“The euro does not lead to an agreement, but the division of Europe”, in 1998, warned the sociologist Lord Ralf Dahrendorf. His exhortations were then unheard. 13 years later, but they threaten to become real and Europe is facing a crucial test. Despite all promises, Greece failed to chart a credible austerity and eliminate supply-policy failures. Interest groups and elites were able to enforce their pension rights continues. Now suffer especially the Greek taxpayers.
Simultaneously suffers the image of Germany, especially among the Greeks. Once again, the banks will protect and transfer the risk to the taxpayer. What we finally need is a European strategy. This must include a final cure of the SGP, the consistent establishment and implementation of the no-bailout principle, a time limit for rescue tools and a courageous rescue of Greece (including refinancing). Otherwise, we experience more disintegration by nationalistic prejudices – and then the European governments were actually the gravedigger Europe.
On further financial assistance to Greece
With today’s decision of the Bundestag on further financial assistance to Greece, end the future stability rules for the euro countries. From July 2013, the European Stability Mechanism (ESM) replace the existing temporary auxiliary systems and complement the Maastricht criteria and the Stability and Growth Pact. The core idea of the ESM, heard in the case of a de facto sovereign default may grant, under severe budget constraints grants. The principle of liability is one of the pillars of the social market economy.
Without competition, freedom of contract and just liability, the market cannot provide credible information. The de facto socialization of the risk of sovereign debt of Greece is so far not only a consequence but also just cause to lower interest rates in the past or the excessive debt. The liability principle should be enshrined in the ESM with the creditor participation strengthened in future sovereign defaults again.
After EMS rules, it would have in a negative debt sustainability. To come to a hearing to the debtor with its creditors would grant the ESM it only if creditors to waive some of their demands. Bond yields would be higher and would dampen excessive debt early. In the case of Greece, it is running but now is quite different. Here, the creditor will only be encouraged to extend their loan terms.
Schäuble calls this “soft restructuring”. In fact, that is good and windfall for all those who benefit from high borrowing rates. The history of the euro is a series of unpunished infringements of the law.