Finland is especially interesting because her economy has taken a MAJOR hit recently. Nokia was once, not so long ago, the shining symbol of her ability to foster an industry (mobile telephones) that could compete successfully on the world stage. But the world of electronics changes rapidly and soon Nokia had lost its place on the low end of the market to the Asians. Then Apple released its iPhone and soon, Nokia's position in the high end of the market was destroyed as well. So some of Finland's best jobs are gone—likely forever. Nokia was a large part of Finland's economy so I would imagine she is not at all excited about backstopping failed Italian (etc.) banks these days.
And so we see the Finnish Finance Minister blurt out an obvious truth only to be be overruled by some bureaucrat willing to state the officially approved "truth."
And while Frau Merkel has been captured by the banking interests, there are many Germans who don't want to see their living standards trashed to save the crooked banksters either. This time, we see the debate over which economic group of experts has the clout to make its positions stick and while the banksters still have the largest group of economic toadies defending them, the opposition to this mega-theft is getting a hearing as well.
Finland Is Ruining A Lot Of Summer Vacations In EuropeWolf Richter, Testosterone Pit | Jul. 8, 2012
Finnish Finance Minister Jutta Urpilainen set the scene for the long European summer break when she declared that Finland was a dedicated member of the Eurozone, eager to solve the crisis, but “not at any price”; it wouldn’t agree to take on “collective responsibility for debts and risks of other countries” via a banking union. And if push came to shove: “We are prepared for all scenarios, including abandoning the Euro.”
A spokesperson had to do some furious backpedaling: Finland wasn’t planning to abandon the euro; such assertions were “simply wrong,” her words had been misinterpreted. Nevertheless, this was the first time ever that a government official of a triple-A rated Eurozone country publicly admitted that they were making contingency plans for ditching the euro—and worse, that there was a desire to do so under certain conditions.
The road to hell, I mean to the euro, was paved with good intentions—and signposted with lots of warnings that at the time were ignored, downplayed, or ridiculed. But one by one, they turned out to be correct. The warnings continue, along with efforts to sweep them under the rug which is more difficult now as the dimensions of the debacle have become apparent for all to see.
And so, in an open letter, 172 economists of “German-speaking countries,” including Ifo President Hans-Werner Sinn, warned citizens and politicians about the decisions of last week’s EU summit—though there’s still no agreement as to what has actually been decided. They were worried about a Eurozone banking union that would collectivize bank debts, which are “almost three times as large as sovereign debts,” and in the five bailed-out countries alone amounted “to several trillion euros.”Taxpayers, retirees, and savers of “still solid countries” must not be held responsible for them. “There is only one group that should and can carry that burden: the creditors themselves.” In other words: banks must be allowed to fail; bank creditors must take the losses; let the market economy do its job.
Politicians hope that they could limit exposure and abuse by instituting a common banking regulator, “but they will not succeed as long as debtor countries possess a structural majority in the Eurozone.” Once solid countries agree to collectivize bank debts, they will again and again be pressured to enlarge the sums they’re liable for. “Fights and disagreements with neighboring countries” would be preprogrammed. “Neither the euro nor the idea of Europe as such would be saved.” Instead it would benefit “Wall Street, the City of London—even some investors in Germany—and a series of ramshackle domestic and foreign banks” that would continue doing business “at the expense of citizens in other countries who have little to do with this.” And all “under the mantel of solidarity.”
Instant brouhaha. Just as the German parliament was wrapping up its work, and as everyone was looking forward to heading out for their long vacations with illusions of calm appearing at the horizon. That top economists would directly, publicly, and en masse attack the government is unusual in Germany.
Chancellor Angela Merkel was furious. She had to explain once again what the agreement’s “small print,” that apparently no one has read yet, really contained. The EU Summit “changed nothing” in Germany, she said. “Everyone should take a good look at the decisions.” The banking union agreement deals with better supervision, and “not at all with additional liabilities.” And collectivizing bank debt continues to be “verboten,” she said.
Finance Minister Wolfgang Schäuble was “outraged.” Economists shot back at Sinn’s group. “The letter damages the public respect for economics,” said Peter Bofinger, one of the Economic Wise Men. If banks were allowed to fail, he said, contagion effects would hit “banks in France and Germany, and therefore German savers and German taxpayers.” Some economist called the letter “irresponsible” and designed to stir up “emotions” and “fears." more
Division in Berlin
Doubts Over Merkel's Euro Path Grow at HomeAngela Merkel has long been able to count on opposition support as she charts her euro-crisis course. But, as dissent grows within her own ranks, Germany's center-left is becoming uneasy, and a prominent economist is fomenting a revolt against her strategy.
Influential German economist Hans-Werner Sinn has always been something of a fly in the soup of Chancellor Angela Merkel's efforts to save the European common currency. As the head of the Munich-based Ifo Institute, Sinn has tirelessly warned that, with euro-zone central banks owing the Bundesbank upwards of €500 billion ($627 billion), Germany is in a precarious situation. "We are trapped," Sinn has been fond of pointing out.
Still, with plenty of other economists eager to counter his doomsday prophecies, Sinn has been an easy fly to ignore. But his isolation may now be coming to an end. SPIEGEL ONLINE has learned that Sinn, together with several other leading economists, is preparing a public appeal against the resolutions agreed upon at the most recent European Union summit. A draft of the appeal says that Merkel was "forced into" agreement at the meeting, held last Thursday and Friday in Brussels.
In particular, Sinn and his allies are concerned about the trend toward the creation of a European banking union and allowing the euro bailout fund, the European Stability Mechanism (ESM), to provide direct aid to struggling European banks instead of channeling that money through governments and attaching strict austerity and reform requirements to it. Such a move, the appeal states, means nothing less than the "collective accountability for the debts of banks in the euro system." Because the sum of that debt is almost three times as high as euro-zone state debt, the draft continues, "it is virtually impossible to make the taxpayers, pensioners and savers in the thus-far stable countries of Europe liable for that debt."
The summit made clear that the EU is moving toward a banking union which, in exchange for emergency aid, would also include a European bank oversight authority and possible euro-zone-wide deposit guarantees. That, though, Sinn and his allies write, would inevitably result in bitter differences between financially solid countries in the north and nations in need to the south. "Conflict and discord with our neighbors is unavoidable," the draft says. "Our children and grandchildren will suffer."
The economist rebellion is telling. As long as Berlin was partnered with Paris in its efforts to introduce reforms to save the euro, Merkel could count on broad backing at home. Now that she appears to be losing ground to the uprising led by Italian Prime Minister Mario Monti and French President François Hollande, concerns about Germany's ability to save the euro on its own -- voiced repeatedly by Merkel herself recently -- are rising.
Germany's center-left opposition, in particular, is demonstrating an increasing unwillingness to support Merkel's strategy for plugging the euro-zone dike. That combined with significant numbers of rebels within her own government coalition, which pairs her conservatives with the business-friendly Free Democrats, could spell danger to the chancellor in the near future. more