Vox Populi is a Thing to be Feared

British Prime Minister David Cameron, as most of you know, has committed the UK to a popular referendum on the nation’s continued membership in the European Union if he doesn’t get what he wants in terms of a rewrite of the treaties that created the EU.

EU leadership thinks this is a bad thing, and they’ve acted on that badness in the past: referenda by France, the Netherlands, and Ireland to the Constitutional and Lisbon Treaties, in which the people of each of those nations solidly to overwhelmingly rejected those arrangements, were ignored outright, and the Know Betters of Europe simply went to the more compliant national governments for the needed assents. They have no such capability regarding a UK vote to depart the EU altogether; neither does the EU have the guns with which to compel continued membership.

Another Misunderstanding

Paul De Grauwe, John Paulson Professor in European Political Economy at the London School of Economics and Political Science, was quoted in Thursday’s Wall Street Journal as saying

They in fact triggered the banking crisis. They’ve failed in their duty to ensure financial stability.

De Grauwe was asserting that the ECB’s decision to not increase the amount the central bank already had loaned to Greek banks for liquidity purposes was a mistake.

Europe and Greece

Peter Müller and René Pfister have a piece up in Spiegel Online International concerning German Chancellor Angela Merkel’s handling of Greek Prime Minister Alexis Tsipras and of the Greek financial crisis. Müller and Pfister’s central thesis is that Merkel has mishandled the situation, and rather apocryphally, they suggest that any resulting failure of the euro will be the fault of Merkel’s policy regarding Greece.

Müller and Pfister are operating from the false premise that, beyond Merkel’s supposed mishandling of Greece and of Greece itself, the euro is fundamentally sound.

They Disagreed with Me!?

[Juncker] said we were ready to front-load EU funds at the disposal of Greece for the future and the Greek government didn’t take the offer, which convinced them that [the Greeks] weren’t interested in an agreement and it was ideological,” an MEP who was in the room told Politico after the meeting.

How dare they not immediately take our deal!? How dare they put patriotism against the wishes of their creditors!?

“He said, ‘We were so close, in fact, we were so close that it was just €60 million that we were arguing over.”

Another Reason

…for Greece to leave the European Union. This time it’s the arrogance of the eurozone honchos.

Greece offered a proposal intended to break the current impasse over its debts and the payments due this month. Whether it was a good proposal or a bad one is beside the point as far as those eurozone honchoes are concerned. Greece’s proposal has these alleged problems:

Greece’s proposal includes targets for its primary surplus—the excess of revenues over expenditures before interest payments are made—that are lower than the targets presented to Greece in a deal struck between the commission, the European Central Bank, and the International Monetary Fund, the three institutions representing Greece’s creditors [the so-called troika].

There’s More To It

…than this, or so it seems.

A wave of cash is leaving the eurozone, where returns on safe assets are infinitesimal, if they are positive at all, and headed to the US and other refuges such as Denmark and Switzerland.

Europe’s common currency has fallen 22% against the dollar in less than a year, from $1.39 to $1.08. The euro touched a 12-year low of less than $1.05 this month.

Returns on safe assets are infinitesimal in the US, too, with the Fed still actively suppressing interest rates (to the detriment of those Americans dependent on fixed income assets, but that’s another story). Why, then, would money come to the US at the expense of the eurozone—at the expense of the EU?

More Competition Stifling

New tax transparency requirements between multinational corporations and European governments may be broadened further this year to encompass public disclosure of the companies’ tax arrangements in Europe.

… The bill, if approved by European governments, would oblige national tax authorities to inform each other and the commission about tax deals they agree with multinational corporations.

… Under the draft bill, which must be approved the 28 European Union governments, the disclosure of so-called tax rulings would happen every three months and would include deals going back 10 years.

A Greek Exit

In a piece in Wednesday’s Wall Street Journal, about Greece’s economic status and its relations with the rest of the eurozone, Matthew Karnitschnig had this remark

[A] Greek exit would prove that the eurozone isn’t inviolable and trigger speculation over the future of other weak links, such as Portugal, Ireland and even Spain, in the currency bloc. The euro crisis could return in full force.

Perhaps the crisis could return. But only briefly, and only if misunderstood by the leaders of the eurozone. After all, what’s the long term (or even the medium term) downside of losing “other weak links” in the eurozone? What would be left would be, by definition, stronger.

An Implication of the Greek Elections

Greece is nearly bankrupt, it has defaulted on one round of national debt since the global Panic of 2008, it has received two bailouts from the rest of the European Union and from the IMF in partnership with various EU institutions (one of which included that default), and it’s demanding another round of…debt relief…against which the current troika of the IMF, the European Central Bank, and the European Commission are refusing to certify that Greece is ready and able to handle another loan. This current crisis reached its fullness last fall, and the then Greek government collapsed, necessitating Sunday’s snap elections.

Another Response to a Desire for Freedom

[Spain] Attorney General Eduardo Torres-Dulce charged Artur Mas and two other local officials with four crimes each, including contempt of court and misappropriation of funds, saying they had defied a court order by allowing the Nov 9 vote, in which 2.3 million people participated and more than 80% favored independence.

The Region in question, of which Mas is President and the “other officials” are his Vice President and Education Minister, is Catalonia, an erstwhile prosperous Autonomous Community of Spain, a nationality—so designated by the Spanish Statute of Autonomy. Catalonia consists of the four provinces Barcelona, Girona, Lleida, and Tarragona, and it sits in the northeast of Spain, hard against the Pyrenees and the Med.