperson said that Berlin was not pursuing the idea of a smaller eurozone. "Reports that Germany is pursuing plans for a smaller eurozone are false," Steffen Seibert, a German government spokesperson, said in a statement on Twitter.

A French source also said there were no plans to shrink the eurozone.

German and French officials denied plans to break-up the 17-nation bloc on Thursday after Reuters reported that the eurozone's two biggest economies had informally discussed creating a smaller, more tightly integrated single currency area.

"There cannot be peace and prosperity in the north or in the west of Europe, if there is no peace and prosperity in the south or in the east," Barroso said in a speech in Berlin late on Wednesday.

http://www.aljazeera.com/news/europe/2011/11/2011111013581936559.html

It would seem that there needs to be a tighter integration of the existing Eurozone countries or a segregation of the rich and poor Eurozone countries. The former would anger the "national sovereignty" crowd (Eurosceptics), the latter would make them happy by reversing the trend of integrating European countries.