ORIGINAL FRENCH ARTICLE: Les euro-obligations, cheval de Troie du fédéralisme européen
by Pierre Ivorra
Translated Monday 12 September 2011, by Henry Crapoand reviewed by
Even though the German Constitutional Court has just condemned the recourse to European loans, euro-bonds fans persist in presenting them as the solution to the euro crisis: but in fact euro-bonds would merely result in aggravating the pressure of the markets.
Has Germany’s Constitutional Court definitively buried them? Solicited for advice over the Federal Republic’s participation in EU plans for the financing of ailing euro-zone countries, it made a point of specifying in its ruling that it would condemn all accord instituting “a community of debts (…) especially if it were linked to unforeseeable consequences.”
To borrow in such a way as to reassure the financial markets
This provision was targeted at “euro-bonds”, which would effectively tend to institute a “community of debt.”
The idea was put forward for the second time late in 2010 by the president of the euro zone, the rightwing political leader of Luxemburg Jean-Claude Juncker, and Berlusconi’s finance minister Mario Monti. It is still upheld by personalities and organizations as diverse as George Soros, the billionaire speculator, the French and other European Socialist parties, the former president of the Brussels commission Jacques Delors, the Montaigne Institute - a French think tank that leans to the MEDEF (the French bosses’ organization) - and the neo-liberal OECD (the organization for economic cooperation and development) as well as by the Greens.
There are no doubt differences between the proposals of those diverse euro-bonds enthusiasts but all in all they would deliver the same results: the objective being the same, namely to provide a means to borrow even more on the financial markets by “reassuring” them. Jean-Claude Juncker explains that the idea is to mutualise part of the States’ loans on the scale of the Euro-zone. The euro-bonds issued would be neither those of Greece, or Spain, or Italy: they would be deeds issued by the whole zone, including a country as sound financially as Germany. Supporters of euro-bonds say that the system would lower the cost of the frailest countries’ debts.
The higher a country’s debt, the more pitiless the dominant countries’ grip on it
To form a complete idea of the full consequences of the proposal, it is necessary to examine all the aspects of Jean-Claude Juncker’s position. In an interview he gave to the French daily Libération (dated December 26, 2010) the euro-group’s president explained that most of those States’ loans will continue to be financed “with national bonds at rates of interest that will consequently remain higher" (than the rate of euro-bonds - T’s N)). The reason being that it will enable the markets to “punish” ill-managed countries through that part of their debts. And to make things clearer, he specified that “this mechanism, if it is well articulated, will incite member States deepest in debt to do their utmost to reduce their debt so as to be able to borrow at the more favourable rate of euro-bonds for the total amount of their debt."
The reduction measures will benefit capital
Euro-bonds are thus conceived as a tool to enforce budgetary discipline, an incitement for governments to take measures targeted at the reduction of public expenses, measures that will be even more profitable to capital, but even more coercive for the European peoples. It is easy to imagine what the German leaders’ demands might be in such a context: in order to try and minimize the risks inherent in the mechanism and keep down the cost of their own debt (the warranty that they would de facto provide to euro-bonds would increase its onus), they would tighten their supervision of euro-zone countries’ budgetary policies.
Some are already saying that “the compensations demanded from each euro-bonds applicant – the renunciation of its budgetary sovereignty - might be a function of the applicant’s current below-par rating.” And so the entrance fee might prove quite high indeed: the greater a country’s difficulties, the more tightly bound it would be by the financial markets and the zone’s dominant countries. Jean-Claude Juncker confesses as much: “this innovation, he declares, leads us to envisage a greater degree of political integration.”
Euro-bonds are definitely one of the Trojan horses of a muscular form of federalism. This is due to the fact that the real objective of the proposal, even if some people are still unaware of it, is not to safeguard public finances but to save the financial markets and the banks, and to continue to support them through the storm at all costs.
The Left would gain nothing by sponsoring markets, be it through euro-bonds. It had far better come to grips with them and master them, and begin to seek other means of financing public expenses. Which implies an overhaul of the European Central Bank.