The Brussels blackmail scheme, and the ensuing forced parliamentary vote on the ESM and Fiscal Pact obviously has been too much. Even CDU faction leader Kauder yesterday had to admit in an interview with Süddeutsche Zeitung, that the vote last Friday almost did not take place, because many CDU parliamentarians were so angry about being left in the dark about what had been decided at the EU “summit” the night before. Today, just as one indication, the CDU spokesman for European policy Michael Stübgen, told Reuters, speaking of the upcoming decisions on bailouts for Spanish banks: “I think we are getting towards the end of what the Parliament and the Bundesrat are willing to accept.” And anger is growing in the FDP faction, because of the unclear conditions on assistance for Cyprus, or rather its banks.
On July 5, Prof. Hans-Werner Sinn, president of the Munich IFO Institute and 172 German economists, so far, issued an “Appeal” to their fellow citizens, against the yawning pit of further bank bailouts. Among the first signers were such “heavyweights” as Prof. Klaus Zimmermann, former head of the German Institute for Economic Research (DIW) and Freiburg economist Prof. Bernd Raffelhüschen. Dortmund Statistics Prof. Walter Krämer and Prof. Sinn put together the appeal after the Brussels summit. Krämer said they both got so angry about the decisions that they decided to act, and that the “famous straw that broke the camel’s back,” was the planned banking union.
The appeal does not call for Glass-Steagall, but focuses very effectively on the bailout of the banks. It is crafted in an unusually non-academic way, directly addressed to fellow-citizens, who are called upon to mobilize their political representatives. Merkel was “forced” into the Brussels decisions, they say in the beginning. In unheard-of language among German academics, the appeal says that the planned banking union will only “help Wall Street, the City of London — also some investors in Germany — and a bunch of domestic and foreign banks.” They “thus can continue their business at the expense of citizens in other countries, who have little to do with this.”
The step into the banking union means “collective liability for the debts of the eurosystem.” “Bank debts are almost three times as large as the sovereign debt and, in the five crisis countries, are in the range of several trillion euros.” Taxpayers, pensioners, and depositors of the still solid countries “cannot be held liable for covering these losses.” “Banks must be allowed to fail. If the debtors cannot pay back, there is only one group which should shoulder these burdens and also is able to do so: The creditors themselves, since they embarked on the investment risk consciously, and it is they alone, who have the necessary wealth.”
This intervention, in an already completely nervous situation after the Brussels summit fiasco and before the upcoming Constitutional Court hearing on July 10, has triggered a huge debate, with other economists lining up against it, Finance Minister Wolfgang Schäuble attacking it as baseless “scaremongering,” the Greens denouncing the professors as “cracker-barrel” economists, and Sarah Wagenknecht of “Die Linke” supporting it, along with people from other parties. Spiegel carried a headline last night, wondering about all the “new alliances” pro and con, with the (hypocritical) headline “Finally Ideas Count, Instead of Ideologies.”
The tremendous anger and ferment against the EU policies of growing bailouts, without any clear rules or limitations, can no longer be swept under the carpet. The worst thing that leading politicians can do now, writes Süddeutsche Zeitung Economics Editor Marc Beise today, is to attack opponents of the ESM and banking union and try to suppress the debate, as Schäuble is doing, because the euro has been “a project of the elite” for so long, and any politician who tries to suppress discussion instead of defending his view, is making “a gigantic mistake.”
Among those who want to suppress discussion are Dennis Snower, of the Kiel Institute for World Economy, and Beatrice di Weber Mauro (one of the wise (wo)men, the government’s top economic advisors, until 2012, now on the board of UBS), who were able to muster a group of 15 (!) economists against this appeal. They defend a European banking union, based on a centralized banking restructuring and recapitalization fund, with the ESM playing the lead role, and strengthened European deposit insurance. And all of this supposedly with almost no cost to the taxpayer!
The government, and in particular Finance Minister Schäuble was not amused at all, attacking the economists for their “alarmism.” He denied flat-out, that the ESM and its follow-up decisions in Brussels mean the take-over of liabilities of European banks.
Other institutions, such as the German government’s Advisory Council “Sachverständigenrat” came out rejecting the ESM’s direct bailout of banks, due to inefficient control mechanisms, also rejecting a “hasty banking union.” Their recommendation is, however, equally stupid: a debt redemption pact,— and they announce a legal paper on that subject to be published soon.
Speaking of a banking union: Now, Deutsche Bank is officially being investigated by the BaFin for its possible role in manipulating the LIBOR.
The genie cannot be put back into the bottle. The system is dead, and that’s what people realize. The next step now is to put the Glass-Steagall question squarely on the table in Germany. The debate in the U.K., ironically, is now helping to push this forward. With Helga Zepp-LaRouche and Jacques Cheminade’s webcast tomorrow on the real growth perspective and the international Appeal for Glass-Steagall available on the website, the BüSo is taking crucial leadership on the right steps which have to be taken now, along with allies internationally.