The first big battle of the current France/Germany war is over and France won, sort of, which makes Frances’ allies happy, Germany happy, and me as well …
French President Francois Hollande’s role in goading Germany towards more flexibility in aiding debt-laden euro zone states positions him well to win parliamentary support for stiffer budget discipline rules he once swore to rewrite.
Clearly the war is not over, but it has advanced the cause of those who claim austerity is not the sole solution to Europe’s fiscal problem, and, ironically, it advanced the cause of Germany, which is to unify Europe more politically and fiscally.
Hollande led a revolt against Berlin’s austerity focus that resulted in a hard-fought deal on Friday offering more help to struggling Spain and Italy in return for joint European banking supervision, and deeper fiscal union down the road.
As in any good negotiation, both sides walk away with something in hand. Germany got the overarching banking supervision, which is one big step toward greater fiscal integration, and the financially strapped Eurozone countries now have a way to shore up their banks without creating more debt for themselves. As well, Germany’s acceptance of the new financial backing structure allows the debt-ridden countries to keep their pride, as the “troika,” the “supervisor” of the countries seeking financial help fundamentally goes away. Now, all the supervision and financial dealings will be done through normal financial channels, which tend to be somewhat more discreet. Kudos to Hollande and Merkel, two shrewd politicians who ended up doing the right thing for the Eurozone as a whole. In my opinion, this is how wars should be fought …
On the subject of Europe, below are one reader’s comments and questions. I will leave you with his words and tomorrow I will respond. In the meantime, know this bright fellow is a longtime reader who has written to me before, always with an interesting and thoughtful perspective.
You kind of make light of the global debt and the solving of that problem. As many investors and citizens of the world are sitting on a powder keg you appear to be bored with it all and seem to ‘have to write about it.’ Well, I too am bored with the continual banter from the bankers, politicians, pundits, and soothsayers, who seem to never get much right.
As they ‘play around’ (Nero fiddling), the crisis is NOT being solved. The debt has gotten so enormous that it cannot be ignored. The only way it goes away is if some entities go bankrupt, lose a lot of money, and then get back to work. Then and only then will we begin to see the global economy get to a more even footing. My question is this:
What is being done to stop the spending, lower costs, and use income more wisely to pay down the debt with actual income, not printed or borrowed money and when is this going to start, or is it just going to press us into the “New Dark Ages,” where we just stop everything and a whole new order takes over? I know what it means to get to the end of the money when there is too much month left. WHERE IS THIS GOING ECONOMICALLY?
Not bad stuff, but, as you might guess, I agree and disagree, and tomorrow, you will read all about that, as I am not shy about speaking my piece, now am I?
Trade in the day; Invest in your life …
