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Citigroup Sees a EURO Rally Because of EU Bailout of Greece : Joschka Fischer in SPIEGEL Interview Assesses German Chancellor Merkel and European Union Fiscal and Political Situation

By Andis Kaulins

Citigroup has closed its recommendation to buy the Norway Krone and sell the Euro as Euro Poised For ?Sustained Rally? on Reform, Aid.

The European Union (EU) bailout package for Greece and the EU plan for helping other member countries in fiscal difficulty have removed the pressure from the Euro, a fiscal danger to the Euro driven primarily by speculative money markets.

Obviously, the EU can not leave any of its members floundering at the abyss of fiscal destruction as easy victims for money speculators, thus destroying the Euro. At the same time, measures have to implemented and enforced to keep the weaker EU Member States from borrowing themselves into hopeless situations from which there is no unaided extrication.

We ourselves are familiar with some young people in newer EU Member States, for example, who have borrowed themselves to the hilt for new cars and technology (PCs, smart phones, etc.) - debts which are all well payable if these people keep their jobs and continue working, which for some is proving difficult in the current job market, with layoffs and the like.

Nevertheless, in the symbiotic relationship in which EU Member States finds themselves, those same purchases have a silver lining, since they help to drive the economies of other EU Member States, who produce the goods bought on credit by the purchasing borrowers. Hence, the EU problem is -- in the last analysis -- a problem of EU integration and should be solved in an integrated way.

Former German Foreign Minister Joschka Fischer in an interview with SPIEGEL has criticized the way that German Chancellor Angela Merkel has handled the fiscal crisis, but we do not agree entirely with that view.

It is true that Merkel has been very slow and careful in her management of the situation, as is her style of problem solving, leaving the center stage open for the more ebullient Sarkozy and Berlusconi, but we think this is more a matter of personality and character of the three country political heads rather than an issue of competence or, as Fischer calls it, national embarrassment for Germany, given the fact that Germany foots the lion's share of the bill but leaves the hero's celebration to France and Italy.

Germany's dominant economic position in the European Union does not mean that German EU policy always has to be geared to being the openly dominant player. Everyone knows, one way or the other, that Germany is the core country of strength in the European Union.

What we like about Fischer is his analysis about European integration, which is very forward-looking -- quoting from the SPIEGEL interview:

"Fischer: ... It was always said that we couldn't talk about a United States of Europe anymore. It was said that the euro could function solely on the basis of the Maastricht criteria, without further political integration. The markets merely made it clear to us that it doesn't work that way. This is why we must now take a courageous step forward.

SPIEGEL: And where would this step go?
Fischer: Now that we have the ?750 billion guarantee, the monetary union has transformed itself into a community of solidarity. That's what has to be implemented now, which means substantially more and not less integration.

Part 2: 'Germany has Benefited the Most From the EU'

Fischer: What nonsense! The European Union was a transfer union from the very beginning. The common market and the agrarian market were and still are primarily transfer guarantees for Germany and France! And Germany has benefited the most by far. Without the euro, many countries would have devalued their currency. We, as an exporting nation that depends mainly on Europe, would have paid the price, because our products would have become more expensive. Now we have to make up for this a little. There is no way around it.

SPIEGEL: Solidarity means answering for those countries that, like Greece, have lied to the community?

Fischer: Solidarity is a two-way street. This means that, in the future, one country in the euro group cannot send its workers into retirement at 67 while another does so at only 55. It will also not be an option for some countries to accumulate debts as they please, while others save. There are several countries that have to become more competitive. We know now that the euro cannot function without all of this.

SPIEGEL: In other words, Europe has to become more German.

Fischer: No, more competitive. In terms of social policy, taxes and economic policy, the EU members must coordinate their activities more effectively, even becoming largely integrated."

Read the whole SPIEGEL interview with Fischer for even more critical questions and insights into the European Union situation.

Full post as published by LawPundit on May 26, 2010 (boomark / email).