Tag Archive: Germany


EU Commission to Investigate Germany’s Account Surplus

Germany’s account surplus, the country’s export to import ratio, reached 19.7 billion Euros this September, a ratio which leads the world. This surplus effectively means that Germany’s exports grossly exceed the imports flowing into the country. The European Commission has now elected to undertake an extensive review of this economic imbalance to determine whether it is harming the European economy. While Germany’s surplus is a significant factor in the country’s global economic success, detractors argue that this fiscal policy prevents other Member States from increasing imports to the EU’s richest market. The US Treasury echoed this sentiment when it recently argued that Germany’s account surplus hinders Eurozone growth. Meanwhile, German officials contend that the benefit of increased German demand on imports would have minimal benefits for the European economies that were hardest hit by the Eurozone crisis.

Despite Germany’s contrary opinion, it is likely that an increase in German demand for imports would have a positive overall effect on the Community economy. Indeed, Germany’s export focused fiscal policy clearly deprives other Member States from increasing imports into the country. Moreover, the policy poses a potential violation to Germany’s commitment to “work for the sustainable development of Europe based on balanced economic growth and price stability, [and] a highly competitive social market economy” under TEU Article 3. The Commission would be prudent to be thoughtful in its approach toward the Germany issue because the prospect of asking Germany to reduce its account surplus inherently contradicts the EU’s policy of encouraging Member States to aim for trade surpluses. However, as the Community’s largest market, Germany is vital to a healthy European economy. Accordingly, the Commission could strive for evenhanded measures which increase Member State access to the German market while also having minimal intrusive effects on Germany’s right to control its internal fiscal policy.

 

EU Arctic Aspirations Stonewalled Again

For the second time, the Arctic Council has deferred an EU application to become an observer on the multilateral Arctic forum. The Arctic Council was formally established through the Ottawa Declaration in 1996. The impetus behind the Council’s inception was the need for an intergovernmental  forum in which Arctic states could cooperate in matters mutually beneficial for the region.

The European Commissioner for Maritime Affairs and Fisheries, Maria Damanaki, has argued that the EU “has a stake in what happened in the Arctic”, and “is an Arctic actor by virtue of its three Arctic states, Denmark, Finland, and Sweden.” The EU has not shied away from speaking about its Arctic interests. In June 2012, the Commission proposed a three point Arctic policy, the most salient of which is the sustainable development of resources.

It is undeniable that the EU has a stake in the future of Arctic development. It is estimated over 90% of Europe’s oil production and 60% of its gas production comes from offshore operations occurring in the North Sea and Norwegian Sea. Moreover, an estimated 13% of the world’s undiscovered oil reserves and 30% of its undiscovered gas reserves are lying within the Arctic seabed. Additionally, proponents of EU accession have argued that climate change is a trans-boundary issue, and thus, will adversely impact European weather patterns and fish stocks.

There have been two primary arguments against the EU attaining permanent observer status in the Arctic Council. First, the Heritage Foundation has repeatedly asserted that the EU is a “supernational” organization and, therefore, does not meet the criteria to join the Arctic Council as an observer. Second, the Canadian government has opposed EU observer status since the EU submitted its first application in 2009.

Canadian opposition began in May 2009 when the European Parliament voted 550-49 to impose a seal trade ban throughout the European Union. A Canadian Inuit group challenged the ban, but the General Court of the EU dismissed the appeal. Additionally, similar challenges have been brought before the European Court of Justice, but they also resulted in dismissal. Consequently, this lack of success in the European courts inspired a Nunavut-based group to begin the “No Seal, No Deal” petition calling on the Canadian government to reject the EU’s application for full observer status.

This second argument may carry more weight with the Arctic Council than the former. Following the announcement of the EU’s deferral, Leona Aglukkaq, the new Canadian chair of the Arctic Council, pointed out that one of the criteria that observers must meet is to demonstrate respect for the traditional ways of life of the indigenous people of the North.

The EU’s interests in the Arctic are not disappearing any time soon. Recently, Italy joined EU member states: France, Germany, the Netherlands, Poland, Spain, and the United Kingdom, as observers on the Arctic Council while Finland, Sweden, and Denmark all have permanent membership. Hopefully these EU Arctic actors will keep the EU’s best interest in mind until relations are able to thaw with Canada.

Earlier this month Germany recognized the Bitcoin as a “unit of account” when used between private citizens. The German government is willing to recognize the Bitcoin as a valid form of payment between individuals willing to use it, while businesses still need to get approval to use the Bitcoin.

But what is a Bitcoin?  Bitcoin is a new type of online currency.  Bitcoin does not have a central bank, but rather is a peer-to-peer based technology.  Bitcoin is essentially virtual cash with no third party involved in the transaction, unlike sites like Paypal or bank transfers.  Bitcoin creators realize that it is a volatile currency, but maintain that with widespread acceptance this will become less of an issue.

Germany’s recognition of the Bitcoin might present some problems with the European Union, as they have “exclusive competence” over member countries whose currency is the Euro, according to Title I, Article 3 of the TFEU.  Title VIII, Article 119 of the TFEU further asserts that the economic and monetary policy of the European Union “shall include a single currency, the Euro.”

Does Germany effectively circumvent this problem by only recognizing the Bitcoin as a “unit of account” rather than as a currency?  If Germany is going to continue allowing businesses, with government approval, to transact using the Bitcoin it looks more and more like a recognized currency.  Interestingly, Bitcoin creators maintain that government approval is not needed to legitimate Bitcoin transactions.

Turkey’s Ongoing EU Candidacy

In October of 2005, both Turkey and Croatia began the process of becoming member-states in the European Union. Croatia has succeeded and is now the twenty-eighth member of the EU. Turkey, however, remains deadlocked in the preliminary negotiation stages of the candidacy process. Contrasting opinions from the EU and its members (although not entirely unjustified) have led to a complex and controversial candidacy where a lot more appears at stake than simply the addition of another member-state.

Efforts at further integrating Turkey into the European community began as early as 1963 with the signing of the Ankara Agreement. This agreement created a customs union between the European Economic Community and Turkey. Arguments in favor of Turkish accession point to Turkey’s remarkable economic growth over the last four years. Such economic success has presented Turkey as an attractive addition in light of the fact that the EU economy has just endured its longest recession in its fourteen-year history.

However, admission to the EU is not based solely on economic stability. A prospective candidate must demonstrate an adherence to “principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law”. It is amongst these latter criteria where concerns have been raised.

Turkey has drawn considerable criticism from European officials for violations of freedom of association and freedom of religion. Criticism culminated this past summer as the world watched Turkey’s crackdown on public dissenters. In response, Germany blocked the recommencement of Turkey’s EU membership negotiations. Another example of Turkey’s harsh treatment towards political dissent has been its targeting of opposing political parties. According to an article by Ashleigh E. Hebert, published in the Chicago-Kent Journal of International and Comparative Law, the European Commission has consistently noted the frequency and the manner in which dissolution of political parties is sought.

On the other hand, there are others that argue that bringing Turkey into the EU is very thing that would catalyze change in Turkey’s domestic political process. German Foreign Minister Guido Westerwelle and EU Enlargement Commissioner Stefan Fule have both stated publicly that bringing Turkey into the EU would commit them towards democratic reforms more aligned with EU principles. In other words, EU membership for Turkey would alleviate the very concerns that now stand in the way of its EU membership.

Only time will tell whether Turkey’s EU aspirations will one day be accepted or if the door will finally close on Eastern expansion.

The EU Sovereign Debt Crisis: Some Legal Causes

A lot of attention surrounding the EU sovereign debt crisis has ostensibly focused on the allocation of blame to Member-States individually, often leaving out the EU institutions themselves. Responsibility for the current financial situation does in large part reside with the more indebted EU states such as Greece, Spain, Italy, and Ireland. However, there are additional causes that also deserve some of the attention.

The Treaty of the European Union (TEU) created the Eurozone and the European Central Bank (ECB). This final level of economic integration completed the three stage monetary and economic union that began in 1990. As the introduction of the Euro drew near, legitimate concerns were being raised by Member States regarding the economic stability of this new Eurozone. In response, the Stability and Growth Pact (SGP) was adopted in 1997. A specific resolution of the SGP, formally recognized as Council Regulation (EC) No 1467/97, implemented a targeted deficit reduction procedure for member-states that possessed excessive debt, imposing a deficit limit, an overall debt limit, and empowered the ECB to levy fines for non-compliance. However, the SGP has been inadequately enforced since its adoption. Such inadequate enforcement of the SGP may very well underlie the troubling economic situation the EU finds itself in today.

The most striking example of this questionable attitude toward the SGP came in November 2003, when the European Council (EC) chose not to implement recommendations of the European Commission (Commission) pursuant to the national budgets of two Member States. France and Germany’s national did not conform to SGP standards and the EC decided against enforcing SGP deficit reduction procedures previously agreed upon. This controversy eventually arrived at the European Court of Justice (ECJ). The Commission raised the issue that the EC’s failure to enforce the SGP’s debt re-structutring mechanisms against the Member States of Germany and France. Although the ECJ did rule against the EC for its refusal to pursue the SGP’s enforcement mechanisms, the checks and balances between EU institutions have been called into question and the authoritativeness of the SGP has been seriously undermined.

For example, the ECJ stated that the EC “cannot break free from rules laid down by Article 104 TEC and those for which it set forth for itself in Regulation No. 1467/97(SGP)”. Article 104 of the Treaty of the European Community (TEC) codifies the discretion of EC to assess a Member-State’s debt [104(6)], make recommendations on remedying that debt [104(7)], and the procedures for non-compliance [104(9)]. However, the SGP subsequently stipulated additional procedures to be implemented against a Member State in the case of non-compliant debt structure. The ECJ opinion alludes to an interesting question regarding the scope of the relationship between Art 104 TEC and the SGP. Understandably, however, they remind the parties that such a question “had not been presented”.

As Professor Larry Eaker of the American University of Paris has explained, this ECJ decision has potentially created a troubling conflict between the broad discretion afforded the EC in matters of economic and monetary policy, as expressed in Art. 104 TEC, and the monetary restrictions that were envisaged in the SGP. It would seem that the subsequent addendum of the SGP to the TEC would resolve this conflict just as a matter of chronology, but things are often never that simple.

The ECJ’s decision prompted subsequent legislation by the European Commission that intended to correct issues raised in the 2004 Commission v. Council case. But the conflict between the EU institutions and Member States is certain to continue, given the lack of resolution concerning the scope of the SGP.

 

Germany’s Rejection of European Stabilization Mechanism Threatens Economic Recovery

After the recent declaration of a proposed European Stabilizing Mechanism (ESM), and Germany’s subsequent approval of such a measure, it appeared as though a potential resolution to the persisting Eurozone crisis was approaching. These hopeful sentiments have quickly receded, as Germany, Finland, and the Netherlands have now backtracked on their commitment to the ESM, instead introducing troublesome stipulations which have inflamed the Community and cast clouds on any hopes of an imminent resolution to the crisis.

A joint statement by the finance ministers of Finland, Germany, and the Netherlands issued on September 25th promulgated two controversial proposals. First, the statement calls for national governments, not the ESM, to be responsible for ‘legacy assets.” This essentially calls for delinquent states- specifically Spain and Ireland- to take care of their own current and previous financial woes, rather than be recapitalized by the ESM. Instead, the ESM would only deal with costs incurred after its enactment. The second proposal advocates using private capital first and public capital second to recapitalize the national banks of member states, with the ESM as a purely last resort.

Some implications of this announcement are addressed in an editorial by economist Karl Whelan, who states that Germany, Finland, and the Netherlands are basically telling Spain and Ireland to “drop dead.” Whelan describes the ominous consequences these proposals would hold for Ireland, which he argues would be denied any serious debt relief by the ESM.

Likewise, the Economist details the repercussions for Spain’s national debt if this proposal is enacted. Currently, Spain’s banks are roughly 59 billion Euros in the hole, and Germany’s plan would tremendously stifle the relief which Spain seeks from the ESM. This may very well throw into jeopardy any potential of economic recovery in Spain.

The immediate reverberations of Germany’s decision to reverse its commitment to the ESM will be financial, as evidenced by the Spain’s precarious national debt. Ultimately, however, its impact may be existential for the European Union and the Euro. The continued reluctance of economically strong states to lend to weaker states has transitioned to flat-out refusal, which some may argue is a betrayal of the precept of solidarity central to the Community, as explicated by Title IV of the Charter of the Fundamental Rights of the European Union. The refusal to cooperate emphasizes the growing disillusionment of member states with being roped in with delinquent states, which a growing chorus of political voices argues threatens national sovereignty. These political and inter-Community tensions threaten to not merely prolong the common market’s economic malaise, but dissolve the Union altogether.

Eurozone Economic Crisis and Jobless Rate

European leaders are attempting to resolve the debt crisis and economic slump that they now face. This crisis has caused a leap in unemployment rates in Eurozone countries because governments and companies are trimming their payrolls in order to address their high debts and to compensate for weak consumer spending. European leaders plan to put an end to the joblessness, and through it the economic crisis, by boosting the confidence of their citizens in government finances; through this, they hope to stabilize the economies of those countries who use the euro as their single form of currency.

The idea of a single euro currency began in 1991, where the Maastricht Treaty was created by the European Union, and the Maastricht Treaty laid the foundation for the creation of a monetary union by 1999. The goal of the Economic and Monetary Union (EMU) is stability; another goal of the EMU is to make the euro less sensitive to those fluctuations in currency exchange.

In July, Eurostat, the European Union’s statistical agency, said that 88,000 more people were without jobs, and in the Eurozone the current rate of unemployment reached a record high of 11.3 percent in July. The cause of the unemployment is tied to several factors, one of which is the cuts to public sector payrolls, benefits and tax hikes. Because of these cuts citizens are hesitant to invest their money and make large purchases, while companies are not willing to take the risk of hiring new employees.

In early August of this year, the statistics gathered by Eurostat were addressed in a meeting with the European Central Bank’s (ECB) governors. There were opposing views as to how the ECB would potentially solve the economic crisis. News agencies believed that the ECB would use the European Financial Stability Facility (EFSF) rescue fund to bring back stability to those countries in trouble, but Germany argues that it is illegal for the ECB to use the EFSF rescue fund to “bankroll government borrowing.”

On the other hand, it was speculated by financial analysts Holger Schmieding and Christian Schulz that the ECB would do nothing more than provide “strong verbal intervention.” Regardless, the head of the ECB, Mario Draghi, said that he would do “whatever it takes” to preserve the euro. It wasn’t until this week that his plan was unveiled. Draghi proposes to buy unlimited government bonds in order to boost the confidence of those countries that are in economic crisis. While this sounds like a good plan there are still many groups that have to agree to it, namely politicians and bankers.

Hopefully, if everyone agrees, this will be the solution to resolving the economic crisis in the Eurozone, and through it lower the rate of joblessness.

 

 

As the Eurozone crisis persists, the European Union is exploring dramatic options to stabilize the economic crisis which threatens to irrevocably fragment it. An article in the Economist documents the ‘continued need for wavering private banks to be bailed out by their national governments. A proposed measure to mollify the banking emergency is a ‘banking union,’ which would inject failing banks with capital, alleviating the burden of weaker member states. On September 12, the European Commission put forth a proposal for a ‘Single Supervisor Mechanism’- a preliminary step towards this hypothetical banking union. Under this Mechanism, the European Central Bank would supervise all banks within the banking union, allowing it to uniformly apply a single set of rules across the European Union market.
However, this proposed Single Supervisor Mechanism magnifies the tension between preserving national autonomy and the stated principle of solidarity at the core of the EU. The economic disaster has brought to the forefront the opposition of economically sturdy and powerful member states such as Germany to be held accountable for delinquent states such as Greece and France. In the instant case, as described by the Guardian, the news of such a EU banking union has furthered mutual distrust between Germany and France. Germany has essentially accused France of attempting to shift its own perceived financial irresponsibility to the EU, whereas France views Germany’s hesitance towards the proposed banking union as proof that it seeks to retain undue influence apart from the Union. Essentially, Germany wants to maintain control over the majority of its banks.
This dynamic highlights a power struggle between member states (mainly Germany) and the EU governing apparatus. As noted by the Economist, important questions remain, especially regarding the scope of the European Central Bank and whether it will have the power to probe any bank, or to issue or revoke banking licenses. Such questions understandably concern Germany, which does not want to see its domestic influence dissipate because of weaker member states such as France.
As economic uncertainty reigns, the fault lines of the European Union may continue to be exposed further. Germany’s potentially hostile reaction to having its own authority weakened by struggling member states may undermine the delicate balance between sovereignty and solidarity on which the EU is dependent.

Greek Financial Crisis and a Possible Exit

When discussing the European Union, it would be hard to escape discussing Greece and its financial situation. Greece has been in dire straits financially and has been at the epicenter of Europe’s financial crisis. With much debate and doubt surrounding Greece’s future with the EU, Greek Prime Minister Antonis Samaras has stated that “exiting the euro would be a ‘catastrophe’ for his country.”

Austerity, a word so popular in Europe that it became Merriam-Webster’s 2010 word of the year is once again at the center of the Greek Question.  Greece needs to cut 11.5 billion euros in spending to qualify for the next 33.5 billion euro installment of their 130 billion euro bailout package. Greece says it needs more time to make the cut–4 years instead of the original 2 years.

These financial troubles bring to light the legal issues concerning Greece’s relationship to the EU as a member state. Member states to of the EU enjoy a strong economic union but also sovereignty. Europe is now facing financial collapse and has forced Greece to go along with its austerity plans, which have been referred to by John Lauhgland as brinkmanship which is essentially a political game of chicken where one party forces an opposing party to make concessions by allowing volatile economic or political issues to reach a critical.  John Lauhgland writes that “the European political class, by issuing this warning, is trying to make it clear to the Greek voters that they have to choose the euro and they have to choose the austerity program.”  The European political class, continues to try and control the Greek electorate. The near future holds what a Greek expulsion from the Eurozone means for the stability of the European Union.

Greece’s future in Europe continues to look bleak. A prominent German politician, Rainer Bruederle,  has even stated that when this bailout has been paid in full, another one would not follow. This shows that Greece’s problem is a long term one, and there is no quick fix through a bailout; this isn’t General Motors, it is an entire country. Mr. Bruederle states that “We Germans are Helpful, but we’re not stupid.” In the words of George R.R. Martin, Winter is Coming for Greece, and we shall see if she can survive the long winter.

Necessary Power? The Development of the European Union Military

The Common Security and Defense Policy, CSDP, could be said to have had its historical beginnings with the signing of the 1947 Treaty of Dunkirk. The treaty was signed by France and United Kingdom after World War II due to a possible with German threat. This treaty of ‘Alliance and Mutual Assistance” might be the first of its kind between European countries in an attempt to bind together in warding off enemy attacks.

In 1999, after the initial Dunkirk Treaty and through other treaties, meetings, and agreements  among the 27 Member States of the European Union, EU, the European Security and Defense Policy, ESPD, was established.  The goal of the ESPD was to ensure the security of Europe in the globalizing world and to formulate a united European international security strategy in order to deal with the growing threats facing the EU. Further, another goal was to support the EU’s “Common Foreign and Security Policy.” These growing dangers might be too much for a single Member State  to face alone. Unlike its predecessor, the European Security and Defense Identity (ESDI), the ESPD included Member States of the EU that were not members of the North Atlantic Treaty Organization, NATO. In so doing, the ESPD, first, fell under the jurisdiction of Europe and second, created the first united Military strategy of the EU because non-NATO Member States of the EU were allowed to become members. In 2009, the Treaty of Lisbon came into force/effect. That effect brought with it a change in name of the “united strategy” from the ESPD to the CSDP.

Before its renaming in 2009, the ESPD carried out its first mission in 2003 following the 1999 declaration of intent of the Member States for the ESPD. This mission consisted of EU troops watching over the country of Macedonia due to tensions of different ethnic groups due to the consequence of the Kosovo War. Since then the EU military have completed missions in Africa, Asia, and Europe. These missions range from  humanitarian (Africa) to peacekeeping (Europe). The 27 Member States that make up the EU military have a combined military budget of 194 Billion Euros  for military expenditures and over 5 million military personnel (active and reserve). In fact, the CSDP has been compared  to the national strategy of the United States’ military.

The United States, unlike the EU, is one country. The EU consist of nations with their own military power, budget and personnel. Furthermore, the 27 Member States each have their own Heads of States who make decisions that, although helps their national interest, must conform with the standards of the EU, because failure to do so would destroy the purpose of the EU. However, there is much to be seen when a Member State has every right to abstain from a mission but is not allowed to do so. It would be interesting to see what the remedy to that dilemma would be. After all, the EU was created for a common market, but whether a unified military was a rightful side-effect of such is still left to be seen.




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