The exception has become the rule: the European rescue fund ESM is now joined at the hip to the European Monetary Union. Setting it up to get eurozone countries that cannot or do not want to play by the rules of the common currency out of their own messes, the Euro-rescuers have defied not only the promise of the founding fathers, but also the ban on bail-outs enshrined in the EU treaties. That shifts the power structure and the dynamics of the monetary union, probably not for the better.
For the young currency has now been taken up as the most important bargaining chip for cohesion: the credible threat that countries that fail to stick with fiscal discipline and fail to ensure that their economy is competitive will have to take responsibility for these shortcomings themselves. "Solidarity" is the new slogan. The joint liability is organised and institutionalised through the ESM, which can call on at least 500 billion euros in cheap loans. Even more can be leveraged off the funds.
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ESM hostage to Merkel election fortunes
“Will the euro survive until September 2013 [date of German elections] or will it end up falling apart under the impact of tactical electoral and cultural movements of the Germany of Angela Merkel, who is determined not to let go of the chancellery at any price? The question may seem paradoxical, even provocative,” writes Il Sole 24 Ore, “on that ‘historic’ day that marked the birth of the European Stabilisation Mechanism (ESM)” and saw the German Chancellor head to Athens to express her support for the austerity policy of the Antonis Samaras government. “It’s not,” writes the business daily —
The fire continues to smoulder under the ashes of this crisis that refuses to go away, and it could burst out again at any moment in a tense and surreal Europe that, like the web of Penelope, keeps unravelling methodically in an atmosphere of conflict and unnerving calm.
In this context —
... the rolling out of the ESM seems an ambiguous exercise, considering that it is only half operational and will stay that way until we don’t know when. What needs to be done urgently is to recapitalise Spanish banks with 60 billion euros – but the ESM cannot do that because there is no agreement yet on the supervision of all the banks (in a banking union) by the ECB, due to German resistance. And because Germany, the Netherlands and Finland now believe that the ESM funds can be tapped only for new bank debt [that is, debt incurred since the entry into force of the ESM]. In short, they are trying to change the cards while the rules of the game are being discussed. [...] What is certain is that Merkel and her finance minister are trying to clear the field of all European Union decisions that could disrupt the German public during the election campaign.