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[quote=BBC]
French President Nicolas Sarkozy has warned that "never has the risk of disintegration been greater" for Europe in a speech in Marseille.
He was addressing a gathering of European leaders of the centre right.
German Chancellor Angela Merkel said it would take years to overcome the crisis but "we need to have more Europe".
EU leaders are preparing for a key summit in Brussels, where they will be trying to clinch a deal on how to tackle the eurozone debt crisis.
The key proposal on the agenda of the gathering in the Belgian capital later on Thursday is how to enforce budgetary discipline with automatic penalties for those eurozone nations that overspend.
Germany and France are pushing for new European Union treaties, saying stricter fiscal rules should be enshrined there.
Mr Sarkozy said Europe was in much danger.
"Never has Europe been so necessary. Never has it been in so much danger," he said.
"Never have so many countries wanted to join Europe. Never has the risk of a disintegration of Europe been so great. Europe is facing an extraordinarily dangerous situation."
He said the eurozone economies still had a few weeks to decide, but that time was working against them.
"The diagnosis is that we have a few weeks to decide because time is working against us. If we aren't in agreement on this, I fear that we won't be able to agree on anything. That's the analysis."
Mrs Merkel has said changes to the European basic treaty are necessary. She said all 27 member states in the EU had a duty to Europe, and had to work together to overcome the crisis in the eurozone.
National egos and interests had to be put aside, she added.
The two leaders were attending the annual congress of the centre-right grouping in the European Parliament, the European People's Party (EPP), in the southern French city.
As the leaders were speaking, the European Central Bank (ECB) cut its interest rates back to their historic low of 1%, as expected by financial markets.
ECB President Mario Draghi called again for governments to cut their borrowing and reform their economies, but did not mention any new financial support from the ECB for struggling governments.
"We have a treaty that says no monetary financing to governments," he said in response to a question on the subject at a post-meeting news conference.
Earlier, European Commission chief Jose Manuel Barroso, who is also in Marseille, urged the EU to "do everything" to save the euro ahead of the Brussels summit.
"The entire world is watching. We must do everything" to save the euro, he said, adding: "It is extremely important that we all together, all the EU, show that the euro is irreversible."
[B]Merkel-Sarkozy letter [/B]
Mrs Merkel and Mr Sarkozy are seeking to enforce budgetary discipline by changing the existing EU treaties.
"We are convinced that we need to act without delay," the two leaders wrote in a joint letter to European Council President Herman Van Rompuy, adding that the new treaty was needed by March.
The Merkel-Sarkozy letter also called for "a renewed contract between the euro area member states".
The German-French plan is based on the following key provisions:
the European Commission to have the power to impose penalties for nations that run excessive budget deficits
all 17 eurozone nations should amend their national legislation to require balanced budgets
the eurozone countries to have common corporation and financial transaction taxes
any future bailouts would not require private investors to absorb part of the costs, as happened in the Greece case
The BBC's Europe editor Gavin Hewitt, at the summit in Brussels, says he has been told it is likely that Mr Sarkozy and Mrs Merkel will sit down for brief talks with UK Prime Minister David Cameron, who is seen as the chief objector.
The UK has said it will veto the proposals unless they protect British interests. The French and German leaders will try to establish where the UK's red lines lie, our editor says.
Mr Van Rompuy is offering an alternative plan, a fast-track "fiscal compact" that does not need lengthy ratification by parliaments or national referendums.
The 10 non-eurozone members of the 27-member EU, including the UK, are concerned they may become isolated if the eurozone nations - driven by Berlin and Paris - decide to move to a new treaty on their own.
However, smaller nations in the EU are concerned that majority voting on a new EU bailout fund would give too much power to France and Germany.
A Finnish governmental advisory committee has said 85% majority voting - as the Franco-German proposal outlines - would be "unconstitutional". [/quote]
This is historic times we live in gentlemen, either they get a un-democratic vote on the future of the European Union through or else it will spill the end for the EU as we know it now. The bank, UBS, made a rapport earlier this year as to what would happen, would the Euro zone be disbanded:
[quote=UBS]
[B]Fiscal confederation, not break-up[/B]
Our base case with an overwhelming probability is that the Euro moves slowly (and painfully) towards some kind of fiscal integration. The risk case, of break-up, is considerably more costly and close to zero probability. Countries can not be expelled, but sovereign states could choose to secede. However, popular discussion of the break-up option considerably underestimates the consequences of such a move.
[B]The economic cost (part 1)[/B]
The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.
[B]The economic cost (part 2)[/B]
Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over EUR1,000 per person, in a single hit.
[B]The political cost[/B]
The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war.
A little more on that particularly troubling last point:
[B]Do monetary unions break up without civil wars?[/B]
The break-up of a monetary union is a very rare event. Moreover the break-up of a monetary union with a fiat currency system (ie, paper currency) is extremely unusual. Fixed exchange rate schemes break up all the time. Monetary unions that relied on specie payments did fragment – the Latin Monetary Union of the 19th century fragmented several times – but should be thought of as more of a fixed exchange rate adjustment. Countries went on and off the gold or silver or bimetal standards, and in doing so made or broke ties with other countries’ currencies.
If we consider fiat currency monetary union fragmentation, it is fair to say that the economic circumstances that create a climate for a break-up and the economic consequences that follow from a break-up are very severe indeed. It takes enormous stress for a government to get to the point where it considers abandoning the lex monetae of a country. The disruption that would follow such a move is also going to be extreme. The costs are high – whether it is a strong or a weak country leaving – in purely monetary terms. When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences.
With this degree of social dislocation, the historical parallels are unappealing. Past instances of monetary union break-ups have tended to produce one of two results. Either there was a more authoritarian government response to contain or repress the social disorder (a scenario that tended to require a change from democratic to authoritarian or military government), or alternatively, the social disorder worked with existing fault lines in society to divide the country, spilling over into civil war. These are not inevitable conclusions, but indicate that monetary union break-up is not something that can be treated as a casual issue of exchange rate policy.
Even with a paucity of case studies, what evidence we have does lend credence to the political cost argument. Clearly, not all parts of a fracturing monetary union necessarily collapse into chaos. The point is not that everyone suffers, but that some part of the former monetary union is highly likely to suffer.
The fracturing of the Czech and Slovak monetary union in 1993 led to an immediate sealing of the border, capital controls and limits on bank withdrawals. This was not so much secession as destruction and substitution (the Czechoslovak currency ceased to exist entirely). Although the Czech Republic that emerged from the crisis was considered to be a free country (using the Freedom House definition), with political rights improving relative to Czechoslovakia (also considered to be a free country), Slovakia saw a deterioration in the assessment of its political rights and civil liberties, and was designated “partially free” (again, using Freedom House criteria).
Similarly the break-up of the Soviet Union saw authoritarian regimes in the resulting states. Of course, this was not a change from the previous status quo, but that is not the point. The question is not how a liberal democracy develops, but whether a liberal democracy could withstand the social turmoil that surrounds a monetary union fracturing. We lack evidence to support the idea that it could.
Even the US monetary union break-up in 1932-33 was accompanied by something close to authoritarianism. Roosevelt’s inauguration was described by a contemporary journalist as being conducted in “a beleaguered capital in wartime”, with machine guns covering the Mall. State militia were called out to deal with the reactions of local populations, unhappy at what had happened to the monetary union (and specifically their access to their banks).
Older examples are less helpful, as they tend to be more akin to fixed exchange rate regimes under a gold standard or some other international monetary arrangement. Nevertheless, the Irish separation from the UK, or the convulsions of the Latin Monetary Union in Europe (particularly around the Franco-Prussian war in 1870 and its aftermath) saw monetary unions fragment with varying degrees of violence in some parts of the union.
Writing in 1997, the Harvard economist Martin Feldstein offered a view that seems to be somewhat chillingly precognitive. He said “Uniform monetary policy and inflexible exchange rates will create conflicts whenever cyclical conditions differ among the member countries... Although a sovereign country... could in principle withdraw from the EMU, the potential trade sanctions and other pressures on such a country are likely to make membership in the EMU irreversible [I]unless there is widespread economic dislocation in Europe or, more generally, a collapse of the peaceful coexistence within Europe[/I].” (emphasis added).
As for what happens if UBS, and the Euro Unionists lose the fight for the euro:
Our base case for the Euro is that the monetary union will hold together, with some kind of fiscal confederation (providing automatic stabilisers to economies, not transfers to governments). This is how the US monetary union was resurrected in the 1930s. It is how the UK monetary union, and indeed the German monetary union, have held together.
But what if the disaster scenario happens? How can investors invest if they believe in a break-up, however low the probability? The simple answer is that they cannot. Investing for a break-up scenario has not guaranteed winners within the Euro area. The growth consequences are awful in any break-up scenario. The risk of civil disorder questions the rule of law, and as such basic issues such as property rights. Even those countries that avoid internal strife and divisions will likely have to use administrative controls to avoid extreme positions in their markets.
[B]The only way to hedge against a Euro break-up scenario is to own no Euro assets at all[/B].[/quote]
In this time of need we need to become closer to our neighbors, help each other, and support and be supported. No country in Europe can survive on it's own easily. I'd say nows the time for the UK to join the euro, so we can tighten restrictions on debt allowance and other shit that money does.
[QUOTE=Thoughtless;33631462]In this time of need we need to become closer to our neighbors, help each other, and support and be supported. No country in Europe can survive on it's own easily. I'd say nows the time for the UK to join the euro, so we can tighten restrictions on debt allowance and other shit that money does.[/QUOTE]
That's the make part for the european union. Either we all go full into the European Union which in the next decades would mean the federalisation of Europe into one single country with member states, like in the U.S. or we go back to pre-EU style.
[QUOTE=Beafman;33631504]That's the make part for the european union. Either we all go full into the European Union which in the next decades would mean the federalisation of Europe into one single country with member states, like in the U.S. or we go back to pre-EU style.[/QUOTE]
How do you guys feel about a Federal European State?
As an American, I pretty much know what it's like for each individual state to have it's own laws and such, so I can't really say that I know how you'll feel if it ever happens. Do you see it as a good thing? Bad thing? Neutral?
Tough times definitely.... For Ireland at least (and presumably most EU countries), we definitely need the EU for many things as we are an isolated island. I don't like the idea of a Federal EU, but I'm hopeful that a solution can be reached at this summit that can help solve our problems.
[QUOTE=ewitwins;33631536]How do you guys feel about a Federal European State?
As an American, I pretty much know what it's like for each individual state to have it's own laws and such, so I can't really say that I know how you'll feel if it ever happens. Do you see it as a good thing? Bad thing? Neutral?[/QUOTE]
I fear the loss of self-determination for smaller states, like Denmark, where I live. Not because I don't like foreigners, but more considering if the EU parliment decided to impose religious stuff on the country that I do not agree with (ie. state religion).
[QUOTE=ewitwins;33631536]How do you guys feel about a Federal European State?
As an American, I pretty much know what it's like for each individual state to have it's own laws and such, so I can't really say that I know how you'll feel if it ever happens. Do you see it as a good thing? Bad thing? Neutral?[/QUOTE]
For me, bad thing. Ireland has fought long and hard for independence, and I don't want to see it lose it to foreigners, and see Ireland bullied by bigger nations. I'm not dumb, I know that federalisation of the EU would bring huge benefits to the EU as a whole, and make it stronger and more powerful on the world stage than ever, but it is too high a price to pay. Besides, I can [B]never[/B] see a situation where politicians would consider proposing federalisation. It would be political suicide in most countries.
As long as each "member state" gets upgraded to euro standards I am all for it. Currently Latvia is nothing like more middle european countries. But we don't use euro yet. I wonder if anything will change.
[QUOTE=Caesar;33631609]For me, bad thing. Ireland has fought long and hard for independence, and I don't want to see it lose it to foreigners, and see Ireland bullied by bigger nations. I'm not dumb, I know that federalisation of the EU would bring huge benefits to the EU as a whole, and make it stronger and more powerful on the world stage than ever, but it is too high a price to pay. Besides, I can [B]never[/B] see a situation where politicians would consider proposing federalisation. It would be political suicide in most countries.[/QUOTE]
But is it suicide if the consequences would be more severe than now? If the union were to default, the crisis that Ireland is in would be nothing compared to after the disbanding of the union. If the consequence is the abyss for european trade and peace, would it then really be political suicide?
[QUOTE=Beafman;33631597]I fear the loss of self-determination for smaller states, like Denmark, where I live. Not because I don't like foreigners, but more considering if the EU parliment decided to impose religious stuff on the country that I do not agree with (ie. state religion).[/QUOTE]
I can't honestly see that happening, the EU would not establish an official religion, because they would encompass so many cultures.
[editline]8th December 2011[/editline]
[QUOTE=ewitwins;33631536]How do you guys feel about a Federal European State?
As an American, I pretty much know what it's like for each individual state to have it's own laws and such, so I can't really say that I know how you'll feel if it ever happens. Do you see it as a good thing? Bad thing? Neutral?[/QUOTE]
I'm in favour of it. In the US we don't look at states as much more than parts of a more important nation, but I like the classifications of 'Californian' and such.
[QUOTE=Beafman;33631597]I fear the loss of self-determination for smaller states, like Denmark, where I live. Not because I don't like foreigners, but more considering if the EU parliment decided to impose religious stuff on the country that I do not agree with (ie. state religion).[/QUOTE]
Why on Earth would the EU try to impose a state religion? The EU only really deals with human rights and economics matters.
[QUOTE=Megafanx13;33631700]I can't honestly see that happening, the EU would not establish an official religion, because they would encompass so many cultures.
[editline]8th December 2011[/editline]
I'm in favour of it. In the US we don't look at states as much more than parts of a more important nation, but I like the classifications of 'Californian' and such.[/QUOTE]
The european union is more like the U.S. comprised of 52 Texas states, all wanting to be their own masters and not part "per-say" of the federal union.
[QUOTE=ewitwins;33631536]How do you guys feel about a Federal European State?
As an American, I pretty much know what it's like for each individual state to have it's own laws and such, so I can't really say that I know how you'll feel if it ever happens. Do you see it as a good thing? Bad thing? Neutral?[/QUOTE]
I don't really see the point of exchanging the sovereignty of the European nations for a single nation with member states. I was under the impression that the European Union is an economic alliance meant to provide the same trade benefits one would expect from commerce within one's own nation. Economic unity, that which can potentially be provided by the current European Union, is what Europe needs, not national unity brought upon by one giant European nation.
[QUOTE=Beafman;33631752]The european union is more like the U.S. comprised of 52 Texas states, all wanting to be their own masters and not part "per-say" of the federal union.[/QUOTE]
I can't imagine they're all like that, especially if Merkel is for a fiscal union.
[QUOTE=carcarcargo;33631750]Why on Earth would the EU try to impose a state religion? The EU only really deals with human rights and economics matters.[/QUOTE]
If the European Union were to federalize, they would be deciding a whole lot more than just those.
[QUOTE=Hidole555;33631754]I don't really see the point of exchanging the sovereignty of the European nations for a single nation with member states. I was under the impression that the European Union is an economic alliance meant to provide the same trade benefits one would expect from commerce within one's own nation. Economic unity, that which can potentially be provided by the current European Union, is what Europe needs, not national unity brought upon by one giant European nation.[/QUOTE]
No more 'giant' than the Soviet Union or the US.
I think EU becoming a country sounds interesting, I'd like to see how it plays out.
I just think countries should keep their laws and not be imposed new ones.
[QUOTE=Megafanx13;33631775]No more 'giant' than the Soviet Union or the US.[/QUOTE]
It's comparatively giant when you take one European nation and compare it to the rest of Europe.
[QUOTE=Beafman;33631765]If the European Union were to federalize, they would be deciding a whole lot more than just those.[/QUOTE]
But why would they otherwise? The composition of the EU parliament and the nature of member states would block it from going through, not to mention a new constitution would prevent it, ideally.
[QUOTE=Beafman;33631765]If the European Union were to federalize, they would be deciding a whole lot more than just those.[/QUOTE]
But the EU doesn't even have a state religion so why would they do that. Also I highly doubt many countries would be interested in joining into a federal state.
[QUOTE=Hidole555;33631787]It's comparatively giant when you take one European nation and compare it to the rest of Europe.[/QUOTE]
Well it'd be pretty nice to put Europe on the international stage as a real superpower.
[QUOTE=Megafanx13;33631763]I can't imagine they're all like that, especially if Merkel is for a fiscal union.[/QUOTE]
That's because we are too deep into the water now and looking back there is no shore we can come back onto. Like a house of cards, if one fails, all fails. Merkel is just trying to make the cards thicker, rather than tumbling the card house.
[QUOTE=Megafanx13;33631798]Well it'd be pretty nice to put Europe on the international stage as a real superpower.[/QUOTE]
We already are, at least the major states are any way (like Germany, Britain and France)
[QUOTE=Beafman;33631815]That's because we are too deep into the water now and looking back there is no shore we can come back onto. Like a house of cards, if one fails, all fails. Merkel is just trying to make the cards thicker, rather than tumbling the card house.[/QUOTE]
Well right, no sense in tumbling the house at this point.
[editline]8th December 2011[/editline]
[QUOTE=carcarcargo;33631816]We already are, at least the major states are any way (like Germany, Britain and France)[/QUOTE]
Well then that's not 'we', that's the UK, Germany, and France. I'm sure Spain and Poland would like a part in that.
[QUOTE=Megafanx13;33631798]Well it'd be pretty nice to put Europe on the international stage as a real superpower.[/QUOTE]
But why as one nation though? As I said, the EU as it is should be more than capable enough to make the European economy function [B]as if[/B] Europe was one nation, while keeping the sovereignty of member states.
[QUOTE=Megafanx13;33631862]Well right, no sense in tumbling the house at this point.
[editline]8th December 2011[/editline]
Well then that's not 'we', that's the UK, Germany, and France. I'm sure Spain and Poland would like a part in that.[/QUOTE]
But they don't have the power to do it
Also I doubt many countries would like someone in Brussels deciding everything that happens in their country, if they try to go federal I can imagine massive amounts of countries dropping out.
[QUOTE=Beafman;33631597]I fear the loss of self-determination for smaller states, like Denmark, where I live. Not because I don't like foreigners, but more considering if the EU parliment decided to impose religious stuff on the country that I do not agree with (ie. state religion).[/QUOTE]
That would never happen.
[QUOTE=Beafman;33631699]But is it suicide if the consequences would be more severe than now? If the union were to default, the crisis that Ireland is in would be nothing compared to after the disbanding of the union. If the consequence is the abyss for european trade and peace, would it then really be political suicide?[/QUOTE]
I don't think Ireland would be in much of a deeper hole if the EU disbanded. The Irish pound would be re-introduced, which we would be able to devalue as much as we wanted, and then we'd default on all of our debt, like Iceland did, and recover, like Iceland did (hopefully).
The suggestion of a single "European nation" is ridiculous, it will [b]never, ever[/b] happen. I don't see why individual countries would willingly give up their sovereignty to Brussels.
A fiscal union and federalisation are two very different things.
[QUOTE=Hidole555;33631896]But why as one nation though? As I said, the EU as it is should be more than capable enough to make the European economy function [B]as if[/B] Europe was one nation, while keeping the sovereignty of member states.[/QUOTE]
But take the crisis with Greece, if they are unable to comply to the terms set forth, the combined budget would not be correct. If there is no plan for the combined currency, The Euro, you get problems. It's because of the currency that we are having trouble, indeed, it was the Euro that started the federalisation process.
I personally fully support the idea of a federal European nation, but admittedly I do not know that much about politics or economics on such a large scale. More than the average joe, but definitely not enough to claim validity in my position. From what little I know it does seem like the best option though, and most reasons I can see against it seem to dissolve to either patriotism, being an egotistical douchebag, or plain unfounded paranoia of governments.
I personally always thought more major powers like the EU would be better suited to make important decisions as they are less likely to make incredibly stupid decisions just to appeal to voters, while still (indirectly) being democratically elected. But, once again, I'm everything but an expert on politics.
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