http://www.telegraph.co.uk/finance/financialcrisis/9336766/Exclusive-Secret-EU-summit-document-shows-first-step-to-banking-union.html
Submitted by Tyler Durden on 06/17/2012 10:01 -0400
Exclusive: Secret EU summit document shows first step to banking union
A classified draft of next week’s EU summit conclusions is the first step on an emerging “roadmap” to a banking union, pooling debt via eurobonds and political union via EU treaty change over the next 10 years.
12:03PM BST 17 Jun 2012
34 Comments
The “limite” text - published exclusively by The Daily Telegraph, is secret, restricted for the "eyes only" of diplomats and officials preparing for the 28 and 29 June European Council in Brussels.
Most of the text, the annexed “Compact for Growth and Jobs”, are deals on project bonds and other small scale EU initiatives that FranCois Hollande is trumpeting as a €120bn “growth pact”.
The first draft is relatively uncontroversial because the eurobond and "banking union" issues are currently all too sensitive to be committed to paper for officials.
Other so-called "non-papers" are circulating at a top secret level between national capitals and Brussels.
The difficult issues not included in the draft are the “p.m” items in the draft: “other financial stability measures” and “PEC report on EMU”.
Translated from the Brussels jargon, the PEC – president of the European Council – report will be Herman Van Rompuy’s preliminary text of the future of “Economic and Monetary Union”. This will be circulated in sealed envelopes next week.
The separate text will set out a “roadmap” to a banking union, polling debt via some kind of eurobonds and political union via EU treaty change over the next 10 years.
Also important and controversial is will the “other financial stability measures” paper, including financial transition tax proposal and moves towards a banking union that can be taken by the EU before the end of the year.
Britain faces major fight over an FTT, or some other banking levy, at a meeting of EU finance ministers on Friday ahead of the summit next week.
The UK – which has no veto under current proposals on deepening EU banking regulation – also faces the ECB becoming Europe’s main banking regulator and the creation of national bank resolution funds that can be asked to contribute to European bank bailouts on a “compulsory” basis.
and from ZH .....
http://www.zerohedge.com/news/case-world-vs-merkel-broke-prosecution-proposes-eurobonds-lite
In The Case Of The World Vs Merkel, The Broke Prosecution Proposes Eurobonds Lite
The battle fronts have been drawn out: it is literally the world against Germany.
What is happening in Europe is nothing short of a full-out onslaught to have Germany, which conventional wisdom says benefited from a decade of importing peripheral European prosperity (although conventional wisdom says little about whether the same Peripheral countries had a gun against their head when accepting the Euro or importing German goods, hence keeping German economy buoyant as everyone else was sinking under untenable current account deficits), repay the favor and literally hand out cash to Greece and now all the other insolvent European countries in order to preserve the European dream. So far so good - and if it was a modest and contained amount, we are confident Germany would have agreed.
However, as Zero Hedge first calculated last July, sticking Germany, and technically a few German states (we can't wait for calls for a return to a West-East German split at some point in the future, because economic prosperity is certainly not uniform across Germany itself), with the bill would result in a collapse of the German paymaster (which as a reminder, already funds a stealthy European bailout to the tune of EUR2 billion/day via TARGET2). Still, none of the matters to EU President Herman Van Rompuy, European Commission President Jose Manuel Barroso, Euro Group President Jean-Claude Juncker and European Central Bank President Mario Draghi, all of whom, Spiegel reports, will hand over a new proposal to Merkel, this time for a Eurobond Lite project. And with Obama's reelection chances on the line should Europe implode one can bet the US president will make his opinion quite clear too.
From Spiegel, google translated:
Euro-bonds are not only for the German government, a red cloth. But at the same time all participants are aware that without the guarantee must be kept of the rich EU partners, the interest on the loan crisis states barely in check. Feverishly looking for the elite of the EU, therefore, after a compromise solution. According to SPIEGEL information they rely on so-called Euro-bills - a common European bonds with short maturities and a limited amount.EU President Herman Van Rompuy, European Commission President Jose Manuel Barroso, Euro Group President Jean-Claude Juncker and European Central Bank President Mario Draghi want the end of next week to present the leaders with a proposal. According to the plans of each State may fund up to a certain percentage of its economic output by €-bills. Those who do not comply with the rules will be banned from trading in the following year with the papers.The quartet hopes to convince the model, the federal government. While France calls for common European bonds,Germany rejects the Euro-bonds from now. In Brussels, however, is convinced that now the model is outlined with the German constitution in line,because the common bonds in the amount and duration are limited.Which again brings us to the fundamental tradeoff for Germany. On one hand:Another way, however, seems hardly conceivable that also believe the financial experts of the Institute for World Economics (IfW) in Kiel. They quantify the financial risk for Germany in the collapse of the euro zone to SPIEGEL information on some 1.5 trillion euros.Yet on the other, Germany will continue to be locked up with ever more contingent liabilities whose ultimate losses will be far greater the longer the illusion continues. Remember: Deus Ex Machinae exist only in ancient Greek theater.All of this was summarized previously by Carmel Asset Management in their presentation which we posted two weeks ago, and which correctly calculated that the loss from a European collapse now is greater than keeping the Euro together... but what about in 1 year...or 5 years...or 10 years, with the ECB funding peripheral current accounts to the tune of almost EUR100 billion in sunk costs each month and rising?After all this is the pure definition of unsustainability.The definition of a lose-lose situation.Going back to the fundamental dilemma for Europe, those across the table from Merkel will continue to propose piecemeal solutions which will not work, something the market will make increasingly clear. Alternatively, Germany, which has all the trump cards, will merely wait for Europe to wither away until it has no leverage, at which point it will be willing to provide a DIP loan on whatever terms it decides on.Just like a true vulture investor.And to think all of this could have been avoided if people had actually listened to Milton Friedman, who once again got things right about 15 years of everyone else:The drive for the Euro has been motivated by politics not economics. The aim has been to link Germany and France so closely as to make a future European war impossible, and to set the stage for a federal United States of Europe. I believe that adoption of the Euro would have the opposite effect. It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.
