Donnerstag, 24. November 2011

Will France and Italy build now an alliance against Germany?

When the German Chancellor Angela Merkel and the French President Nicolas Sarkozy meet today Mario Monti, the recently appointed Italian Prime Minister, the Frenchman will be more pleased than his German counterpart. The reason is obvious: the EU Co-founder Italy is returning after Berlusconi dynamically on the international stage and will under the former EU-competition Commissioner with his no-joke style play a much heavier role than it used to play under his completely discredited predeccesor.
While Sarkozy and Merkel formed a kind of European directorate since the Greek crises broke out, France could have in the future more options. With a more influential Italy, Sarkozy will have a potential ally that up to now was not at his disposal. Don't forget: France and Italy are after Germany  by far the biggest countries of the Eurozone. If they would pool their interestests, Germany would inevitabily drive in a weaker position than before.
Because one thing has to be clear: Germany with it's unreasonable only-austerity-ideology today  is isolated in Europe. Maybe the Finns have similar ideas, but not even the stability oriented Dutch agree on the orthodox attitude of the German government and - worse - the Bundesbank.
So new scenarios emerge if France opens up to Italy and stops treating exclusively with Germany about solutions for the crises and the future governance of the Eurozone. That could mean a new push for a changed role of the ECB as lender of last resort or in the mid term the creation of Eurobonds.


  1. Even if Merkel would aggree to Eurobonds the german constitution court decided already that such a decision would need a plebiscite. At least 80% of the germans would reject such a proposition.

    It would be easier to establish the ECB as last lender, but only under severe conditions. How about automatic VAT increases for the countries that do not conform? With detailed exception descriptions for serious recessions and emergency cases.

    So with such an automatic scheme still the national parlaments can decide how to solve their problems, only in the case they don't, the EC will increase their VAT automatically.

  2. That's the reason, why I argue that Eurobonds are only viable in the mid term (or even never). Much more likely is a changed role
    of the ECB as a lender of last resort, like the Fed and the BoE.
    Interesting thought about the VAT-increases, that could make sense.

  3. I'm German and I'm just freezing at the perspective that we with German taxpayers money will finance countries like Italy, which could come out of the crisis just by themselves. But the political class of Italy is not willing to collect the Italian taxpayers money and instead continue to rely on false declarations and working to get other countries to pay their debts. This is not an insult to Italians as a general, but to the alliance of the political class and the people taking profit of this.

    Your blog provides very interesting insight in the Italian system. You can feel that you have a very clear insight and understanding of what is going on. Thanks for your work.