EUROPE – Carpe Diem – November 25, 2011
The Window of Opportunity is Closing
The window of opportunity for the USA to have great input in defining the next phase of Europe may have a date for its closure – December 9th – the date for the next EU “summit” in Brussels. For the last month and continuing, Merkel is running a full diplomatic offensive to arrive at the following goals:
- 1. Commitment of all EZ countries to a rewrite of the Consolidated Treaty (Lisbon) which would arrive at “fiscal union”.
- 2. “Fiscal union” would be a rules based system under the European Court of Justice (ECJ) (a most curious use of a supreme judicial body) that would enforce via sanctions and penalties the Treaty metrics like debt to GDP and deficit levels and other measures of spending.
- 3. Acknowledge the legislated authority and independence of the ECB, but with unspoken threats as to their implementation of policy that is not aligned with Germany.
The ascendency of Monti was officially blessed by Merkel and Sarkozy yesterday, which is a dangerous precedent in suggesting that Sarkozy and Merkel have such a power of sanctioning and that an unelected technocrat can have legitimate authority as a head of state.
It seems obvious to me that Merkel’s objective will be a confederation of the EZ with fiscal sovereign authority surrendered to under an ECJ permanently standing fiscal “specialty” committee of the court armed with discovery and review and the ability to apply penalties. The ECJ does not enjoy the complete and well defined independence of the ECB and is obviously a “confederate” structure while the ECB is obviously a federal structure. The prescribed mandate for the ECJ (Protocol 3) is to solely ascertain that the provisions of the treaty are being applied and respected – they do not have an interpretive law – Marbury has not occurred in Europe and likely never will have reason to occur. The ECJ is under the rule of the EU, it is not independent and there are no “checks and balances” ideals and although justices are appointed one per EZ country, sub courts and specialty courts are defined by the Treaty and limited to that function which will allow suasion and oversight similar to the informal ad hoc Merkel led takeover we are experiencing now.
In other words the most basic sovereign right – to set a budget and taxation – will be surrendered to a standing committee of a specialty court. The construct to provide rule of Italy and Greece by unelected technocrats Monti and Papademos, will be the standing order under an ECJ supervised EZ budget process, only the Monti(s) and Papademos(s) types will become serving justices on the permanently standing budget oversight specialty court.
It is obvious that Merkel is trying to sideline the ECB back to being a mere “currency board”, setting the value of the Euro and no more.
With the budget process via the ECJ oversight will entrench the German hegemon, translating economic clout into political power, this ECB function of maintaining the Euro only will allow Germany to maintain the dominant competitive position within in EZ – basically making the PIIGS or internal deficit countries colonies. That combined with a corporatist “post-democratic’ plutocracy armored with deliberate complexity will make it very difficult and a long and tedious process to dismantle this Merkel design.
This, while perhaps more effective than what has experienced, is obviously not democratic and given that along with these treaty changes Germany is not entertaining any permanent measures to achieve internal balance – the Schengen Plan has all but disappeared so no significant internal immigration will occur to achieve balance, and of course Germany is adamant about no transfer payments from surplus to deficit locales be allowed (this is despite the fact that every successful federation or even confederation in history required 10% or so of GDP per annum in transfer payments to maintain union) – given these internal rebalancing will not be allowed, then of course serious civil strife will be the results. Those terrible groups who are now history will re-emerge, and now justified in the eyes of their cadre, like the Red brigade, the ETA, the IRA (not in Northern Ireland but Southern Ireland or Ireland entire), Greek communists, Italy ‘P2” type of organizations, and even the Maoists will revisit Germany.
The Reason the “Merkel Confederation Plan” is Unacceptable to the USA
Of course this confederation Merkel envisions, with the German hegemony oversight it will have and will require will not be able to sustain NATO nor any hard power of any usefulness as an ally for the USA for decades to come. A key to this confederate structure surviving will be the lack of motive for any hard power – so Germany and the plutocrats will endeavor to maintain the USA “court eunuch” role and expect the USA to guard the harem. Otherwise, if any hard power develops with any EZ or attached EU countries, an arms race will develop first to police the growing insurgency and civil strife and later to offset the German hegemon. It is not clear that Germany will allow increase of US troops in the area and the recent approach by Germany to Libya is an indication of what this new EZ “power” will be like. The USA will be backed into writing a free security option for the EU, providing the trumping defensive hard power but always being the receiver of any blame for misguided adventures. It should be noted that for the last several decades Europe foreign policy, under the veneer of self-righteous “green” and rights and so on, has been bare knuckles neo-colonial adventures of commerce devoid of any rights or ideology so when it goes astray it cannot be defended. The USA hard power will be sucked into these adventures on behalf of Euro business, usually in the volatile North Africa area, and then if there is mishap be blamed. This would likely destroy any progress we may be making with a Bush Doctrine or Obama’s Egyptian speech.
Almost all pundits analysis and input that is political accepts as a given Germany’s voice and right to pursue the course Merkel is setting. That if the non-democratic nature of Monti and Papademos assumption of power is noted, it is not considered being a characteristic of the nature of the EZ crisis.
Given that I am singular in describing the EZ debt crisis as a constitutional crisis and not at all related to economics or fiscal policy or markets – they are but symptoms – the ascension of Monti and Papademos will be used in history as a main characteristic as to what the crisis is all about.
Analysis that is not centered on the constitutional and Hegelian historical, will be in error.
Any technical assistance to Europe to “muddle through” misses that this is a rare window of opportunity for the USA, a window which may close on Dec 9th.
For example, it is incorrect for the Sec of Treasury to be taking a leading role during this crisis. The correct placement for US interaction with the EZ and the design of our policy should be with the Sec of State, if overt, and other US entities if covert. If US policy is being designed at those locales then we correctly understand the problem.
We cannot have one philosophical message for Egypt and another for the EZ.
It may seem the two locales are a world apart but they are both constitutional crisis. In Egypt our main effort is to bring a liberal democracy to Egypt so as to curtail the fascism implicit with Islamism or the authoritarianism of the military economic opportunism. The US would never see efficacy in sending Sec Geithner to Egypt now, nor allow his area to design strategy for Egypt but for technical assistance – Egypt is in the domain of either POTUS or Sec Clinton or your department.
EZ does not have the obvious violence and strife of the Tahrir Sq., but the problem of designing governance and sovereign definition and the core constitutional nature of the crisis is the same as Egypt. So why is Sec Geithner our main contact point now for Europe? I do not think the US leadership for this crisis are receiving adequate or the correct input. Why is the data and input they are receiving now mostly financial economics and numbers and market input? How much input are they receiving that goes over the historical thrust and Hegelian flow of Europe now, and the constitutional aspects of the crisis. Have our foreign policy leadership received a detailed summation of the constitutionality of the ECB, for example? Are they receiving ideas on how to use the ECB and force constitutional forming of Europe, or are they receiving the contagion implications via market structure? I am reading nothing from DC and other quality analysis and press which go beyond the market and technical nature of the EZ crisis – to me this is a sign of a fabulous error and possible catastrophic course being pursued, if such press reflects the DC policy designer’s mindset.
Given that the US is recovering and our ability to insulate ourselves from the EZ immediate outcome is ever increasing, and given the fact that Germany and Northern Europe are still powerful and liquid – it seems that a “muddle through” pragmatic course of action is being applied with technical measures and input from the USA as Merkel drives for her Dec 9th commitment. This is a serious error.
If a “muddle through” technical path is being applied now there will be likely some success, enough so it seems the USA has done what can be done, but for the USA would actually be helping Merkel close the window on the USA ability to provide suasion in designing the Europe the USA would like in the decades to come.
What Form must the EZ Take: Requisites of a Sovereign Federal Democracy
What form should that Europe take, or has to take to be an adequate partner and friend of the USA:
- 1. The EZ must be a democratic federation;
- 2. Must have a singular liquid “full faith and credit” debt market
- 3. A fully independent central bank
- 4. Universal taxation and decision process to decide on that tax – therefore a federal legislature and a national police force to enforce
- 5. Total mobility of populace at all times for both travel and also to seek new residences of opportunity, liquid internal economic migration
- 6. A hard power capable of mobilizing up to 10% of the populace during crisis to provide national defense
- 7. Close treaty association with the USA
- 8. Supreme court to adjudicate dispute
- 9. Executive power in an EZ wide directly elected executive office
The USA should apply all possible diplomatic, overt and covert power to reach the above objectives. The USA should be aware that the “post-democratic” German hegemon confederation that now has momentum will not be in the USA best interest and will be a danger to the USA and will be in place for the next several decades.
Why Now? Why Urgency?
The USA has to realize an epic transformative historical moment is now occurring which will have a limited time span in terms of formation and definition and that the path of EZ history, the flow, has hit a Hegelian node and is about to branch to one thesis or another. That the thesis that will be the results will be a reality for several decades. It will be cast in cement.
This current point in time for the EZ is, I think, a swift and most significant massive shift – major historical tectonic plates are being realigned. The markets and input of BTP or Germany Bund auction results are, I think, distractions which may lead to policy errors if they are confused with the main problem.
History and SOSH over Finance and Econ
Just as the USA saw the importance of focus on the anthropological nature of the Iraq and Afghanistan crisis, so that US resources could be applied effectively and not be in opposition to the momentum of centuries of history, I think that Europe should be seen through the lenses of history and sociology and the political. The only economics that should be applied now are political economics. Europe is not a financial event nor is it an economic event – it is a constitutional event.
The USA right to be involved in Europe at this stage is unquestionable. I just finished reading If You Survive by George Wilson who served as a LT in the 22nd Reg, 4th Div in WW II and whose unit went through 167% casualty rate and the Hurtgen Forest and later the Bulge. (it is interesting to note Wilson acquired 2 Purple hearts, 2 Bronze Stars and a Silver Star before returning to civilian life where he became an average life insurance salesman. That he never was promoted but was always a LT even though due to casualties he had company command for months in combat. Very “American” – an average “Cincinnatus” ) My point here is that the USA has a duty and right to help in the formation of the EZ not only as we are “exceptional” and the “last great hope on earth” going forward, but also based upon our blood spilt and treasure spent in the EZ. I strongly feel that the current crisis in EZ is, hopefully, the last phase of WW II, and given the USA role we are one of the major actors.
The Remedy for the EZ Crisis With USA Leadership
I think it is important that the Department of State with the President take on the EZ portfolio, with technical input only from Treasury and the Fed. That the Union of Europe in the EZ becomes a most important objective of US foreign policy so as to realize the characteristics of an appropriate ally and friend listed above.
I suspect Jean Monnet was heavily influenced by US interests if not at times an agent for the USA – so the current form of the EZ is in many ways a US creation, and given the blood that the USA has spilt in Europe and the treasure spent, the USA has historical precedence and reason and right to do all we can to form a sovereign Europe. I strongly feel we must.
As the Dept. of State takes on the EZ portfolio, an important first step is to insist on the basic democratic principles for the EZ that we require for all other areas of the world. That the USA withdraws support for technocratic un-elected governance, no matter the cause, of a people. Then the USA provides diplomatic suasion to reach the form of the EZ that would be in the best interest of the USA. That we understand the leverage we have in that US hard power in Europe is critical to the Merkel plan succeeding, for the German hegemon confederation cannot have any hard power of note with any of the confederate members. In a way this is an “inverse Metternich” structure. [I think one wild card is that a German hegemon confederation will inspire a general Polish rearming – which will throw the lot into chaos.]
The Remedy, First Essential Step: ECB “Buys All Bonds”
ECB is the Essential Institution
To forestall the Dec 9th date, and to prevent this window of opportunity from closing, all possible roads or persuasion to have the ECB commit a significant “buy all bonds” action should be applied by the USA.
The ECB charter and mandate as defined in Protocol 4 (referencing many articles throughout the Treaty) clearly show the ECB is the sole and only empowered federal structure in the EZ. That it supersedes any nation, like Germany, in seniority and is over all EZ institutions. That it is the only institution that could withstand a technocratic “counter-attack” led by the hegemonic Germans and plutocrats in Brussels that will come if the ECB takes such action.
The ECB “buy all bonds” must be federal and constitutional and not based upon market dynamics. It would be best to do such an act not on one of the “crisis” market days but on a calm day as possible. The action is to define the federal nature of the ECB, and thereby the EZ itself, and not to support market levels. Once such a definition is accomplished no market support will be required in any case as the crisis will be over given that it is constitutional and that the lack of clear federal definition of the EZ has yet to be provided. Once the ECB acts it via such action defines the EZ constitutionally, basically declaring sovereignty and then all market pricing and expectations for all EZ member debt becomes “one”.
The ECB act must be “blind” to what EZ debt is offered to the ECB “window” – it must be “all bonds”, taking in at the best price offered swaths of $100 billion tranches at a time until all EZ debt normalizes at the same price. While the ECB should make it clear that it will go to trillions of such purchases, as soon as the market realizes the fundamental nature of ECB sincerity and integrity and intent – all EZ debt will trade at the same price. German debt will rise in yield significantly, perhaps 100 basis points or more and Greek debt will meet that level swiftly. “Many become one”.
This moves the EZ status from a “problem” of crisis to a non-crisis “situation”. With the focus now on the ECB, empowered with the clearly written Protocol 4 independence, the ECB becomes the setting for the start and end of nation forming and constitutional drafting versus a constantly morphing and complex informal power structure that is now driving Europe. Germany loses power as “the leader” and becomes simply one of the largest areas of prosperity. In order to provide oversight for this now extremely powerful ECB, appropriate constitutionally defined governance has to be defined – quickly.
Constitutional drafting must commence and then in that process each EZ country has the same voice, the same power and the intellectual capital and leadership of all the EZ is then deployed. In the meantime the EZ ally, the USA – the only ally who can demonstrate such support and friendship and with the power to do so –will provide technical support and protection financially via the Fed and security via NATO during this very dynamic phase. The constitutional drafting phase may take close to two years to reach conclusion. The power of debate returns to the people and the effective putsch that Merkel is now implementing is finished.
The United States of Europe must now be formed for the prosperity and security of the European people, as well as for the prosperity and security of the USA.
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