Friday, September 14, 2012

Blog #3 Germany to the Rescue (Again)

On Wednesday the German Constitutional Court ruled that Germany's involvement with the European Stability Mechanism, which is to take place of the European Financial Stability Facility (originally intended to not change over until 2014), would not conflict with current German law. This ruling sets up Germany as a key player in a €800 billion permanent bail out fund in Europe. The premature transition to the E.S.M. is a reactionary measure to the rapid growth of financial upheaval in the southern European countries.

The Goal of the E.S.M. is to recapitalize money into failing European Banking structures without increasing the debt of the country receiving the bail out, and to create a "firewall" on the crisis of debt. While the E.F.S.F. was still in place, countries, such as, Ireland, Portugal, and Greece all received 192 billion euros in the first year of the program, 440 billion coming from Euro zone countries. Germany's new involvement with the E.S.M. brings Europe's current financial "superpower" into the fray, as well as ideas about proper fiscal management. Now backed by the force of Germany the European Central Bank has re-instituted its bond policies. Already Spanish and Italian 10-year bonds have increased in price, and fell in fields (showing growth among the countries economy).

With all of this going on José Manuel Barasso, of the European Commission, spoke for a "pooled sovereignty" of European power in matters of Economics and Trade.

Germany supporting the E.S.M. certainly has had positive effects on the Euro this week, and should create some lasting stability for the southern European countries. This increased "sharing" among Europe is severely limiting to the northern countries, who if they don't support are "crazed nationalists" and yearn to be a "superpower" again, but at the same time are weakening their own power within their state, and fiscally to rule, by propping up the rest of the country. I think if the countries in financial crisis want support for the north they should not be asking what the Germans can give to them, but what they can give to the Germans to earn that support.

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