Merkel and Sarkozy's Desperate Eurozone Measures

by John M. Curtis
(310) 204-8700

Copyright August 17, 2011
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           Seeking desperate measures to control a potentially lethal crack in the Eurozone, German Chancellor Angela Merkel and French President Nicolas Sarkozy proposed a new business transactions tax designed to augment the European Union’s revenue stream to handle the current debt crisis.  Since the Eurozone launched its common currency in 1999, it was supposed to promote unprecedented prosperity to European countries with histories of national debt and poverty.  When the 17 euro subscribers relinquished coinage rights in 1999, it took time to see how Europe’s disparate economies could handle a more highly-priced currency.  Twelve years into the experiment, it appears to be failing, causing massive debt and insolvency to otherwise prosperous European countries.  Italy has now joined Greece, Portugal, Spain and Ireland as countries who’ve run out of cash.

            Recent reports that France’s most solvent bank Société Général was running out of cash sent the euro tumbling and world stock markets into a tailspin.  Already taxed to the breaking point, most Eurozone nations can’t afford more taxes from the EU.  Europe’s sovereign debt problem has shaken confidence in the euro, prompting some members to consider going back to coining original currencies.  “We want to express our absolute will to defend the euro and assume Germany and France’s particular responsibilities in Europe and to have on all of these subjects a complete unity of views,” said Sarkozy in a joint press event with Merkel at Elysee Palace.  Merkel and Sarkozy ignore the inescapable reality that the euro is grossly overvalued to work for the vast majority of European economies.  While it works for Germany and to a lesser extent  France, other Eurozone countries are going broke.

            Germany and France have much to lose if the euro goes down.  Currently the Frankfurt-based European Central Bank controls the purse strings of the Eurozone.  Eurozone countries are forced to beg, borrow and steal from the ECB to make ends meet in their respective countries.  Forced to live with austere spending plans, many Eurozone countries have run out of cash and are forced to beg for ECB bailouts.  Merkel and her Finace Minister Wolfgang Schauble often make disparaging comments about the lack of discipline or industriousness of other Eurozone countries.  Greece, Portugal, Spain, Italy and Ireland have been blamed for having unsustainable government welfare, sending economies into deficit spending.  Merkel and Sarkozy can’t possibly believe that more taxation will stimulate Eurozone economies.  More taxation will only add to more deficit spending

            Germany and France can’t fathom the idea that the one-sized euro doesn’t fit all, leaving several member-states in a kind of bondage to the ECB.  “Germany and France feel absolutely obliged to strengthen the euro as our common currency and further develop it.  And it is entirely clear that for this to happen, we need a stronger interplay of financial and economic policy in the Eurozone,” said Merkel, seeking a common tax base.  It’s abundantly clear that Merkel and Sarkozy seek to preserve the euro at the expense of virtually all other Eurozone countries.  They both know that the euro more closely resembles the value of the Deutsch Mark, not the basket of other Eurozone currencies.  Merkel and Sarkozy haven’t accepted that for the Eurozone to work German, France, Belgium, Netherlands, etc., must share the economic burden of supporting the struggling Eurozone.

            More taxation will hasten the demise of other Eurozone countries.  Already taxed to the breaking point, Eurozone countries need tax relief not more taxation.  Instead of blaming most Eurozone countries for under-performing, the Merkel and Sarkozy must agree to underwrite less industrialized nations out of their respective national treasuries.  “The French and German finance ministers will table a joint proposal at the EU level next September for a tax o financial transactions.  This is a priority for us,” said Merkel and Sarkozy, rejecting the idea of more prosperous Eurozone countries helping underwrite struggling economies.  With about 80 cents of every euro going to taxes, it’s adding insult to injury to consider more taxes.  If Merkel and Sarkozy wish to keep the euro alive, they have to contribute to the short-fall out of their national treasuries to keep the Euozone viable.

            Germany and France have to do more than propose more taxes to keep the Eurozone in tact.  After the euro’s initial euphoria in 1999, the promises of European prosperity haven’t panned out.  Other than Germany and France, most European countries have run out of euros, now begging the ECB to pay costly welfare and pension obligations.  “What we are proposing here is the means with which we can solve the crisis right now and win back trust, step by step—I do not think euro bonds will help us in this,” said Merkel, trying to sell the EU on raising taxes to deal with costly bailouts of less prosperous countries.  More taxes will only hasten the bankruptcies of struggling Eurozone states, driving otherwise solid countries into insolvency.  Instead of raising taxes, prosperous countries like Germany and France must pony up or get ready for the euro’s imminent collapse.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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