Thursday, June 7, 2012

Europe Heading for Political Union?

Just a couple stories that caught my eye:

First, the Guardian is reporting that Spain is calling for centralized control over budget and fiscal matters within the EU.
Spain is warning that Europe's single currency will unravel unless its leaders decide within weeks to centralise budget and tax policies in the eurozone and agree on a strategy to pool responsibility for failing banks.

As Spain's prime minister, Mariano Rajoy, came under mounting international pressure to accept the eurozone's fourth national bailout in two years, the government in Madrid angrily rejected the demands, insisting that it did not need rescuing. With fears of a euro meltdown having rapidly shifted from Greece to Spain, Rajoy is pleading for a direct eurozone rescue of his country's banks, to avoid the humiliation attached to requesting a national bailout.

Sources familiar with the Spanish government's thinking said its negotiating position was that the fundamental quandary facing the eurozone was not Spain, but a European failure of leadership in persuading the financial markets that the euro would be defended at all costs.

A Brussels summit at the end of the month would have to remedy that by agreeing to establish a eurozone banking and fiscal union – major federalising steps certain to be fought over. Without that commitment, Spain fears the single currency would be finished in months.

The Spanish government believes that the eurozone's fourth-biggest economy is too big to rescue and that the consequences of abandoning Spain to the markets without a pledge of major European reform could be so ferocious that the single currency would not survive.

The current rules governing eurozone bailouts stipulate that a government has to request help and that the money may only be channelled via governments – increasing the national debt burden.

But Spain is stalling until key euro group meetings, the G20 summit and the Greek election later this month. Some analysts believe that if Spain is finally forced to request a full-scale EU/IMF bailout it is likely to come around 20 June.
I have argued before that the response to Europe's monetary crises is not one to save Europe, but one to impose a central government over Europe, most recently here, but also previously discussed or posted about articles on this issue here, here, here and here. In the latter post, I noted that "I would also note that in pushing ahead for greater integration, the other EU members have not adopted a plan to save the Euro. They are simply giving up sovereignty, hoping that it will somehow result in saving the Euro, with still no clear plan on how to get there."

Things are no different now. There is no plan, just a reflexive response for tighter integration with a concomitant loss of sovereignty, for the hope--just a hope--that it will create the financial stability needed. Of course, this is not an instance of one or two nations duping another. If the idea is to create a central taxing authority, then the Spanish politicians probably think that centralized control will allow Spain to more easily live off the fat of Germany. On the other hand, maybe the Spanish politicians are simply selling out Spanish sovereignty for the modern equivalent of 30 pieces of silver.

Turning to the second story, the Independent reports that Greece's loss of credit is leading to a shortage of drugs:
There were long queues outside a state-funded pharmacy in Athens yesterday as people lined up to get life-saving drugs for seriously ill relatives.

The shortages in chemotherapy medicine and other expensive drugs arose when pharmaceutical companies cut credit to the country's largest state-backed heath insurance fund, EOPYY, which provides subsidised medicine to ordinary Greeks.

The problem is yet another reminder of the challenges facing Greece, which goes to the polls for a second time this month after May's elections failed to deliver a government.

Coalition talks between competing parties broke down when the far left demanded a renegotiation of the country's austerity drive – something that is opposed by its European partners, notably Germany. The ratings agency Standard & Poor's said this week that there was a one in three chance that Greece could quit the euro in the months after the elections on 17 June.

Yesterday, the privately run SKAI TV showed scenes of hysteria as hundreds of Greeks queued outside one of the five pharmacies owned by EOPYY. A patient could be heard screaming inside the pharmacy, and a man said he had been waiting hours to get his mother's cancer medication.

The average cost of a cancer patient's prescription is €2,000 (£1,600) but members of the EOPYY healthcare fund got the medicines at a heavy discount. By lunchtime, the morning queues had vanished. "I got my relative's drug a day early," said one woman. "But off course, with this situation, I'm worried we might not be this lucky next time."
But, of course, this isn't really a "journalistic report," as much as the official narrative. Five pharmacies, with people lined up until noon in order to buy heavily subsidized medicines is no more a crises, than people having to wait in line on Black Friday to get good Christmas deals. A real crises would be people unable to buy drugs at all. This is a made for television crises, reported merely to scare the Greeks in voting the acceptable way at the upcoming elections. Or maybe I'm just a cynic.

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