13/9/2013: EU Leader Asks for Self-Censorship from the EU Auditors

If anyone needs a proof that EU elites are intrinsically incapable of accepting open, transparent & properly structured democratic governance, here it is: an EU President who seemingly explicitly advocates suppression or manipulation of facts to serve ideological purpose. This goes beyond simply paying for propaganda news channels and advertorial 'museums' or carrying out a calendar full of questionable in value activities at the expense of taxpayers. Europe's President now demands suppression of disclosure and spinning of reports by EU auditors. In effect we have a man who confuses executive power for absolute power and has a blurred notion of the role of audit in any society or institution.

Stunning admission by a senior EU leader of his innate disdain for checks and balances in the system he allegedly serves.

http://www.telegraph.co.uk/news/worldnews/europe/eu/10306461/EU-auditors-must-tone-down-criticism-of-Brussels-spending-says-Herman-Van-Rompuy.html

12/9/2013: Lorenzo Bini-Smaghi Strikes... again

A very interesting article in Telegraph quoting from Lorenzo Bini-Smaghi's book on went inside Berlusconi's PMship at the 11th hour of his tenure. Bini-Smaghi is one of the key ECB and Euro system insiders and is hardly a naive or malinformed observer.

Link: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100025507/italy-floated-plans-to-leave-euro-in-2011-says-ecb-insider/

If true, there are massive implications (items 1 and 2) on political/governance side and a point of deflated rhetoric (item 3):

1. According to information give by Bini-Smaghi, Berlusconi was effectively removed from democratically-held office due to his willingness to discuss Italy's exit from the euro. This puts a solid boot into the idea of democratic EU and limited sovereignty. If a democratically elected head of state raising concern about the suitability of his/her country membership in the common currency leads to the removal of the head of state, the notion of sovereignty is not limited (as in restricted by the letters of the treaties signed), but truncated (implying absolute exclusion of some considerations from the set of feasible policies).
2. The only thing that held the Euro together in the end was not the ECB with its OMT, but convincing Merkel of the MAD consequences of Greek exit from the union. This in turn implies that there are no institutional constraints on German (or Germano-French axis) power within the union. This problem will not be fixed by all the policies harmonisation and banking supervision reforms anyone can imagine.
3. Being not a specialist on Target 2, I cannot exactly / scientifically confirm or decline Mr. Evans-Pritchard's concerns about the risk transfer within the eurosystem. My understanding is that Target 2 'imbalances' on Bundesbank side are caused by deposits swelling, not assets. Here is how the system functions, in my view: peripheral bank borrows funds from the ECB against collateral. Collateral lands at ECB as an asset. Peripheral bank uses borrowed funds to repay liability to a, say, German bank. Peripheral bank writes down liability to offset the writedown of cash paid. Peripheral bank remains oweing to the ECB. German bank gets cash in exchange for writing down the asset (peripheral bank's liability) and deposits money with Bundesbank which enters as a positive entry on Target 2. Now, suppose the peripheral bank defaults on ECB loan. ECB still has a collateral claim. The net loss (loan amount less collateral value), shall one arise, is amortisable over the entire Eurosystem - all CBs, not just Bundesbank or ECB alone. And more, per Jorg Asmussen: "If a net loss remains even after taking into account all provisions and reserves, it could be recorded on the balance sheet as losses carried forward and be offset by any net income in the following years." (see: http://www.ecb.europa.eu/press/key/date/2013/html/sp130611.en.html). Finally, I do not know where he is getting the information that Bundesbank is selling offset securities to any banks to balance out inflows of funds to German banks from the periphery.

Note: many thanks to Lorcan Roche-Kelly (@LorcanRK) for acting as a sounding board for my doubts on Target 2 and the link to Asmussen's speech above.

31/3/2013: Draghi calling President Napolitano: a nasty precedent

Here's one of the best examples of the total departure of the EU institutions from the normal democratic constraints on their mandate vis-a-vis national affairs:

The story link is: http://www.reuters.com/article/2013/03/31/us-italy-vote-draghi-idUSBRE92U01W20130331?feedType=RSS&feedName=businessNews

For a reply:

That is correct (assuming the reported call did take place): the ECB represents a sub-section of the executive pillar of power in the EU (and via the national central banks - in the member states), just as the US Fed. Neither the Fed nor the ECB have any business in influencing or restricting the legislative pillar (in the case of the above incident - the electoral process) or the entire executive pillar (in the above case - pertaining to the Presidency to which monetary policy institutions are accountable or co-accountable whenever oversight over monetary policy institutions co-rests with legislature) or the judiciary (presumably, Mr Draghi might call on European or national judges too, should their workings approach the issues related to OMT or other aspects of the monetary policy).

To see this, simply replace ECB's Draghi with, say, General X of the Common Security & Defence Policy calling President Napolitano to express concerns about Italian elections. How fast will 'military interference in political affairs' rise to media headlines?

Europe is now clearly on a dangerous path that can lead to subversion or manipulation of democratic institutions and processes. 

23/12/2011: EU - 2013 = Year of Citizens, Rest of Time = Years of Brussels?

So 2013 theme for EU is "The European Year of Citizens". I know, it was proposed some months ago, but...

The challenges for the "Year of Citizens" will be to:

• Raise citizens' awareness of their right to reside freely within the European Union and of how they can benefit from EU rights and policies [Though, of course, if they happen to be Russian-speaking near-majority in some Baltic States, they are not quite 'citizens' and if they happen to be from certain EEC member states, they can reside, but have no right to work in other member states, plus if they live in Ireland, they have a duty to repay banks bondholders in other member states, and if they live in Greece, they have no right to have a referendum on their own economic policies, and... oh, well... the list goes on];
• Stimulate citizens' active participation in EU policy-making [because, as we know it, European 'citizens' are starting to get tired of the farcical nature of governance in the EU, especially when it comes to that pesky democratic deficit (chart below is from Spiegel Online):

• Build debate about the impact and potential of the right to free movement, especially on strengthening cohesion and people's mutual understanding of one another [no comment here, since we are currently living through the period when many member states are starting to put in place measures to reduce that 'free movement']

But overall, did anyone ask the EU Commission and the European Parliament the following question: If 2013 is the year of European citizens, then, pardon me for using foreign turn of phrase here, what the hell were all the previous and will the subsequent years be about? Years of Brussels?