EU financial crisis: Finland rejects majority proposal

[Tiriol]

Two articles, but they are linked to each other.

First the main business: Finland rejects the majority proposal at summit in Brussels, as reported by YLE News.

Finland alone in rejecting majority proposal
published today Dec 9 07:49 AM, updated today Dec 9 10:13 AM

Finland is the only eurozone country at the summit in Brussels to oppose the adoption of qualified majority rule in permanent bailout mechanism decisions. Premier Jyrki Katainen says he has informed other states that Finland cannot accept the change.

Negotiators in Brussels have agreed that the permanent bailout mechanism (ESM) will become operational in July, earlier than previously thought. This suits Finland’s aims as well.

However Finland cannot agree to the switchover from decisions by unanimous consent to decisions made by 85-percent majority of states when it comes to permanent bailout fund’s operations.

The agreement on stricter budget rules, which will include all eurozone states and other EU members wishing to join, now says that the use of majority decision-making is contingent on confirmation by the Finnish parliament.

YLE

And the reason for this rejection... Parliamentary committee finds the Franco-German proposal unconstitutional.

Parliamentary committee: Franco-German proposal unconstitutional
published yesterday Dec 8 03:13 PM, updated today Dec 9 05:43 AM

Parliament’s Constitutional Law Committee has ruled that proposed changes to the European Union’s permanent bailout fund would not be compatible with the constitution. Any such proposal would therefore require a two-thirds majority in parliament, making acceptance of the package much more difficult.

Ahead of the crucial summit starting on Thursday night, France and Germany have proposed that the permanent bailout fund be streamlined by allowing decisions to be pushed through by countries holding 85 percent of the European Central Bank’s capital. Currently, decision-making is by unanimous vote.

The Constitutional Law Committee’s chair, Johannes Koskinen, says that the proposed changes would damage national sovereignty. The Constitutional Law Committee has informed the Grand Committee of its decision. It, in turn, determines the Prime Minister's mandate at the Brussels summit.

Grand Committee Chair: Finland cannot accept proposal

The Chairperson of the Grand Committee Miapetra Kumpula-Natri told YLE that Finland could not accept the proposed changes to the bail-out fund. In her view, the decision of the Constitutional Law Committee ruled this out.

Addressing parliament on Thursday, Finance Minister Jutta Urpilainen again stressed the role of investor responsibility in the permanent bail-out fund due to come into force in either 2012 to 2013. She reiterated Finland had emphasized this and would continue to do so. Urpilainen added Finland's position was for a continuation of decision-marking by unanimous vote.

YLE, AP

So, it would appear that this time there isn't much leeway for our Prime Minister ja Finance Minister: they have been told that the proposal is against the Finnish Constitution and if they give even an appearance that they would still accept it, all hell breaks loose, even though it needs Parliament's ratification before passing. We shall see what threats EU and other countries will now conjure in order to bully Finland into submission.

[K. A. Pital]

This shit simply won't fly. Too many people realize that this is a blatant violation of sovereignity and if the EU is nothing but a confederation, none of the confederate structures should have such wide-stretching authority.

[Thanas]

*Shrug* I see no reason why anybody should be bent out of shape over this. The Fins are perfectly within their rights to reject such a proposal and the EU is perfectly within its right to move on without them.

Though I have to wonder how much of this is possible - will there now be a second-class Euro for Finland alone? Will Finland drop out of the EMU? Or will there be some sort of agreement not to mention Finland when talking about measures concerning the Euro? All of these however are technicalities really.

[K. A. Pital]

Finland leaving the EMU won't look too good for the EMU.

[Thanas]

Finland leaving the EMU won't look too good for the EMU.

*shrug* It is not as if Finland is such a huge contributor the EMU cannot do without.

[K. A. Pital]

Finland's share of the non-PIIGS and non-periphery part of the EFSF (the one that's supplied by core Euro nations and thus the only part which matters, sized at 475 billion Euros) is 3%. Not too big, but not completely insignificant either.

[Thanas]

It is not completely insignificent (and I never claimed it was) but really, 3% is not going to cause that much damage that the plans are in danger.

[Starglider]

In addition to this Ireland is still bravely holding out on maintaining a 12.5% corporation tax rate, despite being constantly attacked by France & Germany for over a year. The septic socialist core countries are angry that the competitiveness of the periphery has not been completely destroyed and keep trying to remove Ireland's major remaining factor retaining international corporations, but fortunately the power of the Eldrich Merkozy continues to wane with every farcial summit.

[madd0ct0r]

the septic sociailst core? i though it was the periphery that had gone bust.

[Thanas]

In addition to this Ireland is still bravely holding out on maintaining a 12.5% corporation tax rate, despite being constantly attacked by France & Germany for over a year. The septic socialist core countries are angry that the competitiveness of the periphery has not been completely destroyed and keep trying to remove Ireland's major remaining factor retaining international corporations, but fortunately the power of the Eldrich Merkozy continues to wane with every farcial summit.

Considering that Ireland has joined Germany and France willingly now, I very much doubt this corporate tax rate will continue on. And if it does, let us hope it benefits the Irish economy who needs it.

That being said, if you think this is all some part of power grab on part of the Germans and French, you are mistaken.

[Starglider]

the septic sociailst core? i though it was the periphery that had gone bust.

Demographic and financial trends in Germany and France are incompatible with projected government spending and pension returns; while the US has hideous deficits, the eurozone core has the worst long-term outlook in the developed world. The euro was massively beneficial to the eurozone core by tricking the periphery into utterly destroying their competitiveness (as customary rapid wage rises were no longer defrayed by high inflation) and digging themselves into crippling sovereign debt. Germany refuses to let them solve the problem the normal way, via monetisation. France refuses to let them default due to the damage that would cause to their banks (and conequent massive bailouts as socialist France absolutely will not allow major bankruptcies and job losses). So now we have a vision of a eurozone periphery with budgets dictated by Germany, locked in endless >100% GDP debt slavery, totally reliant on EU funding and sending a significant fraction of GDP back in debt service to French & German banks for the forseeable future. Fortunately this mad dream is crumbling as the tide of reality is coming in and washing away the eurocrat sand castles faster than they can build them.

Now excuse me while I go hug a bond vigilante.

[Thanas]

What turning tide? More countries than before are signing up for this new union. Seems to me that they are jumping at the chance and Britain is the one left out.

[K. A. Pital]

The euro was massively beneficial to the eurozone core by tricking the periphery into utterly destroying their competitiveness (as customary rapid wage rises were no longer defrayed by high inflation) and digging themselves into crippling sovereign debt. Germany refuses to let them solve the problem the normal way, via monetisation. France refuses to let them default due to the damage that would cause to their banks (and conequent massive bailouts as socialist France absolutely will not allow major bankruptcies and job losses). So now we have a vision of a eurozone periphery with budgets dictated by Germany, locked in endless >100% GDP debt slavery, totally reliant on EU funding and sending a significant fraction of GDP back in debt service to French & German banks for the forseeable future.

Sometimes you can formulate stuff better than me. Thumbs up.

What is even more important is that those who sign up for this probably realize that the periphery will be fucked forever. Either they want to use their position to dictate to the periphery or they want to make sure they're being saved if they're insolvent. In either case the motives for joining are cruel.

[Thanas]

Or it might just be that the other countries want to go ahead with a new Europe.

I really do not get people. First they rail against the bad banks, then when Europe tries to regulate bad banks they rail against Europe.

[K. A. Pital]

Or it might just be that the other countries want to go ahead with a new Europe.

I really do not get people. First they rail against the bad banks, then when Europe tries to regulate bad banks they rail against Europe.

People don't rail against Europe. People rail against the idea of using the common currency to create a perpetual domination of the center over the periphery. Because that's what will happen.

[Thanas]

People don't rail against Europe. People rail against the idea of using the common currency to create a perpetual domination of the center over the periphery. Because that's what will happen.

How? I mean, it is not as if the center is exactly happy about paying the periphery right now. They would probably far prefer it if they did not have to ship billions of their money to prop up periphery states. Yes, he who has this thumbs on the purse has the power (Bismarck) but I don't really see this being a power of the center. It is more an increase of power of the European commission, in which the smaller nations (especially the Benelux nations) are overrepresented (if we were to go with population radius) and an increase of power of the European Courts. Under the new plan periphery states like Italy and Spain would still be able to effectively veto any measures.

The 60% population rule would give greater power to Germany and France, but this already is in effect since Lisbon. And don't you think it fair that a majority of the population of Europe should get to decide what to do, or are you in favor of having the votes of one populus count for far more than the votes of another?

Eventually, if the end goal is a unified Europe that works together to face the global challenges, should a vote from a Czech count more than the vote of a Pole*? Are you really in favor of weighing one vote more than another just because person X is a member of a different nation state? This is a voluntary club. Anybody who does not like it can leave or stay out of this new development. The British and Hungarians did and the Fins apparently will follow.




* besides the already existing inequality due to safeguards, obviously.

[Murazor]

At this point, I am very much beginning to suspect that for southern Europe (Spain, Portugal and Greece, Italy perhaps to a lesser extent) this development is likely to work about as well as joining NAFTA did for Mexico.

[K. A. Pital]

And don't you think it fair that a majority of the population of Europe should get to decide what to do, or are you in favor of having the votes of one populus count for far more than the votes of another?

No, Thanas, because Europe is not a unitary government. Constituents are sovereign states.

Under the new plan periphery states like Italy and Spain would still be able to effectively veto any measures.

In this case there's little point in implementing it. That won't stabilize the markets (and at this point I don't think anything will).

[Thanas]

And don't you think it fair that a majority of the population of Europe should get to decide what to do, or are you in favor of having the votes of one populus count for far more than the votes of another?

No, Thanas, because Europe is not a unitary government. Constituents are sovereign states.

The EU already has a similar mechanism in place in the European Parliament. The precedent is there and the EU is not just a simple confederation. It is a mix between a sovereign state like the USA and a confederation, with elements from both forms of Government.

In this case there's little point in implementing it. That won't stabilize the markets (and at this point I don't think anything will).

I doubt that the outlook is quite as bleak. Spain for example has been very cooperative in approving measures wanted by Brussels and is taking active steps in fighting the crisis.

[K. A. Pital]

The EU should not exceed the limits laid by the confederate form of organization and infringe on the sovereignity of member states. No wonder the measures fell through. Not all are comfortable with such drastic expansion of central authority.

[Thanas]

The EU should not exceed the limits laid by the confederate form of organization and infringe on the sovereignity of member states.

It is too bad then that the treaty of Lisbon did exactly that - to which the members agreed.

That being said, I fail to see why the transformation of the EU is inherently a bad thing. You seem to think so, why?

No wonder the measures fell through. Not all are comfortable with such drastic expansion of central authority.

All but three nations are however apparently fine with it, which is an overwhelming majority. And those who are not can always leave, as is their right to do so.

[Thanas]

Update:

http://bbs.stardestroyer.net/viewtopic. ... 1#p3609961

[J]

I really do not get people. First they rail against the bad banks, then when Europe tries to regulate bad banks they rail against Europe.

Question: How are they regulating bad banks? The EU is running bank leverage ratios which are twice as high as those in the US, in fact those ratios are similar to those of Bear Stearns and Lehmans when they imploded in 2008. Also note how every nation other than Germany has copious amounts of red. The only countries on the chart which aren't in deep trouble are Canada and Germany, and that's only IF we act quickly and correctly to deal with our existing issues before they blow up.




Also, this.

[Stark]

Now excuse me while I go hug a bond vigilante.

Champions of the free... wait.

I meant to say 'your buddies'.

There's a line between recognising an event and acting appropriately, and actively causing that event to occur. Now - define where that line is. :V

[Thanas]

I really do not get people. First they rail against the bad banks, then when Europe tries to regulate bad banks they rail against Europe.

Question: How are they regulating bad banks?

They are discouraging the hedge fonds and bank speculation with a new tax on financial transactions - which even if it fails to discourage things it will help fund the recovery. Likewise, if there is a clear vision on a unified Europe or a fiscal union, which there appears to be then that will also lead to more developments.